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CORPORATE MASH-UPS CAN PROPEL YOUR BUSINESS THROUGH TOUGH TIMES

Corporate thinkers and marketing strategists wondering how best to navigate through turbulent economic downswings should turn their attention to non-competing products, where they can add customer convenience and value while reducing cost-of-sale.

Because, let’s face it, in this economy you have limited choices. You could: – Spend your money on restructuring consultants – Slash prices in the hope that keeping busy will hide your losses – Increase incentives and slash prices for even greater losses – Stare frozen into the headlights and wait for the inevitable…

Or be creative. Find more values to sell to your existing customers and enable them to do more with less.

Here are some examples:

B-2-B

Office Cleaning & Building Security – lower property management costs and improve on the cleaning staff integrity. Payroll Processing & Job Placement Agencies – as payroll fee income drops earn commissions on placements of the displaced staff, as well as increase reach for your payroll services.

Couriers & Food Services – fill up the water fountain/coffee machine while you pickup/drop-off the packages. Cut your cost of distribution and make margin on the sale of snacks.

Computer Manufacturers & Airlines – digital and physical connectivity from point-to-point, e.g. in-flight hookup to your virtual desktop, best price reservations to frequently-used, business destinations on the purchase of notebooks with extended warranties. Etc.

B-2-C

Toys & Tools – for the chip-off-the-old block, an incidental purchase for dads while they calculate how much drywall they need.

Fashion, Flowers & Gifts – you can surely trust your fashion stylist/boutique to know how to create the right bouquet or pot pourri for you.

Shoes & Socks – socks wear out more quickly than shoes. Shoe sellers should stock socks (say 10 times quickly) as a traffic driver and an incidental profit booster.

Home Entertainment Systems & Movie Studios – create a utopia of choice and a measurable market to forecast demand for in-home or out-of-home entertainment metrics. Etc., etc.

You can do this in a number of ways:

strategic partnerships
mergers
cross-promotions.

You have to care and share to make it work. And be customer-centric in bringing the value home to the customer, so that they can gain to ease their pain.

There are thousands of potential mash-up opportunities. These came to mind quickly, to make the point. Corporate mash-ups can be a low-cost, low-risk investment. Each party has control of its own customers. The strategy is to be customer-centric, to increase your value to your customer and reduce their total outlay for the same services. Unlike a straightforward customer promotion, a mash-up increases your reach into the market as your partner extends it to their customers. So your total market reach is expanded without additional marketing cost to you. It’s not a freebie, and the discount comes through real cost-efficiencies, not profit slashing.

Tangential thinking comes naturally in this business; so if you have a sense of the possibilities but no immediate notion of how to move it forward, call me.

Written By Jon|Marketing Strategy|Comments Off

Selling the Environment With Customer-Centric Values

Since Canada’s political balance of power may weigh in on the environment in the near future, how does this monumental issue affect the day-to-day choices of Canadians?

Politics is all about customer-centric marketing. What the voter won’t buy, the politician won’t sell. The marketing of environmental issues and products has to factor a number of different perspectives that reside within voters and customers and bring conflicting values when making personal choices:

The pendulum swings back and forth:

– “It is the nature of humanity to turn land into garbage and garbage into land.” (Jon Sherrington, 2006). Not a pretty idea, but the drive for consumption does just that. Do we feel remorse? Yes and no. Consider a growing forest that chokes the land of sunlight and lives off its own decay. It creates an environment ideal for its living conditions and all other organisms adapt or die. Is the forest a problem or a solution? It is no different with humans. Humans expand and change the environment to suit themselves and in the process all other organisms adapt or die. Environmentalists want to limit this impact of change, and the general population focuses on the consumption it needs to sustain itself, regardless.

– Within the three constants: the sun, gravity and geothermal energy, our atmosphere is a contained bio-system in which whatever exists will return to its original state at some point in the future. Carboniferous trees can reproduce, crystallize, liquify or gasify. As implausible as it appears on the surface, the earth’s bio-system will not fail under any circumstances outside of sun, gravity and geothermal energy. This constancy insulates the human conscience from reacting to changes in the environment influenced by specific human intervention. Whatever we are doing is a pin-prick in the earth’s history. But that doesn’t mean it won’t change.

In a recent consumer poll conducted by a non-profit organization sponsored by IPSOS-Reid in 2006, the greatest number of Canadians cited the Environment as the biggest issue that will face Canadians 20 years from now. Why are we not seeing this survey response impact politically and in terms of consumer behavior today? Because the environmentalist lobby is not very good at customer-centric marketing. It has become associated with left-spectrum politics. This is strange. How can climate change and ecosystems be valued within a political spectrum when it affects us all?

The answer is because they don’t know how to sell it. In the macro-political view, the majority of consumer-voters really care more about growth than its consequences. This includes even those polled in the survey. Yet the influence we exert on our environment shapes the immediate aspect of our lives, not just the future.

If the politics could sell the environment better we wouldn’t see it pushed behind considerations of growth. But don’t expect politicians to be influenced by anything other than what people are buying – and people are still turning more land into garbage and more garbage into land. If marketers could sell the environment better, consumers would make environmental choices because these reflect their own values.

So it is a marketing challenge that speaks to the heart of customer-centric marketing – how to align products and services to those values that enable customers to achieve the growth they desire without consequence to the environment. As long as the majority of marketers are concerned with growth more than its consequences, customers will side with the majority and politicians likewise.

Written By Jon|In the News, Uncategorized|Comments Off

ENTITLEMENT AND THE FREEBY GENERATION

If civilized society has anything to gripe about concerning the psychology of the Next-Generation it is the notion of Entitlement. Everyone feels entitled to whatever they want. Whether it is media attention, petty theft, massive fraud, obscene public demonstrations, more pay for less work, or the calculated elimination of ‘whoever gets in my way’, the overbearing sense of “What’s right in my eyes, is not wrong” is at the core of a society overfed on a diet of Entitlement.

I was musing on the source of this growth of human failing and I arrived at the conclusion that it is We Marketers that have fed the beast. We took a youngling generation and bombarded them, not only with hyped-up aspirations, but also the tempting lure of anything FREE – the unearned reward offered for future gain. Nothing breeds a false sense of entitlement better than providing something for nothing to someone that has done nothing to deserve it. It is the classic case of the parent that spoils the child. And, if you consider carefully enough you will see that the lure of so many competing brands has been carved out of the ‘I’ll give it you for FREE’ promotion. To the extent that mortgages went sub-prime, and that Central Banks are actually contemplating PAYING interest to get you to borrow money in order to keep the economy liquid. The word FREE has become so common place in marketing that it has become a nickname for WORTHLESS.

So I was quite happy to see that Apple had reported its highest profit report in contradistinction to the World Economy having gone SPLAT. Nothing Apple sells is for free. The opposite is true. It sells at a premium and makes a healthy profit. Yet I have attended many conventions and read many marketing experts who say the best way to get your product out there is to offer it for FREE.

How to understand the paradox? It is not so simple as to say that a gift cheapens the giver. Or that entitlement cannot be resisted. A free trial will get the product into the customer’s hands. But then you start to lose control. There are two psychologies at work here. Entitlement and Ambition. If you think about it further, you will realize that these are polar opposites. Ambition is to strive for. Entitlement is to stagnate.

Apply a customer-centric marketing scenario: if the relationship is built on the customer’s Entitlement values, then you won’t find room for growth. Any improvements in service or quality will just feed Customer Entitlement and you will have to keep adding more value to maintain the current relationship, while cutting into your product margin. But, if you focus your marketing on your customer’s values of Ambition, then it drives you to innovation, invention and a means to grow the premium value of your product. This is how Apple is distinct from the other PC vendors.

We have known for a long time in marketing that price promotion kills margin and resets the bar of customer expectations to a lower level. But did we ever consider how we have bred a generation of entitlement sociopaths? The sense of entitlement over all material aspects of our society is deeply embedded. It is only the products that are the fruits of customer Ambition that can truly succeed without the ubiquitous FREE offer. Those products are the ones we want to pay more for. It satisfies our Ambition.

So what do you think? Is FREE a death word in marketing. Any takers?

Written By Jon|Advertising Truths, B2C, Marketing Strategy, Uncategorized|Comments Off

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.

Written By Jon|Customer Focus, Marketing Strategy, Uncategorized|Comments Off

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.

Written By Jon|Marketing Strategy|Comments Off

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.

Written By Jon|Marketing Strategy|Comments Off

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.

Written By Jon|Marketing Strategy|Comments Off

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.

Written By Jon|Marketing Strategy|Comments Off

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.”

Written By Jon|Marketing Strategy|Comments Off

Previous 12

blog: hydrogen creative

CORPORATE MASH-UPS CAN PROPEL YOUR BUSINESS THROUGH TOUGH TIMES

Selling the Environment With Customer-Centric Values

ENTITLEMENT AND THE FREEBY GENERATION

The Fool’s Gold Rush

Marketing ROI

SUPPRESSING DIGITAL FLATULENCE

Selling Integrity to Truth-starved Customers

SUPPLIER FROM PLUTO, CUSTOMER IN ANOTHER SOLAR SYSTEM

Loyalty and Price Elasticity

Jon Sherrington

Owner, Strategist, Writer – Hydrogen Creative Inc.

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