Tuesday, March 27, 2012

From 1,80€ to 8,40€: Where is the increase in value?

Are you adding value to your price?
A few days ago I had an experience that made me think very deeply about the need to talk, share and strengthen through this blog basic and fundamental marketing and business concepts, especially when the economic crisis itself is asking us "to reinvent ourselves or die" and, on top of everything, asking us to do things differently, to obtain different results.

Driving in a small town, I needed to buy a glue gun and stopped by a service station to ask where I could buy one. The attendant gave me instructions to go to a hardware store on the village, which was about 500 meters away, more or less.

Even though I didn’t remember the price I had to pay the last time, I was willing to pay as much as 3 € for the new glue gun, and knew that I wasn’t going to be requested more than that amount, so I was good. I got to the store I was referred to go and asked the clerk if he had a glue gun and how much did it cost. The clerk said yes and then stopped to look at his price list.

"It costs ... let me see ... uhhh ..... 8.40 € "- he said quietly.

All of a sudden, I didn’t feel good anymore. I felt a little weird, kind of shocked, wondering if I didn’t get it completely, or if the clerk was simply kidding.

"How much is it?" - I asked, still amazed.

"8.40 €" - he confirmed.

If the price is excessive, your client will leave and buy from your competition.

So there was nothing else to be done. The price I was offered was much more than what I was willing to pay for the glue gun. In fact it was almost 3 times what I had in mind. I thanked the clerk and left the store.

Not far from that place, in the same town, I got to a small bazaar in whose sign I could read: "Housewares" and so I stopped my car. Again I asked the clerk if he had a glue gun and the guy said yes. He had the same type of gun I had been offered in the first place, also in a transparent bag, no label or brand, and at first I didn’t feel good, because I thought the price was going to be the same as I had been asked before, being the same product as it was. My surprise was huge when the clerk told me the price. He said: "1.80 €"

"Whaaaaat? 1.80 €?" - I thought. Obviously, I took out my wallet, picked the money, paid and then left, as happy as a child with a new toy.

1.80 €! 40% less than what I was willing to pay for the damn glue gun and 80% less than what I had been asked in the first store I went, in the same city, and only a couple of minutes away. Luckily I didn’t buy it in the first place I stopped by: I would have had thrown away 6.40 €!

When products are the same and do the same, only the added value justifies a price increase.

As I sat in my car, I couldn’t do anything but think about what had just happened to me that day. From 8.40 € to 1.80 €. A 6.60 € variation between one price and the other. An almost 4 times variation on the price I finally paid for the product.

What factor can justify such a big price difference on the same type of product in two different companies? In my personal opinion, and in a situation like this, there are only two elements that might become a justifying factor:

  • The perceived brand / company’s value.
  • The additional value added to the product.

However, in this case, it was an unbranded, generic product, which I received on a plastic bag, without any type of fancy design or anything at all. It wasn’t that I was buying a glue gun manufactured by BMW with the top of the line technology, but a generic product.

In terms of added value, it was just more of the same. A glue gun does just that: to assist me on gluing things, nothing more. And in this case, it wasn’t a stun gun, nor had a different grip, or performed a different operation. It was simply a glue gun. The same one as I had been offered in the first place.

And it's not up to me to say that the pricing policy of either business is better than the others’ because if you ask each dependent separately why they have that price, each one will give you their own reasons and they are all likely to be valid.

The analysis of competition and the pricing policy of a product.

What is completely clear to me is that the first business owner didn’t take into consideration what their potential competitors were doing when he was deciding what the price for the glue gun was going to be. And not because you necessarily have to have the lowest price to be competitive, because in fact, personally, I'm not usually an advocate for low pricing policies, quite the opposite, I always like to recommend adding value to products to create and strengthen the perception of value.

However, you obviously have to be aware of what’s happening around you, if you want your business to stay afloat. Without a proper competition analysis, even though you don’t pay full attention to the information you collect, it becomes very difficult to make relevant business decisions.

If you have a product that, in your very same town, can be bought at a price 80% cheaper, you necessarily have to offer something extra (add value) with your product if you want to sell it. It's that simple.

Either you add value to the product itself, like adding more features to allow the product make its job better, or you must add value to the service your company  offers. But either way, you have to add value in some way to justify an increase in price.

Your potential customers need to feel they are getting something in return for those euros they are paying in excess for your product, otherwise you take the risk of being perceived as a loan shark business, to put it on a decent manner.

Don’t ever allow a decrease in sales volume to be your reason for increasing prices.

Unfortunately it’s happening very often that small businesses turn to increases in pricing to compensate for declining sales in recent months. The downside is that, most of the times, prices are increased but no value is added to the product itself. And this can be an error with serious consequences.

Probably a price increase will generate additional income for a certain period of time, but at the moment your product stops being competitive in the market, then not only you will no longer receive this additional income, but your customers will start buying from other businesses, and not yours.

Then, you lose the customer, the extra money, and also you’ve generated a negative “I-do-not-have-competitive-prices” kind of reputation for your business.

Note that to justify the price difference between your products and those of your competitors, you must add value. Remember that price is a critical component of your product, because it can allow it to live longer and more prosperous, or it can make the product be condemned from the very beginning.

Do you think I'll stop by the store in which I was offered the glue gun for 8.40 €? Never again! I don’t even give myself the opportunity to find out if they have good products or not, because the perception that remains in my mind is that they are usurers, that’s it. Do you want your company to be perceived the same way?

Related article: Benefit’s Marketing: You want my money, I want benefits.

Wednesday, March 21, 2012

Social Media: Don’t stop halfway down.

Did you stop to smell the flowers?
There is a story about a football club which was going through an extremely bad streak, in which everything was going the way it shouldn’t: not winning games, not being motivated enough, they were not even making the elementary plays, the basic ones. In few words: a total disaster.

Faced with such a difficult situation, and after completing one of the games they lost more outrageously, the coach gathered his entire staff on the benches, asked all of them to take a deep breath and relax a little bit. Then he took the ball in his hands, staring at it, lifting it up, and started saying, "Gentlemen, back to the basics. This is ... a soccer ball."

It was necessary, by that time, to start from the beginning, the basic concept.

The market is about products + companies + consumers.

Social media is a truly dynamic environment that moves at such an impressive speed, with a tool for almost anything you can think of, abundance of options and possibilities. In such an environment it’s easy to make a stop on your way to smell the flowers and get distracted by this new application which is just fresh out of the oven, brand new on its package and with many new features. Has it happened to you already? You've probably heard until boredom about the little boy who got lost in the woods and couldn’t make it back home, right?

At times like those we are living in today, where every day we get to see a new digital tool being developed, it’s worth recalling a fundamental concept in marketing and business: the business cycle is built upon a company that produces a product or service for the use of a consumer in exchange of a compensation, which is usually money.

Nothing more! All other considerations you can think of, revolve around this fundamental concept. If one of these elements isn’t there, the market itself doesn’t exist. Come’n, give it a try. Think about it. Imagine for a moment that there is no company. Who creates and develops the product? I hear you probably saying, "Well, someone will come up with something", and I would say yes, and I'll tell you, at that moment, that person has turned itself into "the company".

With the new tools in social networks, do not stop halfway down.

What’s the point in today’s post? Social media marketing exists to connect you with your client on a digital and extraordinary way, and pursue specific goals, either selling, building relationships, or any goal you choose. Again, it's still marketing, but in a digital environment and society.

In this social environment in which we decided to meet with our client, there are many beautiful trees, large and lush. They each represent a tool in social networks, both old and those that have emerged more recently. Many of these trees are so striking that it is difficult not to get lost in their new features and benefits and forget that we’ve came to this forest to meet our clients.

You can’t lose your focus. Your goal is not to stop and smell flowers, or stare at each of the trees and tools individually, but to connect with your customer. If trees are distracting your attention more than they should, keeping you from seeing where your customer is, it's time to rethink some things and start over.

The gold of social networks, regardless of the venue of your choice, it’s the wonderful opportunity they offer to interact with your customers in a way never seen before, without being limited by time, physical space or geographical distances.

Turn all those trees into connecting bridges with your client.

Make the most out of the benefits each tree offers, whether facebook, Google +, twitter, Pinterest, Blogger, Wordpress, Foursquare, Linkedin or any species of choice, to build a bond with your client, your audience, keeping always in mind it was the reason you decided to come to this forest we called "social networks".

Don’t stop in the middle. Building connecting bridges with your audience, you are directing your efforts towards achieving for your business the goals that initially brought you here and obtaining the greatest benefit you can from your social marketing plan.

What do you think about it? are you putting all your efforts in building the connecting bridges?

Related article: Relationships' Value: What can we expect from social media?

Tuesday, March 13, 2012

If you had to pay to be in Facebook ¿Would you continue to use it the same way?

What if social media stop being for free?
This is a perfectly personal reflection that comes from an article I read last week which was referring to us being "addicted to social media." And although I don’t want to consider myself (or realize I am) as an addicted to these things of Facebook, Twitter, Linkedin and other similar stuff, I do have to admit that for some years now, much of my time online is spent carrying out my "digital life’s things” both for personal and professional reasons.

And so far it has been great and I do believe, like many others, that the main advantage of these platforms is that they are free to use. All of them offer you the opportunity to participate without having to spend a penny, obviously putting aside the value of all the hours we have to invest, specially when we are using them to develop and complement our professional lives.

Is it the fact that they’re free the main reason why we use them?

It’s a turning point. Social networks offer us the opportunity to  dramatically connect with the world. In my case, living far away from my home country, they have helped me to maintain a link with my loved ones, friends, and all the relationships I left many miles away.

Now if we talk about the professional environment, then it’s a different issue, because social networks allows us to develop our personal brand, our digital identity in a way that we could have achieved never before. It allows us to contact people who we’ve not even had the opportunity to meet personally, expand our borders, collapsing geographic boundaries to really build a global village.

Could I have ever imagined I was going to be sharing my professional opinion with a businessman in India that has a super large business distributing nuts? Or that the articles of my blog would be read down in Australia? Never in my life. However, today, it’s the most common thing to see happening.

Many companies, perhaps yours included, are embarking on this issue of "social media" pushed by the argument that "it’s free" and that will allow them to "grow their business significantly," not even considering how an intensive job it can become, or the large number of hours that must be invested to develop a proper digital presence. And it's a valid argument.

Many companies, especially smaller ones, are moving forward and successfully, little by little, through the effective management of their social media presence.There's even a large percentage of them that have social media as their only promotional channel in use. And that shouldn’t be the way either, in my opinion.

In any case, one might ask the question: Do they do it because it’s free? or do they actually do it because social networks represent for them something valuable within their marketing strategy?, maybe a combination of both?

What if Facebook were to stop being free tomorrow?

And you, as a company, have made facebook the only channel for your marketing and promotional strategy. What do you do then? Have you thought about it?

In a situation like this, definitely two things could be happening:

  1. You don’t really see Facebook as a valuable thing, neither for you nor your business, as to continue paying a monthly, or yearly, or whatever that is fee, and decide to get down of the train and look for other ways to keep in touch with the world, or
  2. You've recognized the value that facebook (and with it, all other social platforms) can add to your personal and professional life, as well as your business, compare it with what the requested payment would be and you make the decision to continue with your digital life as it was, this time on paying for it.

Now, what if you’re requested to pay more money than you can really afford to pay?

You shouldn’t have a dependency relationship with social media.

Necessarily we all must understand that social media is simply a tool and should never become the one thing we do within our marketing plan, no matter how limited are the resources we have available.

There are many activities that you as a company can do to promote your business, or brand, on and off-line, starting from direct mail campaigns, flyers, in-store promotions, PPRR events, networking, and much more.

Don’t blind yourself thinking that your only alternative is social media, because then you could be losing extraordinary business opportunities for you, your company and product.

Adding social media to our traditional marketing plan.

Some time ago I published an article entitled "It's not a new but overhauled marketing", just referring to the fact that we’re interacting with a bunch of new platforms that allow us to carry out very well developed and effective marketing activities.

However, we must take into consideration that the fact that digital platforms offer us the option to participate for free doesn’t mean we should make them the only place we use to connect with our customers and audience.

Social media should be integrated into a comprehensive marketing plan that addresses all areas of work, from promoting face to face contacts through networking and PPRR events, to spreading the brand’s footprint through all the available venues, both traditional and digital.

What would happen tomorrow if suddenly you had to pay a monthly fee in each of the social networks you participate in with your brand or product? Would you be able to keep on doing it? Do you have other choices?

Related article: It's not a brand new but overhauled marketing.

Tuesday, March 6, 2012

Want a successful product? Become your most demanding customer.

Become your most demanding customer.
On a recent post on this blog, I shared with you my thoughts about the importance of clearly defining where is the starting point, referring thus to the point where you start for the effects of planning and implementation of any marketing action or plan.

I even think it's important to consider such thing as the starting point in any action that we propose to carry out in real life, but that would be a topic for another day.

In any case, it also happened that, while reading an article on the "Entrepreneurs" blog, it made reference to many entrepreneurs developing their business proposals taking into consideration many subjective product assessments, ie, getting carried away, in many cases, by their deep convinction that their idea was great, that there was an excellent market for it, that it was an out-of-this-world opportunity and things like that.

It is difficult to objectively assess your own product.

Do you have kids? Have a relationship in which you are deeply connected? Well if you do, you will  perfectly understand what I mean. In the same way that a wife finds it difficult to recognize that her partner is suffering from alcoholism or that she's being victim of domestic violence, thus it's difficult for the product creator to step aside and  objectively evaluate the different situations through which the product will pass.

The emotional bond that binds you to your product is natural, normal, and occurs from the moment that your product was on its development stage, the same way as the mother is connected with the child that is formed in her womb, or the wife connects with her partner when decided to join their lives.

Again, that link is normal and natural. However, as the mother finds it difficult to recognize the weaknesses or bad habits of her child, for you, creator of your product, it's the same. That emotional bond that connects you with the product from the beginning, in many occasions, keeps you from, or at least make it more difficult, being able to evaluate your product objectively.

There is a solution: Look at your product through the eyes of your customer.

It's a simple yet powerful statement: Step aside and try to think and act like your potential customer would. Ask yourself the same questions your client would ask, honestly ask yourself if your product really does what it's supposed to do, and take it a step further: use the product yourself as a normal buyer would.

As in the automotive industry, "take your car for a test ride". Be the test driver for your product, one that demands the best performance, one that has the highest expectations, the one that stops at every detail.

Only doing it this way, you will have real answers, valuable knowledge, because you're looking at your product from an objective point of view, a real and analytic one. And therefore, you will be able to straighten out whatever feature that isn't working properly, or add whatever you've come to realize is missing.

You might be wondering: Is it necessary to go so demanding?

The answer depends on the experience that you want to develop for your clients. If you want them to really fall in love with your product, then it pays off to be extremely picky. If you don't care that much, then you can simply leave it half way down.

That decision is simply on your hands and depends on how much you want to take your business forward. There's one thing you can be sure of: If you push yourself to the maximum, two things will happen:
  • You will have an iron shielded confidence: because you know that your product really does what you say it does, and more. Not only because you believe in it, but because it's been proven in practice.
  • Your customers will love your product: they will be as confident in your product as you are, and live the experience that you lived, because you anticipated to their needs. 
And you know that your experience with your product will be formidable, or at least one not soon to be forgotten.

Related article: Marketing; Where can we find the starting point?