How do you set your prices

How do you set your prices

Jan 16, 2017 | Marketing, Small business

Most times people set prices as a function of three things:

  • What their costs are,
  • What margin the budget demands,
  • What the competition is charging.

All are the wrong way to go about it.

Prices should be absolutely dependent on what customers are willing to pay.

This bears no relationship whatsoever to your costs, or what the boss wants by way of margin, but has a lot to do with what the competitors are charging, assuming your product is substitutable.

The challenge therefore is to ensure that there are no substitutes for your product.

In many categories, perhaps most, this is a real challenge, one that makes marketing all that much more important, as marketing should be focussed on the delivery of value.

Most businesses set out to deliver all the bells and whistles, and the reasoning is that they are trying to help customers by giving them as much as possible, and some choice. However, looking at a product feature by feature and figuring out which ones customers are willing to  pay for, and which are just in the way, makes more sense.

The better you know your customers, it follows, the better you will be able to determine which features they are prepared to pay for, and how much they are worth to them. It also follows that the more specific the niche you are in, the easier it becomes to understand their purchase motivations. Nobody can be all things to all people, choices simply have to be made.

There is an electrician in my local area with a strong proposition.

In an environment where we do not expect tradies to come on time, and when they do turn up, they tramp through your home, and leave a mess behind them. This bloke makes several promises:

He will be there at the nominated time, + or – 15 minutes, or you do not pay him,

He leaves the work area at least as clean as he found it, or you do not pay him.

He will give you the price before he starts the job, and it is a fixed price, it will not change.

He charges a premium rate, and the biggest problem for a potential customer is the waiting list. If you cannot wait, or do not like the hourly rate, he does have the numbers of others he will give you, without any guarantee of performance.

Many people in the area would not use him, as he ‘charges too much’. They are the ones who see little value in the propositions that make him different, and he is fine with that. In fact, he seems to enjoy directing potential customers elsewhere, as it highlights the fact that he is really busy, and has become a price setter, not a price taker.

Back to the challenge of price setting.

When the cost of provision of something that adds value is less than the value customers see, then it makes sense to provide it. In my electricians case, he leaves himself some spare time to ensure he can make good on his promises, and he charges for the privilege, simply because the certainty offers great value to his client base.

Simplicity is a key, the simpler the better.

Simple to explain, deliver and understand.

 

 

 

 

Are we coming to the end of the great Australian FMCG Duopoly?

Are we coming to the end of the great Australian FMCG Duopoly?

Jan 3, 2017 | Marketing, Sales

Supermarkets in Australia have had it good for some years, having the protection of a duopoly, which is almost a licence to print money in most circumstances. Woolworths certainly did for quite a while, and the fact that Coles did not is a reflection of poor management rather than a competitive market.

Perhaps I am being overly conspiratorial, but why you should ask, did Woolworths not at least, stick a toe into the burgeoning markets to our immediate north when they were so awash with cash a few years ago? They left it to the European retailers, so presumably they did the numbers and determined that  the margins were not up to their standards, the competitive nature of those markets was beyond their ability to survive. Interestingly and perhaps tellingly, the 4 major Australian banks, now a very comfortable oligopoly have made forays into foreign markets, with a stunning 100% failure rate, and are now hunkering back down to squeeze more margin from the domestic mulch cow.  Perhaps Woolies came to the same conclusion, so opted instead for a skirmish into domestic hardware.

Look how well that worked.

Business models evolve, sometimes quickly and we appear to be in a period of extreme evolution. It may not be obvious on a day to day basis,  but I bet you will be able to look back in 5 years, and see that the changes will have been significant.  I predict that general wholesalers will be almost a museum piece, as business is done directly, enabled by digital technology. The choke hold they have held on the supply chains for the last 75 years is about to end.

Added competition has further complicated the happy duopoly. Aldi has taken a big chunk of share, and in the process changed the dominating retail model, increasing the focus on price to the detriment of proprietary brands and margin extraction by the ‘rental’ of  retail shelf space to suppliers. By another means, Cosco has also made a dent, although nowhere as marked as Aldi, and there are pointers that Aldi’s German rival Lidl, owned by Kaufland is eying an entry to the Australian market. In addition, AFN,  reporting on the Woolworths AGM is highlighting the rumoured entry of Amazon Fresh into the Australian market.

Changing consumer habits. The trip into the supermarket is just one point in the process of urban dwellers feeding themselves.  Not only are there many alternate sources of products they can cook themselves now available, but eating food prepared for you is increasing, from a high priced restaurant to the lunch van that turns up in the area at 12.30 every day and sells you a sandwich.

Fragmenting consumer lives. Eating together as families has been a part of the human DNA since we came out of the trees. It plays a social role as well as one that delivers safety and acts as a medium to pass on the knowledge and experience  gathered that day, and from a lifetime, but that habit is fragmenting rapidly, along with all other aspects of our work and social lives.

Technology is the enabler and often cause of all that is going on above, and the one thing we know for sure about tech, is that the pace of development is always  accelerating, and that if for no other reason is the reason that the FMCG landscape will be very different in 5 years. For evidence, look no further than the Amazon Go  test in Seattle, just one store, accessible by Amazon staff only at this stage, but perhaps the way of the future.

My conclusion to the opening question therefore is ‘Yes’ we are coming to  the end of the duopoly, and not just in FMCG.

 

How to make your website really work for you

How to make your website really work for you

Dec 7, 2016 | Communication, Small business, Social Media

A friend of mine recently drafted a website for a product he is launching, and asked me to have a look before publishing it. Not a great thing to be doing, as by the time I had finished commenting, he had tuned out. There was just too much bad news.

There are millions of websites out there, so the question  now is not just how to get your website seen by those to whom it is targeted, but how do you then get them to take some sort of action, without which, it all has little point.

A few simple rules

Clarity of purpose. Ensure it is crystal clear what you do, in essence why the site exists. The simpler the better, remove all the detail, all the jargon and fancy words, opting instead for simple statements and graphics that illustrate why you are there.

What problem do you solve. Customers buy solutions to problems, not products. The purchase of everything from the groceries to expensive luxuries are in some way connected to a problem, real or perceived that the customer has. Tell them which one you are solving, how, and why they should buy from you.

They are not interested in you. Almost every site has an ‘About us’ page. It is useful to give some background, demonstration of expertise, and how you care deeply about the ‘bilbies’, but less is more. People are interested in you only to the extent that it confirms their decision to purchase from you. The fact that your grandfather who founded the business was apprentice of the year in 1935 is supremely irrelevant, as are the awards you may have won in 2000.

Demonstrate that your solution works. This can take many forms from testimonials to statistics and demonstrations, but is an important component of building trust and credibility.

Have a designer design. The look of a site says a lot about you, and it is a designers job to interpret the important things visually. The choice of images, layout, use of white space, location of icons of various types are all done better by a pro. It does not have to cost a lot, and most of those who design websites who may be good technically are not necessarily good at visual and creative design. The bit of extra investment is almost always well worth it.

Tell them what to do now. Ask for the action you want a visitor to your site to take. Download something, watch a video, follow a link, whatever it may be, make it clear, easy to do, and ask.

My friend was sorry he asked, but a week or so later, showed me a way better version that will now be published as a part of his product launch in a few months.

9 strategies for social media marketing success

9 strategies for social media marketing success

Dec 5, 2016 | Marketing, Social Media

Social media is the ‘shiny new thing’ of marketing. Everyone seems to want one, whatever it is, and everyone has a view.

There is plenty of advice around on how to do it, I just put the term ‘How to manage social media’ into Google and got 54.5 million responses in a millisecond.

At the risk of adding to the dog-pile, after a conversation a couple of weeks ago with a so called expert who clearly had only picking pockets on her mind, I thought I would add to the list, and try and keep it sufficiently simple to be of use.

Be original.

Pretty hard when there is so much already out there, but so much of it is the same, just in a different dress. Being able to throw a light into a dark corner is always useful. I am reminded of my kids soccer games when they were little. 10 kids all around the ball, kicking it at the same time, with 95% of the field empty. Commentary on Social media is similar, everyone follows the ball, is in the one place, but there is so much space elsewhere, that seeing it for what it is, opportunity rather than barren space is useful.

Be focused.

 Knowing who you are writing for, and speaking to them about things they are worrying about, see as threats or opportunities, and speaking in their language, in the first person, in an individual way, makes a huge difference to the results you will get.

Writing quality.

Pretty obvious, nobody will willingly read crap, so follow the rules of grammar, be interesting, entertaining, remove bullshit and weasel words, and deliver ideas worth sharing. This applies irrespective of the medium. A written blog post, video, email, twitter post, whatever it is, make it quality to suit the medium.

Eye-catching layouts.

 We are visual animals, blocks of text are not attractive, and not how we scan material. Have a good header photo or illustration, a headline that demands more attention, paragraph headers, and plenty of white space. As a test, go into your local newsagent and look at the magazines on display. These guys are the experts at this stuff, those that have survived are very good at grabbing and keeping your attention, and leading you to a purchase.

Linking.

As you build a library of content, it makes sense to link it in relevant places to post you have written in the past, and other places you may have posted. It is also vital to build credibility by linking to good content others post, and in time some of them may link back to posts you write, which gives your google rankings a real goosing. When a so called ‘influencer’ links to something you have posted, some of their google cred rubs off on you, and that is gold.

Cross posting.

This is as essential as linking, as it enables a wider audience to have the chance of finding your content. Much of this can now be automated, but it also pays to personalise and tailor the content to the platform to which you are cross posting to better suit the way that platform interacts with its users. In my case, there are hundreds of people who have subscribed to my blog posts, not a lot by some standards, but plenty by mine as they are a pretty selective bunch, and there are hundreds more who see the posts via LinkedIn, and there are very few multiples, those who are both blog subscribers and subscribers to the LinkedIn posts.

Be observant.

I can only go by my experience here. When I started, 1500 posts ago, I wondered where the next one would come from, but they just started to flow as I looked at the world through a different lens. I also found it necessary to keep a log of ideas, post drafts, links, and all the other supporting stuff, which I do in a huge file on One Note, an essential tool to record being observant.

Be patient.

There are millions of blog posts published every day, 60 hours of video uploaded onto YouTube every minute, just being seen is a major achievement. Believing it can happen overnight as promised by many with a product to sell is delusional, it takes time, effort, and persistence, on top of those elements above.

Never steal.

There is so much stuff out there, who would ever know?? Everyone. It is obvious pretty quickly when you just plagiarise, and there are multiple software solutions that crawl the web looking for copied material, so you will be found out, However, more importantly, being original, genuine, authentic, whatever you choose to call it, is essential to success. The exception is attribution, but that is not stealing, just the opposite, it is acknowledging the expertise of others, and you may find tnhat they in turn will acknowledge yours. More google gold.

Tell me what works for you.

 

 

How to set a marketing budget that works

How to set a marketing budget that works

Nov 21, 2016 | Governance, Management, Marketing

Pretty obvious question, particularly at this time of the year when organisations are starting to think about the preparation of the 2017 budget.

In many  enterprises, the marketing budget is set by the boss and the finance people.

They see marketing as a cost, so typically it becomes a percentage of revenue. They agree a targeted revenue, then apply a percentage.

What absolute bollocks

If marketing is a driver of revenue, then the more you spend, the more productive you should be, and when well done with metrics and sensible discipline, the more money you get at the top line as a result.

Therefore the challenge is for marketers to come up with sensible marketing plans, that promise to deliver on the strategic objectives agreed by the enterprise.

Marketing then becomes  an investment, not a cost.

Zero based marketing will have its day, when the marketing planning  is done reflecting the strategic drivers and priorities of the enterprise, and answers the question ‘what are the best ways to deliver on the objectives?’.

Do that and you generate the revenue, and marketing becomes an investment, the effectiveness of which can be measured.

Thinking about marketing as an expense is about the most common stupid assumption in the corner office, but is well ingrained because marketing people have lacked the balls and organisational grunt to back their convictions that it is otherwise. When confronted by reasonable, but difficult questions marketers without the necessary experience, knowledge, or intellect,  break into generalisations, weasel words and fluff.

Use cascading S.M.A.R.T. goals to forecast and measure the impact of the tactics employed to achieve an outcome, any outcome, not just marketing.

Pretty sensible acronym.

Specific. Measureable. Agreed. Realistic. Time bound.

I know the BEHAG (Big Hairy Audacious Goal) crowd will trot out JFK’s BEHAG to reach the moon by 1969, that galvanised the space effort, but most of us do not have the resources of the US at our disposal, so lets just take a powder and be realistic.

Set realistic enterprise goals, then have them drive the allocation of resources to marketing, and indeed elsewhere, hold people accountable, and have continuous learning loops in place. Only a fool makes the same mistake twice.

I once had a very confronting shouting match with the MD of a business I worked for who drove the whole budgeting process from the bottom right hand corner of the P&L. Somehow, magically, a number appeared, and he drove budgets backwards through the business. It was a reverse auction between functions, who could promise to deliver the most for the least?

Problem was that the promises were extracted in a strategic vacuum, and meant little.

The shouting happened as the finance guy offered up a chunk of his budget that had been earmarked to integrate the reporting systems of several businesses we had taken over the previous year to deliver reliable and timely sales and margin numbers. At the time (it was over 20 years ago) I stated it was not worth spending marketing budgets if I could not track the outcomes, and the priority was therefore the sales information, not the promised revenue resulting from the marketing expenditure because it could not be reliably measured.

I smile now, but at the time, it was not fun, and was just another nail in my corporate coffin.

Should we be rethinking our Unique Selling Proposition?

Should we be rethinking our Unique Selling Proposition?

Nov 15, 2016 | Marketing, Sales

From the dawn of marketing time, the Unique Selling Proposition has been a foundation idea. I wonder if it holds the same attraction now, post the digital reconstruction of marketing, or should we be rethinking our approach.

The USP was intended to communicate what you did that nobody else could, or would. That was fine in the days before the marketing world was global, as in your local area you could pretty easily be unique, but that is no longer the case.

Any idea that emerges that generates traction with customers will be copied very quickly by competitors, making it no longer unique. Anyway, just because an idea or claim may be true, there is no compulsion that customers should believe it.

Perhaps this boils down to making an appeal to people’s hearts rather than their minds. This has always been the case, but in a homogenised world, takes on even more importance.

When I think about my own behaviour critically, there are a few things I notice that presumably are pretty common. If so, why are we not using them more in place of claims of bigger, faster, better?

Choice. In most cases, there is more than one product that solves whatever challenge I am facing. In making a choice, being sure of the ability of the product to deliver the solution is worth money to me.

Top of mind. TOM is even more relevant than at any time in the past. We are blasted with thousands of messages every day, so being Tom when the appropriate occasion arises is gold!. A good enough solution that is there, easy to access, and offers reasonable value will get a vote.

Experience is never forgotten. Good or bad, the past influences the way we behave today. There are now a number of café’s in easy walking distance of my office. Some time ago I got a lousy coffee in one of them, probably a ‘trainee barista’ but when I pointed out politely the coffee was crap, all I got was a shrug, and explanation that the boss was  not there. No second chance will be given, perhaps irrational, as it was a while ago, and almost certainly a one-off, but  that is their problem, not mine, I have plenty of choice.

Heart. What it says about us. Sometimes we make purchase choices simply on the basis of what the choice we make says about us, and this is usually almost unconscious. I drive an old Mercedes, it is a great car, but much to my surprise, it is what that car says about me that makes it so comfortable for me. Similarly, in the days we all smoked, Marlborough was a big brand, not because there was any USP, it was just a fag, but because of what it said about the smoker. (Lucky that has changed a bit over time).

Value is always a combination of all sorts of little things, some not obvious. Convenience, availability, branding, packaging, exclusivity, design, and yes, price, as well as many other often highly personal factors.  In an increasingly busy life, changing just a little of any one of the factors can considerably enhance value.  When we compute value, again often unconsciously, it is rarely the USP that pops into our minds, there is a mental wrangle of all the foregoing, that sometimes ends up being expressed as a number relative to some other number for an alternative, called price, and sometimes as just a feeling.

Back to the question, should we rethink our USP?

To my mind the changes that have occurred in the last 20 years demand that we do so.

We used to be able to sell products, so the USP was a useful tool, but that time has passed. The power in the buying relationship has moved from the seller to the buyer, completely altering the nature of a sales process. We can no longer deliver a product and charge a price, now what we deliver is an increasingly personalised value package, for which we are paid. We need therefore to be considering a Unique Value Proposition, UVP.

It might seem just a semantic difference, but it is a huge behavioural one