blog: archives

The Fool’s Gold Rush

Early adopters are frequently thought to be the leading edge of the next mammoth venture, inviting speculators and venture capitalists to whet their expectations for the next iPod/iPhone/Blackberry revolution. Yet, in many cases early adopters turn out to be the only segment that values the product or service and the venture stalls beyond this low-hanging fruit. This is probably not what a myriad of high-tech hopefuls want to hear right now. But I am not the voice of despondency. The dot.com meltdown did that already. I am saying that there is a way to eliminate the threat of over-promising and getting burned.

How does the over-promising come about? The goals-oriented marketer defines a market, measures performance based on test marketing (or early adoption) and extrapolates based on an exponent of the total market volume. Call this building Castles in the Air, based on a model built on the ground. We love to do it and dream of success delivered through incomparable genius. It’s exciting, and on paper it works for accountants as well as marketers. Take a business model, then maximize it to the power of ten or a hundred, or a thousand. Be as greedy as you dare. “Gee! If we only tap into 5% of the total market we’ll be gazillionaires. And our product is 25 times better than anything out there.”

How to avoid getting burned: The customer-centric marketer researches the values a customer has in regard to a particular product or service, and then defines the market potential according to those values.

Example: Grocery Gateway – goals-oriented approach: online order, home delivery, early adopter uptake is great, shows significant growth potential. All things being equal, 2 million shoppers in the GTA. Wow! Sink $30 million dollars into this and see where the rainbow ends.

Result: Grocery Gateway is now the private property of the Longo’s chain with 15,000 claimed customers and a constant viability issue how to make more money. Could be lots of reasons: logistics, costs, customer experience. The point is, when it launched, the world thought that Ship of Grocery Retail had embarked on a Dramatic New Course. Reality is that it is a niche segment for which the early adopters are probably still loyal customers. Plus $30 million invested. I think it is a good idea, but that all other regional online grocery delivery businesses are marginal players. Perhaps, one day, like the funeral home, school bus or waste management businesses some entrepreneur will buy each in turn and figure out an economy of scale to make a ton of money -– but on such thin margins I doubt it. More likely it will be the customer database that has more value than the retail business, and Longo’s that holds onto it.

Had the analysis been using a customer-centric methodology, the research would have come out differently, distinguishing between those who like to shop, those who don’t trust the Internet, those that are comparison shoppers, those whose strange work ethics prohibit ordinary shopping habits, those who are agoraphobes, insomniacs et al. And the answer might have been “You need $4 million” and there are only 15,000 potential customers for this service. $30 million for a GTA based distribution franchise sounds chunky to me. I think they were hoping for 150,000 customers – less than 10% of the market. Instead they have less than 1% of the market.

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The Good Old Days or The Good New Days

If population, technology and economic growth were predictable then the value of a product’s unique selling proposition would also be predictable and the stable growth of a business would be assured. There was a temporary experience of this phenomenon in the post-war 50’s in America when industrial technology released from the war effort into a stable market hungry for innovation created a boom in both the economy and the birth-rate.

However population mobility, economic volatility, technological innovation, geopolitical instability have since created such unpredictability that consistent values seem impossible to gauge. These destabilizing factors weaken the corporate armor of even the most dyed-in-the-wool product icons for competition to attack. And the greater the proliferation of choice, the more unpredictable the customer appears in how they make choices.

Stuck In Tunnel Vision
Despite all this uncertainty the most common practice of businesses and organizations is to mold their values around a core leadership within the business. And they define their marketing assets based on the values that are business-centric, such as described above.

A business that blends this cocktail of assets successfully will achieve growth and achievement within a specific window of oppportunity. And, if it can generate enough capital within that window then it will be able to sustain itself through the inevitable redundancy of the product or service that built its financial base to adapt to changing market conditions. If it misses that window of opportunity, then so much innovation and investment will be flushed down the toilet. This is the scary and unpredictable world of venture and risk capital. It has become the roulette wheel of corporate fortune and misfortune.

Get Out of the Tunnel
But, if you think about it more deeply, the ability to sustain coporate performance throughout all the environmental and economic changes and fluctuations really depends on one thing: Customer values. Customers make all their choices based on their values. And there is ample proof in population statistics to demonstrate commonalities in customer values to sustain both mass market and niche markets for products and services. You can look at this as the basis for forming your Customer Value Grid.

Customer values form a totally different grid to the corporations. Each product is a fraction of the customer’s total spectrum of activity. So the product or service provider is only addressing a small fragment of the customer’s needs. Understanding the full spectrum of customer values will inform the marketer how to place its products within the Customer’s Value Grid. Rethinking your approach along these lines is your first step to keeping customers engaged for loyalty, frequency and continuity. What does this mean? It means stability within the context of change, or the reduction of unpredictability within your business.

The first step we mentioned is to classify the assets of your product or service in relation to a comprehensive customer needs system of classification:

  • How does your customer look at your product?
  • Achievement: how well will this product or service help me to achieve my goals?
  • Convenience: how easy is it to locate, engage or acquire this product or service?
  • Comfort: can I use this product in a comfortable way or to increase comfort.
  • Esteem: will the use of this product/service equate with or raise my esteem?
  • Pleasure: will this product/service directly or indirectly enable me to increase the amount of pleasure in my life?
  • Trust: is this product, service or company a reliable source for all of the above.

Don’t be surprised that affordability is not represented as a customer value. Customers will expose themselves to financial risk to maximize comfort, esteem or pleasure. A house purchase is a fundamental example of this. Few homebuyers purchase a house that is easily affordable. In a consumption-driven society customers will invest disproportionate to their means to maximize these values. Wal-Mart’s value pricing simply enables their customers to maximize convenience and pleasure, often at the expense of comfort, through over-consumption. Although one the world’s largest retailer has built its business on the value of affordability, this is because price is only a function of the degree to which all the above can be satisfied.

A business that builds its values on the ACCEPT Customer Value Grid and maintains this focus can realize stability and predictability within its financial model.

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The Vicious Circle of the Marketing Cycle

I have spoken throughout this blog about the problems of the goals-driven enterprise, as opposed to the customer-driven enterprise. The goals-driven enterprise has one mandate: to leverage its assets to achieve maximum wealth. The fastest way to do this is to tender shares publicly. This is how the shareholder becomes more important to the enterprise than the customer.

In an economic downturn, in order to maximize shareholder value the enterprise cuts prices to stimulate demand and cuts costs to maintain a margin. Marketing investment becomes highly expendable. What the enterprise is effectively saying is, “My products and my customers are now worth less to me so I am going to invest less in them so that my shareholders don’t complain about achieving a lower rate of return on my customer investment.”

This is perfectly reasonable accounting view of the marketing cycle. The Corporate Treasury says “When I am profitable I don’t mind risking some of that money in marketing as as long as I can see growth. When there is no growth then marketing is futile and it will be erased from the bottom line as long as I can prove in the books of accounts that it does not fuel growth.”

Let’s look at the possible consequences of this strategy:

– When you stop communicating with your customer and lower the price of your product, what does that do to the perceived value of the product, service or business? It creates a ‘new normal’. The value of the relationship with the customer flies out of the window and the product becomes a commodity item, indistinguishable from other low-cost solutions available.

– What happens when the economy comes back? The compelling reason customers bought your product/service in the past has been lost as the relationship linked through COMMUNICATION was severed by the Treasury. You find that your competitors have caught you up, or overtaken, and you realize that your name no longer carries weight. So what do you do? You hire an expensive branding or rebranding consultant and revamp all of your marketing literature and advertising to overcome the inertia caused by the vacuum that you created.

This gamble might pay off. But if it doesn’t the shareholders will excoriate you for failure and try to eject the Board. Or another competitor that did not cut of communication with its customers steamroller you into being bought. If you don’t believe this happens then you aren’t looking.

So how to get out of the vicious cycle? Be a customer-centric enterprise. When there is an economic downturn adapt to your customers new realities without divorcing the relationship and cutting off communication. Work with your marketing partners to find more cost-effective solutions that keep the customer dialog and relationship going. Find ways to add value better than cutting your price.

Those who say it can’t be done do not deserve the title of Marketing. Marketing is the meeting point of customer need and product supply. There is always a way to communicate value that supports this relationship connectivity. You may have to be more creative and give up on some of your personal goals achievement in the short term. But, customer-centric marketing establishes loyalty, frequency and continuity as its scale of success. If you cannot align your business to a customer’s values in an economic downturn then you are a goals-driven enterprise and you will be punished by your shareholders at some point for failing to engage customers over the long haul.

That’s when the vicious cycle comes and bites you where it really hurts – at the peak of your career development.

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Marketing ROI

I have been doing a lot of reading on ROI lately and found that writings on this can vary quite significantly on how to address this, and yes it appears to be very muddy. At the end of the day though, the big question still comes down to “How do we know we are spending our marketing dollars effectively – and how do we demonstrate it to others?”.

When trying to answer this question, there is not one clear cut ROI formula that defines this that can be applied universally for all marketing activities. (I am stopping here but his comments continue in the forum)

Reply from David McNab:
Here is a thought that might incite fear in the hearts of marketing departments everywhere – instead of muddling around with a whole sloough of measurements of ROMI, ROI, ROC and the like for measuring marketing performance why not simply make the marketing department (probably along with sales) accountable as a profit centre ?

This isn’t hard. Simply “sell” the products to Marketing at a discount (sales price less industry average marketing and sales percentage) and let them live or die on the profit they make.If the spend doesn’t drive excellent returns marketing loses. If it does, they win. Tie bonus to the results and we have accountability.

No-one does this. Hmmmm I wonder why … ?

My contribution to the thread:
That would strike more fear in the hearts of the Treasury and the shareholders. The marketers perpetual vision of success would make him/her the most likely to want to grab hold of the reins. But it takes more than marketing sense to make a business flourish.

ROI is a simple calculator in a small business environment. Just ask the owner. He knows whether the money spent had any payback. The simplicity of the question gets lost in a more complex enterprise. And it is our own fault. The inability to define a marketing ROI is because marketers still execute programs based on assumptions and then develop complex rationale, couched in the finest jargon and best-case case studies that they cherry-picked to win their point.

For example, brand advertising => top of mind => market share growth => profitability. It is a leap of logic that baffles accountants, because, while it sounds logical and insightful, there is still the no-name bottler selling more soda that Pepsi, without spending a nickel on marketing. Sometimes it’s true and sometimes it’s not. But the marketing dogma says “It’s empirically true.”

We now live in a state of technology where marketers can develop program models that are so targeted to a specific customer segment or objective, ROI should be a constant measurement per campaign. But it is easier for marketing to say, “We think this is a good idea. Let’s try it and see.” That’s a sink-tank not a think-tank. And do we ever fear failure. Nothing hurts quite so hard as being told by someone who knows zip about your profession that your last campaign bombed and you have to fumble for excuses.” That ended my posting. But the adjunct that I would put in this blog is that Customer-centric marketing is designed for ROI measurement. When you define your marketing based on customer values you can measure the uplift of a specific campaign because you are marketing with an identifiable objective rather than a catch-all mentality. The focus of customer-centricity identifies the real drivers of your marketing programs. There is a common failing of a goals-driven enterprise – fling many things at the wall to see what sticks, figure out later what it was and explain to accounting why your marketing budget should not be cut by 50%, even though 50% of your investment was wasted.

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SUPPRESSING DIGITAL FLATULENCE

What is digital flatulence? It is the unexpected, public, disruptive and frequently embarrassing electronic notification that someone (other than the person with whom you are speaking) wants your attention. It could be your mother, or about something of no immediate consequence. Either provides the same distraction.

The range of audio styles for this is so diverse that, unlike organic gaseous emissions, it is easily traced back to its source. It doesn’t matter how permissive the recipient is (opted-in) to receiving interruptions, the intrusion affects everyone in the vicinity. Therefore the onus of digital flatulence (no pun intended) falls to the sender, not the receiver.

We are only a few years into the popularity of this media, and there still exists in the minds of many users a certain cachet, that they are so sought after, or that the present moment is never as important as the interruption. This cachet is trumpeted by Telcos, to my mind being the equivalent of encouraging digital flatulence contests between high frequency users. (You have to have gone to a British All-Boys School to truly appreciate the metaphor.)

My prediction is that, within a couple more years there will be a societal backlash against media invasion into personal space through excessive emails, texts, pings, alerts, notifications, spam, spit, twitters or any other expletive noise coming from a wireless device in a public space. They will be treated with the same disdain as smoking, urinating or emitting a loud and malodorous body stench into the local atmosphere.

We create our own problems through exploitation of new media opportunities and this is one that will more obvious in people’s lives, as wireless devices become permanently joined to the human hipbone.

As customer-centric marketers we have an opportunity to define policies regarding how to engage with this media, to prevent this backlash. Here are some suggestions:

Device manufacturers:
Work to improve silent modes of notification.

A simple flashing LED has some great advantages in power-saving and reduced public intrusion. The goal of a wireless device should not be to interrupt whatever the user is doing, but to enable them to function proactively from any location at the convenient moment.

Telcos:
Enable features that are common on landlines e.g. Do not disturb/Busy call-back later settings and Automated redial when the line becomes free

So, if I need to call you and you have put your phone on Do Not Disturb, then as soon as you free up your phone my phone will ring, and as I pick up it will redial your number and connect us. That way I know I am catching you at the earliest moment of convenience and I don’t have to keep redialing and leaving multiple voice mails. I remember having this feature on landlines in the UK years ago. Surely the technology must still exist?

Carriers & Marketers:
Understand your customer’s preferences

Send out your spit, spam, twitters and texts within very defined windows of time to minimize daily intrusions and resentment build-up. Track instant deletes as a strong hint not to resend the same message over and over and over again. Work together as carriers and marketers to bundle packets of messages into specific time windows that are socially more acceptable, e.g. happy hour, the drive in, the drive home etc.

Employers:
Stop trying to herd cats.
Your staff are easier to reach than ever before, but don’t exploit the situation to create social mayhem.

This subject is more than a nuisance in cinemas and concert halls. It is more than teen’s googoo-gagaa-ing over the latest ‘happening’ thing on the bus or subway. We are headed into a wireless spaghetti world of unwanted noise, where privacy will become a ridiculous notion for lack of social grace in digital human behavior.

This is not a soapbox rant. It is a clarion call to marketers to understand the negative impact of wireless social media on our quality of life and be proactive and build better customer relationships through smarter solutions.

 

 

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Selling Integrity to Truth-starved Customers

My log-cabin beach vacation, cooking with charcoal, without TV, cell phone or laptop, using my own paddling power for water sports has given me a reaction to returning to life as I usually know it. But here goes:

Q. How do customers evaluate marketing hype?

A.
Perceived Customer Value = √ Brand Value Proposition (√ is the square root of)
Actual Customer Value = Retail Price LESS 40%

It is an automatic filter. We need the hype to penetrate any sense of value and we need the discount to feel it was worth paying for it.

Q. What is the reason that most customers don’t read either the blurb or the small print?

A.
Because they make a choice to believe in the realm of mythical marketing. Tolerance for myth and brand legend has been drummed into consumers through mass media hypnosis (a.k.a. hype-nosis?)

Q. Aren’t money-back, satisfaction guaranteed programs assurances that the customer will be satisfied?

A.
It’s a compromise, not a lure. Money-back warranties go hand-in-hand with unbeatable, lowest price promises. In contradistinction to the belief that it means the customer will love the product, the program only really gives you the choice to pay less instead of more for something better. It works because most customers are willing to lower their satisfaction in tolerance to the price. It is also provides a mechanism for the manufacturer to back out of customer revolt with impunity.

Throwaway Society
We have become a throwaway society because we have been lured by marketing hype into buying cheap, not-as-good-as and ‘only-the-latest’, letting hype fill the vacuum between availability and durability. This has destroyed our domestic manufacturing sector, since only the lowest-paid employees can build the cheapest products. And nobody wants to be the lowest-paid employee. We have put our blinkers on because the illusion of achievement is more appetizing than the reality. Latter-day historians who recall the feel-good 50s and the number of advertising icons that it spawned, should be able to measure the decline over the past 60 years in the value of substance over image by the rate of product refresh in almost every category of consumerism. If it isn’t new it isn’t wanted. And we now live in a world where the hype is not the mirror of society – rather society that has become the mirror of the hype.

Yet even as we ram our blinkers on to hide the obvious flaws, there is a hidden consciousness that we know what we are compromising and we grit our teeth wishing that we could get better value for less hype. This is evident in the increase in stress and depression and the disappointing failure of consumerism to provide true-life satisfaction. It is even more evident in the importance of self-image and self-esteem in the human psyche and its disastrous consequences in the teen community when hyped-up expectations are not achieved.

Where is integrity to be found?
Do the purveyors of myth still hold all the cards? Where is integrity to be found? Can marketers be scrupulously honest, deliver real value and retain customers through a cost of ownership that saves money over time, reduces waste through extended product lifecycle and builds a longstanding relationship between the customer and the provider? Are customers now even ready for integrity? Politicians, economists, marketers and advertisers might quote the immortal line: “You want the truth? You can’t handle the truth!” Who wants to know that the unbeatable-value product’s true cost of materials is 10% of the sale price, or that the brand name sneaker doesn’t cost three times as much to manufacture. We have enough trouble absorbing the reality that a Canadian car cost 20% more than the US for no reason, or that the price of oil is not really set at the value of the supply, refining and distribution cost. Our flock mentality is a soothing anesthetic that keeps us grazing in the direction the shepherd is pointing – just so long as we can keep the wolves at bay we are happy to ruminate.

But there is a new movement in consumer behavior that is starting to redefine how marketers react to the voice of the customer. Twitter, the blogsphere, online consumer reviews, and the greater information research base available to consumers through the Internet provide customers with more knowledge power to make more guided choices. Social networks and the democratization of information have started to fragment traditional media. Marketers can see the effect of their mythical mishaps in real-time.

Life as we know it has not yet completely changed, but there is a backlash that is starting to form around the ‘customer as the centre of the universe’. It will take some time in gestation for the mass marketing industry to stop trying to leverage new media tools in order to regurgitate the same product solutions. The real Nirvana of customer-centric marketing will be when marketers start to align their product and service development roadmaps around distinct online communities that aggregate common values from disparate parts of the commercial and consumer universe.

How do you prepare your customer market to be resilient in the face of change? By selling integrity, making hype relevant, by identifying with and responding to customer communities as distinct market segments; by personalizing your message and values to the audience segment, which means rethinking your product deliverables and distribution mechanisms; by investing in your customers before you invest in your products; by delivering on your marketing promise or accepting failure as the result.

Integrity is not something you can manufacture on a large scale. It is something that is built, brick-by-brick, within communities and localities that has to stand the test of endurance, in relationship, satisfaction and repeated experience.

Are your customers ready?
Are your customers ready for integrity? Are you ready to put your customer’s claims ahead of your own? It is a new vista for marketing that triangulates customer expectations with affordable value and professional conduct. It is communicated through relevant networks and communications grids that the customer defines. And it requires a closer ear to the ground and more sensitive market intelligence than quantitative methodologies.

I don’t think of it as evangelism. I have the good fortune to apply real, effective and successful marketing campaigns selling integrity to truth-starved customers It is one of the most refreshing aspects of my profession to present truth as an alternative to myth and enable businesses to build successfully on their deliverables.

If you want to find the right route to your customer, build relationships and generate demand in a new era of customer-centric media than you need to re-engineer your hype and start selling integrity to a truth-starved marketplace.

 

 

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How to Rebuild Your Brand in Your Customer’s Image

OK. You have a product, service or company that became successful based on your accurate determination of product/price/place/persona (brand relationship). But now competition has made inroads, or leapfrogged you. The market has changed. Your revenue curve is slipping, price-cutting is killing your margins, you don’t seem to be able to satisfy your customers, and they won’t reveal why. What do you do?

Reinvent yourself, rebrand your business, keep it fresh? One of the most expensive undertakings a marketer can entertain is a rebranding process. And it is commonly one of the most futile acts when it is to combat a negative trend in the business cycle. A valued former client in the computer manufacturing business went through this undertaking three times in the course of two years, and ended up being swallowed by another titan, after shelling out a tidy six-figure number to a NY-based rebranding consulting group.

When you define the marketing assets of your business or product, stop thinking solely in terms of key differentiators and usps, and start thinking about the values that are at the heart of your customers’ purchase decisions. Corporate definitions of your marketing assets such as:

Leadership
Profitability
Patentability
Productivity
Stock Value
Innovation
Technology
Functionality
Style/Culture Price,

all sound great in the board room. But they can kill your relationship with your customer if you don’t factor is customer values like:

Achievement
Convenience
Comfort
Esteem
Pleasure
Trust.

Yes, the acronym ACCEPT is intentional. It is a good mnemonic for rebuilding your brand in your customer’s image. To continue, review The Good Old Days or The Good New Days blog entry.

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SUPPLIER FROM PLUTO, CUSTOMER IN ANOTHER SOLAR SYSTEM

Borrowing from a recent article in the Nat Post Business Section (that applies the standard Mars/Venus equational imbalance), about a book called “Wired to Care: How Companies Prosper When They Create Widespread Empathy”, penned by Business Strategist Dev Patnaik, also founder and chief exec of Jump Associates, adviser to businesses on growth strategies:

“Companies often hinder their success by focusing too narrowly on selling products and not on their customers’ actual needs.” ibid.

He has written a book about a concept he describes as the ’empathy gap’ between employees and the customers they serve. Well, that saves me the trouble.

Dev specifies the gap as a chasm between employees in organizations and the people (customers?). I wonder if the euphemism was derived from actual experience of shopping at The Gap?

Not wanting to put the onus entirely on employees I was relieved to see he spoke of “Companies stamping out customer empathy” within their staff and then being “surprised when their employees make poor decisions or try to sell things that their customers don’t need.”

From the interview (attached) it comes as a fairly rudimentary exercise in customer-centric marketing. I haven’t bought it, so I can’t recommend it, but it is all grist to the mill.

But I want to deepen the thought: he describes the growth of a business as a cause, as success moves the stakeholders away from the products that they produce. What elastic band magnate uses the same product to hold up his socks? Not like the old days when he couldn’t afford socks with lycra built in (not a real example in the book).

Question: is there a lack of integrity in the staff of a business that does not use its own product? If they use a competitive product then the answer would be “Yes.” If you work for Chrysler and you don’t drive their wheels then you won’t think too much of customers that roll up with a Dodge Hemi under the hood. But if the employees are not users of that product, then there is no reason for the lack of empathy. I doubt that manufacturers of prosthetics are all missing body parts, yet they probably care more than most about how the customers feel using their products.

Empathy with the customer has to be defined within the culture of an organization, not at a product level. In fact it doesn’t have to be product relevant. The manufacturer of women’s hosiery doesn’t have to wear the product, (if he is not accustomed to pantyhose). He/She just has to understand the problems that wearers of such products have to deal with in the context of: warmth, protection, comfort, appearance, climate, U/V rays, skin sensitivity, ease of putting on/removing, durability and budget. That puts hosiery on the same plane as global warming. I am in no doubt that, in the microcosm of daily frustrations with women’s hosiery, there are issues that are scalable to global warming. This is what we can call ‘empathy’. I don’t know if the author of the book goes so far to say so. But, it should be, from the CEO down to the photocopy worker, that empathy is ingrained. That way a customer might actually believe in the advertising.

Otherwise you might as well be as far removed from the Sun as Pluto and wondering why your customer is orbiting a different solar system.

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Loyalty and Price Elasticity

In recent marketing history the belief was formed that rewards increase customer retention. Up to what point is the value of the reward negated by a price increase? Forget rewards – with any price increase, what is the melting point of intrinsic loyalty?

Questions:

Hypothesis: Wal-Mart unilaterally increases its pricing by 15%. Could the Wal-Mart brand handle a 15% bump in prices?

Fact: gasoline goes up universally 50% and is absorbed. At 100% it starts to topple one of the world’s biggest companies. What do you do next?

Experience: your insurance company surcharges you on your dental plan because your dentist increased his fees outside the range of their policy limits. Do you swallow the difference or find a cheaper dentist?

Air Miles Rewards offers to double its rewards on select brand name products. Do you buy them or go for the store brand at the lower price?

Your hair-stylist: on whom you depend doubles his/her fees. To what extent is that reflection in the mirror worth the increase?

The answer to all of these questions depends greatly on to what extent price was a factor in the original decision. In the blog entry “Price, Shmice!”, I posited that Price is an indicator of value, but marketers should evaluate the decision criteria that precede it before they start messing with their prices, and presented the following as predetermining factors ahead of price valuation:

Achievement: how well will this decision help me to achieve my goals? Convenience: how easy is it to engage or acquire this product or service? Comfort: can I use this product or service easily or with peace of mind? Esteem: how will I be respected for this decision (by self or others)? Pleasure: how will I derive pleasure from the outcome of this decision? Trust: how can I trust that all my expectations will be met?

Answers:

Wal-Mart could not handle a unilateral 15% increase across the board because the trust that it has built up with its customers is based completely on price-point. Wal-Mart doesn’t cheat like some other discount retailers. All its products meet its discount values standards and any departure would breach the trust of its customer relationship.

Gasoline is oligopolistic. Come one price increase come all. But there’s no love lost. If you were to put your pump price up $0.001 cent above the gas shack down the street, watch and wave your kishkas goodbye, as no self-respecting driver will want to be seen in your station. There is zero loyalty now in the gas station business and I am bona fide PetroPoints customer. 2 years ago I would have given them a penny premium. Not any more.

Your choice of dentist has nothing to do with price. Trust, convenience and comfort are important values in play here. The surcharge on your insurance will only affect you if it brings economic hardship. You would sooner look for a better insurance plan.

Air Miles: doubt it. Most consumers put off future gain in favour of immediate gratification. That’s why personal savings are at an all-time low, credit card debt is an all-time high and most people fail to keep to their diet. If you are pre-disposed to buy the branded product and the rewards come gratis, you should buy in bulk while the promotion lasts, giving the branded product a false sense of accomplishment and the likelihood of repeating the mistake when sales falter over the next 3 months.

Hair-Stylist: offer to sweep the floor for them, or spread the visits out by a week or two. If it costs $300.00 for you to have your hair done with highlights and the whole bit you will see the increase as more reflective of the true value of you than the stylist. Esteem, achievement, pleasure, trust, comfort all come with a successful trip to the personal image reinvention store.

The customer-centric marketer will seek to constantly over-deliver value relative to the price. This is insulation against price increase, as the increase will then only reflect true commercial value. It is the quintessential value-add. As the price increases the customer-centric marketer will create more value-add offsets to the price escalation. Most marketers don’t put the customer at the center and when the prices increase there is no elasticity. Loyalty rewards are an artificial stimulant to fabricate a customer retention framework but they don’t offset price increases.

I am not an opponent of rewards. I simply don’t regard them as effective incentives for loyalty. As long as they don’t cost anything I will enjoy them. But increase the cost and bye-bye. I reward customers because I believe that they deserve them, not because the reward will keep them loyal. The customer-centric marketer will match price elasticity with values for long-term customer retention. That is what is meant by “Customer-centric marketing increases loyalty, frequency and continuity.”

 

 

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Price, Shmice!!!

I recently went head-to-head with my toughest critic to argue that A.C.C.E.P.T. decision criteria accurately summarize the values that purchasers use, knowingly or unknowingly, in making a purchase decision, regardless of whether they are a consumer, a business or a procurement agency.

A quick refresher on the criteria:

> Achievement: will this purchase help me to achieve my goals??
> Convenience: how easy is it to buy this product/ service?
> Comfort: can I use this with peace of mind?
> Esteem: will my decision be respected?
> Pleasure: can I derive pleasure from the outcome?
> Trust: can I trust that my expectations will be met?

The first comment hurled back at me was “PRICE!!! How can you possibly represent purchase decision criteria and exclude price?”

So with my back up against the wall I had to explain how price is a value indicator that is relative to all of the above. How if 2 identical products at the same price from the same country of manufacture were offered and one had a designer label on it and a sticker that showed it was discounted to the same price as the one without the label, then price would not be relevant to the decision and you would choose the discounted product. How if you have $10 to spend you will apply all these decision criteria in order to maximize the value you derive from the $10, and it is still $10 so cost is not issue, satisfying your values is the issue. How products that help you to achieve very little are the most price-sensitive and those that help to achieve a lot are the least price-sensitive (a truth that can be applied to any of these criteria). How low-income families will minimize cost on low quality food and invest significant portions of their income on entertainment products to maximize pleasure. How even this particular critic only purchased Heinz Ketchup and not a cheaper brand because that is what they learned to trust from early childhood.

It was a tough exchange and brought up some good points, such as longevity of the product (warranties, reliability etc.), which I parked under Achievement, and culture (tradition, religion, pop values), which I parked under Trust and Esteem.

There are words that can be added as sub-categories or used in place to mean the same thing like objectives, respect, flexibility, location, and satisfaction. I created these labels as a memorable acronym. But the function of these criteria is not to constrain the customer, but to determine, through analysis, where their values lie in reference to a marketer’s products or services, based on what they want to achieve, respect, trust, enjoy, in comfort and convenience. And I use them to build a compelling marketing program to align the brand, product and service values to key customer segments in the market.

Buyers frequently make the wrong choices:

– They expect to achieve more than the product can deliver (the 6 HP snow-blower in a 3 foot drift).
– They experience delays and frustrations with services that are not convenient. (Almost any Telco.)
– They make choices that do not suit their personality or appearance. (The Wrong Designer Dress at the Oscars, what was she
– They choose a product that they cannot easily use (Ikea, keep working on user-friendly self-build manuals).
– They expect pleasure from the packaging and are disappointed by the reality of the experience (Most diet frozen meals).
– They assume trust when they choose the lowest price (Municipal tenders on anything).

But they are lured to all these decisions by the promise of satisfying their expectations. The application of the A.C.C.E.P.T. decision criteria is to align your product or service offering to these customer segment values, then communicate and deliver to the customer, in order to satisfy their expectations. Price elasticity could be more accurately gauged as the margin by which a product would exceed or trail the customer’s values. Prices are relative and, as buyers, we often assume too much based on price. But once expectations fail to materialize we learn from our mistakes.

Some of the resistance I experienced in this exchange might have been because no one likes to be psychoanalyzed. Our unique values are programmed into our subconscious like a lens shutter. Blink, fits, blink, doesn’t fit. Even in a long-term evaluation designed to eliminate all possible irregularities and biases, decisions are still made based on expectation of achievement, convenience, esteem and trust. When a competent bidder that has the best product at the best price, still doesn’t get the sale, they should review the trust, or esteem criteria, because therein might lie the weakness. Customers are risk-averse, which is why it is so hard to break in with new products unless you cover all the bases of the A.C.C.E.P.T. decision criteria. Putting such programs together depend on a strong understanding of the market segments you need to penetrate and then defining your marketing program to encompass all of these criteria. If you rate some of the outstanding performers like the iPod, you will observe how successfully this product meets all of these criteria, and it’s not cheap.

I did not lose the argument, or my wife, in the process of this discussion, but I would like to invite comment from other sources.

 

 

Written By |Marketing Strategy|Comments Off on Price, Shmice!!!

Jon Sherrington

Owner, Strategist, Writer – Hydrogen Creative Inc.

May 1996 – Present

My role is to provide strategic marketing guidance to clients to ensure their objectives are attainable, remain in focus and the communications solutions work.

My expertise is in how to realign goals-oriented brands, products, services or businesses to customer values to build loyalty, frequency and continuity.