Archive for the ‘marketing’ Category

A successful price-raising strategy: a bit at a time

Wednesday, April 21st, 2010

Companies that have discounted in response to the Great Recession now find themselves in the position of needing to find a way to return prices to something closer to “normal,” whatever that is. Those companies have gotten some good news and bad news in the form of research from Michael Tsiros of the University of Miami and David Hardesty of the University of Kentucky, as reported in the April Harvard Business Review.

The bad news? Trying to bring the price back in one fell swoop doesn’t work: only 10% of shoppers would pay $499 for a product that had been previously discounted to $349, according to the researchers.

The good news, though, is that raising prices in several steps can capture more revenue; 62% of shoppers would buy at an intermediate price of $379 and 24% would buy at $449 after the prior price rise. According to HBR, moving the price higher gradually “raises the expected future price in consumers’ minds and increases shoppers anticipation of what’s known as ‘inaction regret.’”

[The authors' original paper is in the January 2010 AMA Journal of Marketing.]

Related posts:
A business owner raises prices during the financial crisis
When you can raise prices, don’t hesitate

Department of Brandular Deception – what is a Samsonite anyway?

Monday, January 25th, 2010

The old backpack briefcase had a hole in it, and it wasn’t healthy to carry 15 pounds of stuff on my shoulders anymore, so I searched online and found a great deal on a Samsonite rolling briefcase. It arrived late last week.

My wife said, “Does that have the Samsonite lifetime warranty? Sometimes when you get something that’s discontinued, they don’t have the lifetime warranty. You should check.”

Fast forward to today. I was moving my stuff from the old briefcase to the new one, and saw a card from Samsonite. “Thank you for purchasing a fine Samsonite product… our Samsonite product is backed with a Three-Year Limited Warranty…. While our products are handcrafted using the finest materials available, our warranty is not unconditional.” And then there were lots of exclusions and exceptions.

At the bottom of the card, it said the following: “Heritage Travelware, Ltd., 430 Kimberly Drive, Carol Stream, IL 60188-1804 USA under license from Samsonite Corporation.”

Scanned ImageThis explained a lot. There wasn’t going to be an unlimited warranty, because this bag, no matter what the label said, was not Samsonite. It was Heritage Travelware – whoever they are.

Behind this simple label is a well-worn yet risky strategy. After more than 90 years manufacturing its own luggage, Samsonite has decided to trade on that name by licensing it out to other manufacturers. Designers have been doing this for decades (sometimes, much to their chagrin), but for Samsonite it’s particularly risky. I didn’t really think Geoffrey Beene designed that Dopp kit I bought years ago at Marshall’s, but I wasn’t buying a Samsonite toothbrush here, I was buying luggage. I thought – I really thought – that Samsonite, the purveyor of the lifetime warranty my wife valued so much, made that case I bought.

But they didn’t. And the licensor offered its own Three-Year Limited Warranty in place of the lifetime one. Brands take decades to create, but can fall apart in a flash. The easy money offered by licensing can come at a price – the erosion of goodwill and trust that has been built up over the years. Let’s hope my new bag lasts long enough for me to forget it’s a “Heritage.”

[Below is what luggage companies used to promise, before Three-Year Limited Warranties.]

Customers who return products – not as bad as we thought?

Tuesday, December 1st, 2009

There’s been lots written about customers who deserve to be fired. “Bad” customers call customer service constantly, return products willy-nilly, and otherwise misuse the gifts that corporations bestow on them with their products and services.

But there’s another side to the story. By clamping down on returns (or even selectively penalizing “serial returners”), companies can depress their overall sales, write Andrew Petersen of the University of North Carolina and V. Kumar of Georgia State University in the most recent WSJ Business Insight section (”Get Smart About Product Returns“):

For every retailer, there is an optimal rate of returns. Higher returns, up to a point, have been shown to result in higher future sales. So if the rate of returns is too low, the retailer is missing out on potential sales. But if the rate of returns is too high, the costs to the company outweigh the benefit of the increase in sales.

Petersen’s and Kumar’s insights are based on their study of a large catalog retailer. They compared sales during a period with a liberal return policy with another period with a more restrictive return policy. In this brief podcast, Petersen further illuminates their findings. Lenient return policies caused purchasers to buy more, and also encouraged referrals, which were found to be extremely valuable. In the end, the amount returned by frequent returners (and the study found them – 5% of shoppers made 75% of all returns) was outweighed by the increased purchases from all other shoppers.

Retailers dwelling on getting ripped off by “serial returners” would do well to think about what their policies do to all the other customers out there, who end up buying somewhere else.

[Here's a little taste of the moral quandary posed by returning a product that you shouldn't.]

Related post:
Using customer returns information to improve products

Marketing messages are simply another bee in the hive

Tuesday, November 10th, 2009

Cynthia Kurtz starts off a recent blog post with a provocative statement: “Telling a story is not always the best way to tell a story.”

She continues:

There are no green fields in the land of stories; every available spot is occupied and contested. There are no story-free environments. When a new story is launched into the world, the stories it meets do not simply watch as the newcomer descends; they rise to meet it and swarm around it in complex, unpredictable and sometimes baffling ways. If an idealistic metaphor for telling a purposeful story is pulling a lever or pushing a button on a compliant machine, a more realistic metaphor is sending a bee into a hive.

I want to talk about what this means for marketing communications, especially in today’s world of proliferating social technologies.

Marcomm people have always been tasked with creating messages that can inform the public utterances of the company – be they press releases, speeches, interviews, advertisements, etc. For simplicity’s sake, let’s call these things “stories.” Here are some examples of very brief stories that companies have told over the years:

  • Budweiser is the King of Beers
  • Chevy is the Heartbeat of America
  • GE brings good things to life
  • Wal-Mart: always the low price

Those are the most public messages, but there are others, not explicitly stated, perhaps, but nurtured and supported by the marcomm folks:

  • Nobody ever got fired for buying IBM.
  • A Mercedes tells people, “I’ve arrived.”
  • Cool people shop at Target.

The official messages have always encountered other bees in the hive. Protesters, in some cases unions, and the press have offered counterstories to the company story – although one could argue that the press has often swallowed the company message and regurgitated it whole. (Quick aside – for the longest time I was amazed by how news stories profiling a musical artist would appear just a couple of days before a new album hit stores.) Here are some counterstories you may be familiar with:

  • GE’s industrial pollutants have damaged the environment at certain places where they had plants.
  • Wal-Mart achieves cheap prices by purchasing goods from overseas factories that exploit their workers.
  • GM cars have poor fit and finish and aren’t fun to drive.

By and large, though, the hive was pretty empty. Corporate messages were transmitted, and seeped into our consciousness pretty much unaltered. This was because mass public communication was expensive and exclusive.

Now we live in a different world. The hive is buzzing with voices. Communication is cheap and easy. Blogging, Tweeting, Facebooking, Yelping, Amazon-reviewing, etc., etc. The counterstories fly fast and furious (read this one contesting an oft-reported statistic that Wal-Mart prices save American families $3,100 per year).

More than once, the other hive members have swarmed all over a corporate story and killed it. Remember the Motrin Moms fiasco, or the short-lived new Tropicana packaging?

Marketers, it’s time to stop trying to control your message. It’s time to stop believing that if you spend a lot of money buying advertisements, sponsoring sporting events or creating publicity stunts, that people will automatically believe what you say.

Instead, you’re going to have to earn your positive messages. Sell great products, service them well, provide outstanding value, thrill your customers. Listen hard to what they’re saying. The deep values they espouse in the stories they tell are your messages. Feel free to retell those stories in your forums. Look in the negative ones for clues to things you can improve, or markets you simply don’t serve well.

But, most of all, stop thinking you’re in control.

(Photo from direct dish via Flickr Creative Commons)

Related posts:
The “Values Proposition”
Tropicana hears feedback, brings back old carton
Marketers, stop shouting

Farmers’ market secret ingredient – community

Thursday, October 22nd, 2009

Broad Street Market 2I did a project last year with the Broad Street Market, a farmers’ market here in Harrisburg. (Disclosure: I am on the Market’s board of directors.) We were trying to establish some parameters for a strategic plan for the Market. My project was to interview Market customers to understand why and how they valued the Market, and what common issues might be that the strategic plan should address.

I did 60 open-ended interviews, and heard some great stories – for example, a woman in her seventies discussed coming to the Market as a young girl, shopping at a place that used to sell wonderful pears, taking the trolley that ran down 3rd Street. But some of the best stories weren’t explicitly told – they occurred during the interviews.

Perhaps half a dozen times an interview was interrupted while the person I was speaking to greeted a friend who walked by: “Hi, how you doing?” and an embrace. “Let’s get together,” or “See you Saturday.”

And when the board reviewed the stories, a theme emerged: community as an important value. We had expected customers to discuss safety and cleanliness (and they did), the types of vendors (a bit), fresh and local products (yes) or the hours of operation (a lot). But the theme of community, something we hadn’t been looking for, kept coming up. For those customers, the Market was more than just a place to shop. It was a place to meet friends, to stay connected, even to return to after they’d moved out of town.

This is an interesting observation for all brick-and-mortar retailers, restaurants, etc. Even in this technology society, people yearn to get together, to be with friends and acquaintances. (Note how tech-based getting-together solutions like Meetups, Tweetups and Foursquare have emerged.) How aware are you of the community you serve? How can you engage it, and nourish it? How can you honor the value that your customers place in it?

Related posts:
The Values Proposition

John Jantsch on “how to get your customers talking”

Tuesday, October 13th, 2009

Today John and Duct Tape Marketing posted on a topic near and dear to my heart: how to get customers talking. (I take it for granted that customers talk anyway, but John is right: smart companies help the process along.) Read the entire post, but here’s my favorite piece of advice from John’s post:

Ask them – the best word of mouth starts with “word of listen.” Call your customers up and ask them why they buy, why they stick around, and why they tell their friends about you. You might be a bit surprised by their answers. Hint: it’s usually not the stuff you have in your new marketing brochure. You stand a far greater chance of attracting the right customers and the right buzz if you really understand what your current customers value about doing business with you. This goes for online and social media listening as well – what are they saying in chat rooms, blog comments and on twitter?

One phrase in this excerpt – “you stand a far greater chance of attracting the right customers… if you really understand what your current customers value about doing business with you.” This points directly to the Values Proposition, and I think every company, B2C or B2B, needs to have one.

(Hat tip Brick and Click)

Please visit these new pages on the site

Tuesday, October 13th, 2009

Caution: self-promotion ahead.

I’d like to bring your attention to some new pages on the site, describing particular offerings you can get from Caddell Insight Group (see circled links below). I’d appreciate it if you could give those pages a visit, and contact us if we can help you in any of these areas.

If you’re reading the RSS feed, here are the links:

Slide1

Memo to marketers: stop shouting

Tuesday, June 30th, 2009

When Billy Mays died over the weekend, his Times obituary observed that

Mr. Mays learned his craft on the Atlantic City Boardwalk, where he drew crowds as he hawked his mops and other wares. His big break came in the mid-1990s when he was hired by Orange Glo International to appear on the Home Shopping Network to promote the company’s line of cleaners, which included OxiClean, Orange Glo and Kaboom.

I liked Billy Mays; in fact, we have some OxiClean and Mighty Putty in our closets here at home (unused, I’m pretty sure). My kids enjoyed his TV pitches. But I think that his passing is an opportunity to re-evaluate how marketers talk about their products.

Because despite the new community-building and discussion tools the internet has provided us, we marketers still communicate more like Atlantic City barkers than friends or businesspeople.

Consider the state of marketing messaging.

Send Sales Rep Productivity Sky-High
*

Nokia Saudi Arabia Capitalizes On Its Revolutionary Software & Solutions To Redefine Mobile Use**

Illumina Introduces Breakthrough Software Advancements with Genome AnalyzerIIx Sequencing System***

Just cut, activate and apply Mighty Putty™ to fix, fill or seal almost any surface!

There is one powerful similarity between Billy Mays’ pitches and the “serious” press release headlines above. Their purpose is to get our attention. “Revolutionary!” “Breakthrough!” But these words have lost their meaning through overuse and underdelivery–no one believes them anymore. [There's also one striking difference--Mighty Putty has Billy Mays, a real person, who you can laugh with, remember, and even mourn.]

Isn’t it time to retire “breakthrough” and “revolutionary” marketing copy for B2B products?

Granted that there’s a lot of noise out there about all products, but there are far better and more effective ways of finding and engaging with customers than adding your voice to the chorus of shouters.

* salesforce.com
** Nokia
*** Illumina

Re-examining Kindle pricing

Monday, June 15th, 2009

UPDATE 13 July 2009: Kindle 2 price has been reduced to $299

The Kindle 2 ($359) is expensive. The Apple 3G (now reduced! $99!) is cheap. Right?

Lots of people have been criticizing Amazon for the high price tag they put on the Kindle, a nice and important device but no iPhone–including yours truly.

But the iPhone price decrease caused me to look again at the pricing model of the two devices and belatedly recognize that behind both prices are two different structures that influence both the upfront price and, perhaps most importantly, the total cost of ownership. Let’s break apart the pricing, then.

Kindle: $359 (no contract), wireless service (free), content ($9.99 per book).
iPhone: $99 (2-yr contract), wireless service (min $70/month), content ($0-$20 per app).

Let’s assume that content pricing cancels out–both seem like pretty good deals to me. Let’s also assume, to be fair, that the iPhone customer is replacing another cellphone, and that she would be paying $45 per month for voice access. This leaves the iPhone-only service charge as $25 per month.

Now the 2-year comparison price looks like this:

Kindle: $359
iPhone: $699

This isn’t meant to compare the value of the two devices. The iPhone can do a lot more than the Kindle, whereas the Kindle is a bit of a savant–really good at doing one thing. It’s meant to illustrate two different pricing models at work.

The iPhone is packaged using the traditional US wireless approach. Heavily subsidized initial cost, long-term contract (with penalties for early termination), monthly postpaid subscription services.

Kindle has simpler packaging. For the high upfront cost, you get the device free and clear, as well as the wireless service underlying the book ordering/fulfillment service. (One analyst estimates Amazon’s monthly wireless service cost at $2 per month per subscriber, by analyzing Sprint’s financial reports.) You pay more only when you buy something. Of course, the Kindle is not an open device (neither is the iPhone), so you can’t shop for better-value books elsewhere.

The Kindle isn’t necessarily expensive; it’s just packaged with one price for device and prepaid service. The iPhone, on the other hand, is a bit like leasing a car: low upfront and monthly payments that continue as long as you want to use the device. Both models are legitimate: but do point up the difficulty of understanding “price” in the connected technology marketplace.

Caveat emptor.

UPDATE 16 June: Jeff Bezos of Amazon discusses the Kindle pricing model, via NY Times Bits Blog.

Related post:
Kindle illuminates skim-pricing strategy

Why didn’t GM use “Harry Potter Marketing”?

Thursday, June 4th, 2009

I was driving to the local baseball field this week (very slowly–there’s a townwide sidewalk construction project underway and every street is a work zone). Coming the other way was a big Cadillac driven by someone in the Cadillac market sweet spot–a 75-year-old guy.

Which got me wondering about Cadillac and GM’s restructuring and the flashy, angular Caddies they’ve been selling for the past 10 years. The guy I saw was driving an older Seville, long and smoother, a real Caddy.

A few years ago Harvard Business Review’s annual “breakthrough ideas” section included a piece called “Brand Magic: Harry Potter Marketing” by Frédéric Dalsace, Coralie Damay, and David Dubois. The essay argued that marketers, rather than continually trying to reinvent brands to make them relevant to a younger demographic, should allow the brand to follow its audience, aging as they do–the same way Harry Potter ages, from book to book, as his readers age.

To me, it seems a lot easier to manage Cadillac to its demographic and then create some other brand to pick up younger drivers. Easier said than done, I know. But the continual, tortured reimagining of Cadillac is symbolic, I think, of GM’s Sisyphean effort over the past 30 years to show that Alfred P. Sloan’s strategy of “a car for every purse and purpose” had legs. [I mean, did the rap-star-accessory 2001 Escalade really point the way to the future of the brand?]

Trying to reposition a brand involves cutting out some (most?) of what makes it appealing to its current audience. That’s expensive. It also involves a leap of faith–that the name and brand equity can be made meaningful to a new audience.

By pouring billions of investment in new product and advertising to change Cadillac, GM could have nurtured Saturn from a brand that 20-somethings valued (its early 90’s positioning–I know because I drove one!) to one that appeals to forty-somethings: the “aspirational” buyers that Cadillac drew during the ’60’s and ’70’s. It probably wouldn’t have changed much with GM as a whole, but it’s almost certain that they wouldn’t be ditching Saturn and keeping Cadillac if they had done that.

Seems to me that Toyota, with Scion, has the chance to do “Harry Potter Marketing” right. It will be interesting to see if, in 20 years, Scion is still selling weird young-people cars, or ones that their current owners–who’ll be older and wealthier–really want to drive.

(Photo: left, the 2001 Cadillac Seville; right, the 2002 Cadillac Escalade EXT)