Dynamic Pricing: Here today, gone today.
By Paul Herbig
Pricing is one of nature’s hidden wonders. We all see it but few of us understand it. And perhaps it is rightly so. To paraphrase an ancient wise man, “ You do not want to see legislation, sausage or pricing being made. It is not necessarily an appetizing process and you will be a changed man forever more as a result.”
With the advent of the Internet and vast computational capabilities, a phenomenon called dynamic pricing has arisen, mighty in scope and tremendous in its capabilities to change habits of every American and business. Dynamic pricing. Like it or hate it, it is here and for the rest of time. Dynamic Pricing is the practice of charging different customers different prices for the same product or service . . . at the same time. It has been typical marketing practice to charge different prices (at different times) . . . the retail markdown, the seasonal sale, the inventory clear-out are all examples of this. What makes Dynamic Pricing different is that prices offered to different customers at the very same time could well be considerably different. Some examples include charging travelers different fares for the same flight or same hotel accommodations, setting prices for sporting events based on the quality of the opponents and charging borrowers different interest rates based on their credit history. From a company perspective it is full of promise and excitement, yet fraught with risk. Dynamic pricing gives marketers the flexibility to pursue margins and sales volumes simultaneously I(especially true in settings with high uncertainty regarding market condition), and that increases profits. Companies that experiment with dynamic pricing could lose a few customers but the gains from the many, many customers who don't care would far outweigh the losses.
It is both new and old. In some ways, Dynamic Pricing is as old as commerce. Think of the Arab bazaars where buyers haggle with merchants over the price of spices and rugs. One buyer could well get a price considerably different from another buyer of the exact same good within minutes or seconds of each other. What makes it different is with the advent of technology, Software programs using sophisticated statistical models and algorithms can crunch all the factors that go into determining something's price, including market trends, competitors' prices, the cost to produce and sell the item, and the customer's demographic information and past purchasing history. Companies can now disseminate an individual price instantly to the Web, to store, or to customers anywhere in the world at anytime of day. Overstock.com acknowledges the company watches how long you linger on the site and how much you spend which could determine whether you will see a notice of a liquidation sale or a new shipment of premium priced items
An urban myth had Coca-Cola developing the ultimate in a dynamic pricing vending machine. The machine could sense the outside temperature, the number of cans of each brand still left in the machine, the time of day and was programmed to factor in how many nearby vending or retailing outlets existed. Then it supposedly would change the price instantaneously accordingly. That is, if it were hot outside, the machine isolated and how few cokes were left, the machine would register a significantly higher price than if it were cold and stocked full.
You too can check out dynamic pricing on the web. If you already have an Amazon or other online retailer account, create a second email address, than order the same item from your regular account as you would from your new address. Preferably do it as close together as possible. Are the prices the same? If not, odds are that your new account was provided a lower price (as inducement to become a new customer ). Or even go to a site, check out the price and return moments later and you may well get a totally different price..
Yes it is here to stay. What can customers do? Compare often. Shop carefully and become more savvy with the technology race. Marketers beware. Dynamic Pricing offers higher margin but at a cost of consumer discontent. What is the value of a lost customer to you? And more to the point, how important is your reputation? Do you want to be perceived as the ever shifting (and shifty) company or one that is consistent and fair to all? The choice is yours.
One is to make customers who pay a higher price feel they're getting more for their money. For instance, travelers are willing to pay hundreds of dollars more on first-class plane tickets even though the ticket doesn't get them to their destination any faster than the folks flying economy. What it does get them are perks such as complimentary drinks and more comfortable seats. Dynamic pricing also lends itself to products that are purchased infrequently, such as cars or luxury goods, because consumers are less likely to remember how much they paid or to compare prices with friends. Finally, segment customers appropriately and don't charge higher prices to those who are price-sensitive. Otherwise, you'll definitely alienate customers.
Saturday, August 25, 2007
Tuesday, August 21, 2007
Numbers
Numbers
Numbers is the award winning CBS science drama that shows on Friday nights. It has become quite a hit in the year plus it has been airing. Once or twice in each episode the young math progeny professor (who could multiply four digit numbers together before he could even speak complete sentences) describes how a mathematical concept (simple or otherwise) or mathematical law can be used to assist the good buys in finding or stopping the bad guys. Add some nifty graphics and visuals and it makes for good TV and some true learning about how that dismal mathematics we all learned in high school can be applied to real world problems. For nerds, it shows that you too can be cool. Of course, it is a drama show with the math angle as the device to provide hour -long drama. Nonetheless, it does provide some real-world education benefits, which is more than I can say for practically everything else on the tube.
So what does Numbers have to do with Marketing? Simply this, do you as a businessperson know your numbers? Do you even know what numbers we are talking about? Do you know what numbers are the important ones and which can be happily ignored? If so, go to the head of the class, you are dismissed from class and can go back to adding on to your net worth. IF not, come to the front of the room, pull up a chair and be prepared for some basics.
Here are the questions about numbers you should be asking yourself: How many leads do you get per day? Week? Year? More or less than last year at this time? What is your conversion rate (that is, converting leads into customers)? Is it rising or falling? How many customers do you have? Compared to last month or year? How many potential customers exist in your universe (your market area)? Is the number increasing or decreasing? What market share do you have? How many competitors do you have in your market area? How do you compare to your competitors? How many regular customers do you have versus transient one-of-a-kind customers? What is your average revenue per customer? What is your average revenue per regular customer? Do you know your profit margin for each product? For each customer or class of customer? Can you answer any of these questions?
Why is this important? How does this relate to you? Think of some products. No, not the type of products you sell but the type you get when you multiply two numbers. Your number of leads times your conversion rate provides you with the product that is the number of customers you have. Multiply this number by the revenue per customer and you have total sales. One more multiplication, this time revenues by the profit margin per customer should provide you with the total profit. Do you have these numbers? If not, what have you been using? Do you know how much better or worse you do from year to year? Do you have an idea as to why you are being better or worse? (for instance, if you improve your conversion rate slightly, this increases your revenue and profit stream if all else stays the same.) But if you do not measure it, you have no idea what happened within the black box called your business and hence cannot readily analyze what is the cause of business swings that regularly occur. But you might say I do not have time to spend to analyze my market and my numbers for I must work constantly to stay in business as it is . But I ask you, can you NOT afford to do so?
Take the time to find the numbers that matter, to analyze them, to understand the dynamics of your business, and then use them to make your business grow and become more profitable.
Numbers is the award winning CBS science drama that shows on Friday nights. It has become quite a hit in the year plus it has been airing. Once or twice in each episode the young math progeny professor (who could multiply four digit numbers together before he could even speak complete sentences) describes how a mathematical concept (simple or otherwise) or mathematical law can be used to assist the good buys in finding or stopping the bad guys. Add some nifty graphics and visuals and it makes for good TV and some true learning about how that dismal mathematics we all learned in high school can be applied to real world problems. For nerds, it shows that you too can be cool. Of course, it is a drama show with the math angle as the device to provide hour -long drama. Nonetheless, it does provide some real-world education benefits, which is more than I can say for practically everything else on the tube.
So what does Numbers have to do with Marketing? Simply this, do you as a businessperson know your numbers? Do you even know what numbers we are talking about? Do you know what numbers are the important ones and which can be happily ignored? If so, go to the head of the class, you are dismissed from class and can go back to adding on to your net worth. IF not, come to the front of the room, pull up a chair and be prepared for some basics.
Here are the questions about numbers you should be asking yourself: How many leads do you get per day? Week? Year? More or less than last year at this time? What is your conversion rate (that is, converting leads into customers)? Is it rising or falling? How many customers do you have? Compared to last month or year? How many potential customers exist in your universe (your market area)? Is the number increasing or decreasing? What market share do you have? How many competitors do you have in your market area? How do you compare to your competitors? How many regular customers do you have versus transient one-of-a-kind customers? What is your average revenue per customer? What is your average revenue per regular customer? Do you know your profit margin for each product? For each customer or class of customer? Can you answer any of these questions?
Why is this important? How does this relate to you? Think of some products. No, not the type of products you sell but the type you get when you multiply two numbers. Your number of leads times your conversion rate provides you with the product that is the number of customers you have. Multiply this number by the revenue per customer and you have total sales. One more multiplication, this time revenues by the profit margin per customer should provide you with the total profit. Do you have these numbers? If not, what have you been using? Do you know how much better or worse you do from year to year? Do you have an idea as to why you are being better or worse? (for instance, if you improve your conversion rate slightly, this increases your revenue and profit stream if all else stays the same.) But if you do not measure it, you have no idea what happened within the black box called your business and hence cannot readily analyze what is the cause of business swings that regularly occur. But you might say I do not have time to spend to analyze my market and my numbers for I must work constantly to stay in business as it is . But I ask you, can you NOT afford to do so?
Take the time to find the numbers that matter, to analyze them, to understand the dynamics of your business, and then use them to make your business grow and become more profitable.
Monday, August 13, 2007
Viral Marketing
Viruses are catchy: More on viral marketing
Viral marketing essentially takes advantage of the rapid multiplication effects of online social networks (through e-mail, chat rooms, IM, file-sharing networks, etc.) to help spread a commercial message on the cheap. Potential exists for exponential growth in message exposure that can far exceed what's achievable were similar budget spent on commercial media channels. Passed via peer to peer, "word of mouse" messages can help endorse a brand among like-minded consumers, thus spreading its influence. Because they're passed between individuals at a low distribution level they can bypass spam filters with relative ease.
Those seeking to attract and influence a young, Web-savvy, male-oriented audience should consider online viral tactics. Many of the most successful viral marketing campaigns have come from advertisers promoting consumer packaged goods and lifestyle brands to this demographic.
Here are six rules on how to succeed at v-marketing (as it is quickly becoming known as) .
Rule 1: Stealth is the essence of market entry
Most marketers know that getting into the consumer's mind is the toughest part of the challenge; the usual response is simply to turn up the volume. Viruses are smarter: They find a way into the host under the guise of another, unrelated activity.
PepsiCola is one company that has begun to experiment with v-marketing. Its Mountain Dew campaign offers kids the chance to send 10 proofs of purchase and $35 to qualify for a Motorola pager. Cool! The kids have to subscribe to the paging service themselves, and Mountain Dew reserves the right to beep their newly equipped customers with Dew-related messages on a weekly basis. So every time the pager goes off, it reminds the kids indirectly who's responsible for getting them that way-cool piece of social technology.
Rule 2 : What's up-front is free; payment comes later
Viruses are unusually patient little buggers. Many will lie dormant in their host for years before demanding payback; digital viruses often burrow into an unsuspecting hard drive and wait for their trigger date such as Michaelangelo's birthday before making their presence known. It's a corollary to stealth: no payment up-front.
Consider how Intuit's wildly popular Quickenrogram got its start. It all spread from a single campaign that contained a basic message: order the product and pay nothing. If you aren't productive within eight minutes of opening the box, tear up the invoice.
Of course, most users were not only balancing their checkbooks within eight minutes but also discovering that they couldn't live without this software. The result: 70% global market share in personal-financial-management software with minimal expenses for traditional marketing or selling. As an added bonus, Quicken gained an installed base to drive pricier sales of ancillary products such as checks and upgrades.
Rule 3: Let the behaviors of the target community carry the message
Viruses do not spread by chance. They let the high-frequency behaviors of their hosts -- social interaction, email, Websurfing -- carry them into new territories. The lesson for v-marketers: fashion your messages so that the target markets will transmit them as a part of their core interests.
This tactic works best when absolutely no one is masterminding the campaign. On America Online, for example, there are multitudes of chat rooms for investors; Motley Fool is only the most prominent. Not long ago, these communities got hold of a couple of high-tech stocks Iomega and Presstek that key members of the group "talked up" as hot investment opportunities. Both stocks enjoyed a skyrocketing hundred-fold increase, carried by the hospitable hype of the online hosts. When the mainstream press caught on, critics rushed in to pop the bubble. But compared to their starting points before AOL came along, Iomega and Presstek still trade at hugely inflated prices.
Rule 4: Look like a host, not a virus
Because they are able to masquerade as something they are not, viruses are able to avoid being rejected by human immune and computer operating systems. They enter human cells and mimic genetic material, or they enter software systems and mimic existing code. The message to v-marketers: be the host.
One consumer marketing company, albeit one with lots of money, has perfected the tactic. Consider Nike's "Just Do It" campaign. All it takes is megabucks to hire the world's most sought-after celebrity athletes, to buy television time at $40,000 a second during the Super Bowl, and to saturate the retail channel with product promotions and giveaways. But none of that worked as well as Nike's ubiquitous tag line, "Just Do It." The phrase is practically an entry in the Merriam-Webster Collegiate Dictionary under the listing: American culture. Everyone from cynical marketers in ad agencies to prison guards in B-movies is using the phrase without irony. Every time they use it, they're endorsing Nike products.
Rule 5: Exploit the strength of weak ties
Sociologists have long noted that individuals with many casual social connections have a larger influence on communities than do individuals with fewer strong connections. Viruses thrive on weak ties. The movement of viruses over the Web -- a practically infinite collection of weak ties in countless virtual communities -- is a prime example.
In business, such tactics are the instinctive practice of companies engaging in multilevel marketing: marketers such as Tupperware, Amway, and Mary Kay Cosmetics, for instance. In each of these businesses, the strategy is to find a collection of individuals who excel at developing a large number of weak ties -- and use those ties to sell products and services. Tupperware, for example, gets someone in a social community, such as a suburban neighborhood, to host a party featuring Tupperware. Everything about the party is ostensibly noncommercial: it's her house, her food, her friends. But the social interaction is funded by the sale of Tupperware products. What's social is indistinguishable from what's commercial a powerful business network built on weak social ties.
Law 6: Invest to reach the tipping point
Viruses do not become epidemics until they reach the tipping point. In other words, the virus must expand through the host population until it reaches a certain threshold of visibility and scale. Assume, for example, a virus doubles each year. In year one, it's only 1% of the host and scarcely detectable. In year two, it's still minute, only 2%. But in year five, it's 16% -- and suddenly it's an epidemic. V-marketers must understand that they're playing the same game because the impact of exploiting weak ties does not come overnight.
That's why Microsoft's true leverage with its DOS and Windows operating systems took a decade to pay off. Today Microsoft operating systems run on an estimated 85 million PCs the world over. That's why CNN was viewed as a joke by the mainstream press -- until suddenly everyone from Saddam Hussein to Bill Clinton was getting real-time news exclusively from the 24-hour network.
Though you can certainly derive a number of benefits from encouraging the viral spread of commercial content, be aware of the limitations. You cannot control the message and the channel thus making outcomes unpredictable and difficult to measure. The proportion of the online audience likely to participate is small. Jupiter Research's latest European consumer survey shows only 5 percent of the Internet population had forwarded an advertising message. Of respondents who said they had, 64 percent were under 34 years old and 56 percent were male.
If you want to use viruses, be smart and be patient.
Viral marketing essentially takes advantage of the rapid multiplication effects of online social networks (through e-mail, chat rooms, IM, file-sharing networks, etc.) to help spread a commercial message on the cheap. Potential exists for exponential growth in message exposure that can far exceed what's achievable were similar budget spent on commercial media channels. Passed via peer to peer, "word of mouse" messages can help endorse a brand among like-minded consumers, thus spreading its influence. Because they're passed between individuals at a low distribution level they can bypass spam filters with relative ease.
Those seeking to attract and influence a young, Web-savvy, male-oriented audience should consider online viral tactics. Many of the most successful viral marketing campaigns have come from advertisers promoting consumer packaged goods and lifestyle brands to this demographic.
Here are six rules on how to succeed at v-marketing (as it is quickly becoming known as) .
Rule 1: Stealth is the essence of market entry
Most marketers know that getting into the consumer's mind is the toughest part of the challenge; the usual response is simply to turn up the volume. Viruses are smarter: They find a way into the host under the guise of another, unrelated activity.
PepsiCola is one company that has begun to experiment with v-marketing. Its Mountain Dew campaign offers kids the chance to send 10 proofs of purchase and $35 to qualify for a Motorola pager. Cool! The kids have to subscribe to the paging service themselves, and Mountain Dew reserves the right to beep their newly equipped customers with Dew-related messages on a weekly basis. So every time the pager goes off, it reminds the kids indirectly who's responsible for getting them that way-cool piece of social technology.
Rule 2 : What's up-front is free; payment comes later
Viruses are unusually patient little buggers. Many will lie dormant in their host for years before demanding payback; digital viruses often burrow into an unsuspecting hard drive and wait for their trigger date such as Michaelangelo's birthday before making their presence known. It's a corollary to stealth: no payment up-front.
Consider how Intuit's wildly popular Quickenrogram got its start. It all spread from a single campaign that contained a basic message: order the product and pay nothing. If you aren't productive within eight minutes of opening the box, tear up the invoice.
Of course, most users were not only balancing their checkbooks within eight minutes but also discovering that they couldn't live without this software. The result: 70% global market share in personal-financial-management software with minimal expenses for traditional marketing or selling. As an added bonus, Quicken gained an installed base to drive pricier sales of ancillary products such as checks and upgrades.
Rule 3: Let the behaviors of the target community carry the message
Viruses do not spread by chance. They let the high-frequency behaviors of their hosts -- social interaction, email, Websurfing -- carry them into new territories. The lesson for v-marketers: fashion your messages so that the target markets will transmit them as a part of their core interests.
This tactic works best when absolutely no one is masterminding the campaign. On America Online, for example, there are multitudes of chat rooms for investors; Motley Fool is only the most prominent. Not long ago, these communities got hold of a couple of high-tech stocks Iomega and Presstek that key members of the group "talked up" as hot investment opportunities. Both stocks enjoyed a skyrocketing hundred-fold increase, carried by the hospitable hype of the online hosts. When the mainstream press caught on, critics rushed in to pop the bubble. But compared to their starting points before AOL came along, Iomega and Presstek still trade at hugely inflated prices.
Rule 4: Look like a host, not a virus
Because they are able to masquerade as something they are not, viruses are able to avoid being rejected by human immune and computer operating systems. They enter human cells and mimic genetic material, or they enter software systems and mimic existing code. The message to v-marketers: be the host.
One consumer marketing company, albeit one with lots of money, has perfected the tactic. Consider Nike's "Just Do It" campaign. All it takes is megabucks to hire the world's most sought-after celebrity athletes, to buy television time at $40,000 a second during the Super Bowl, and to saturate the retail channel with product promotions and giveaways. But none of that worked as well as Nike's ubiquitous tag line, "Just Do It." The phrase is practically an entry in the Merriam-Webster Collegiate Dictionary under the listing: American culture. Everyone from cynical marketers in ad agencies to prison guards in B-movies is using the phrase without irony. Every time they use it, they're endorsing Nike products.
Rule 5: Exploit the strength of weak ties
Sociologists have long noted that individuals with many casual social connections have a larger influence on communities than do individuals with fewer strong connections. Viruses thrive on weak ties. The movement of viruses over the Web -- a practically infinite collection of weak ties in countless virtual communities -- is a prime example.
In business, such tactics are the instinctive practice of companies engaging in multilevel marketing: marketers such as Tupperware, Amway, and Mary Kay Cosmetics, for instance. In each of these businesses, the strategy is to find a collection of individuals who excel at developing a large number of weak ties -- and use those ties to sell products and services. Tupperware, for example, gets someone in a social community, such as a suburban neighborhood, to host a party featuring Tupperware. Everything about the party is ostensibly noncommercial: it's her house, her food, her friends. But the social interaction is funded by the sale of Tupperware products. What's social is indistinguishable from what's commercial a powerful business network built on weak social ties.
Law 6: Invest to reach the tipping point
Viruses do not become epidemics until they reach the tipping point. In other words, the virus must expand through the host population until it reaches a certain threshold of visibility and scale. Assume, for example, a virus doubles each year. In year one, it's only 1% of the host and scarcely detectable. In year two, it's still minute, only 2%. But in year five, it's 16% -- and suddenly it's an epidemic. V-marketers must understand that they're playing the same game because the impact of exploiting weak ties does not come overnight.
That's why Microsoft's true leverage with its DOS and Windows operating systems took a decade to pay off. Today Microsoft operating systems run on an estimated 85 million PCs the world over. That's why CNN was viewed as a joke by the mainstream press -- until suddenly everyone from Saddam Hussein to Bill Clinton was getting real-time news exclusively from the 24-hour network.
Though you can certainly derive a number of benefits from encouraging the viral spread of commercial content, be aware of the limitations. You cannot control the message and the channel thus making outcomes unpredictable and difficult to measure. The proportion of the online audience likely to participate is small. Jupiter Research's latest European consumer survey shows only 5 percent of the Internet population had forwarded an advertising message. Of respondents who said they had, 64 percent were under 34 years old and 56 percent were male.
If you want to use viruses, be smart and be patient.
Thursday, August 9, 2007
इन्तेग्रतेद Marketing
As Benjamin Franklin said during the Revolutionary War, “Gentleman, we must hang together or we will hang separately.” Neither marketing nor sales can succeed on their own; but together, working in unison, they create a powerful, almost irresistible force. Marketing needs the feedback from sales to determine what is working and what isn’t. They must know what promotions work and those that don’t. Sales cannot be competitive without the tools that an enlightened marketing can provide.
Integrated Marketing or Collaborative Selling is where all aspects of the organization, marketing, sales, support, customer service, are found within one umbrella organization and all facets, data bases, personnel, etc are integrated to optimize previously discrete business departments. The objective is to link all the business processes among all these common elements into a smooth flowing cooperative endeavor. If successful, the end result will be the creation of a Customer-centric organizations.
We want to be one company, providing a single face, to the customer. Therefore, you must integrate all interactions to the customer to create the customer expectations and customer experience that is relevant and useful to that customer. Companies that integrate internally across those sales and marketing process see benefits exceeding 20 to 30 percent over those that do not integrate. The ultimate is thinking of sales and marketing as one and not two organizations linked together. Consistency is the key: to be viewed at all times through all angles by all customers the same way, providing the same message.
Integration continues to gain ground slowly and painfully. Necessity, not corporate vision, will continue to drive the process of improved marketing and sales integration. Silo-based management of sales and marketing resources promotes waste and thwarts results measurement. It also creates a procedural barrier to ensuring that organizational actions align with organizational goals related to sales and customer retention
Major barriers to integration remain. Don't bet on integrated marketing becoming a corporate fad. Unlike past fads, the process of integrating business development and retention faces some unique obstacles that actually might benefit the process in the long run. Perhaps the biggest obstacle is the lack of a clear champion, short of the chief executive. Integrated strategies span sales, marketing, human resources, and operations, and few people, aside from very senior executives, have responsibilities spanning this range.
Large companies such as IBM have created integrated marketing groups, but even these don't necessarily tie into the customer service and operational issues that go along with the need to fulfill marketing promises at the operational level. Large ad agencies for years have claimed to offer this service, but, with few exceptions, integration really means the offering of additional direct marketing, promotional, or other tactical services, and not high-level organizational consulting potentially needed to align organizational silos with organizational goals. (Coke recently announced that its next ad agency will have to come up with inventive new ways to promote the brand beyond creating new types of television ads.)
Companies with a results-oriented, integrated approach to business development and retention almost always run their businesses this way, because the bosses insist on it. In the meantime, more and more of the nation's business schools are turning out students with exposure in one way or another to the emerging area of integrated management,
which could eventually create a new group of leaders less wedded to a specific
tactic.
Integrated marketing is the wave of the future and the separator for companies that will succeed and those that will fail. Which will you be?
Integrated Marketing or Collaborative Selling is where all aspects of the organization, marketing, sales, support, customer service, are found within one umbrella organization and all facets, data bases, personnel, etc are integrated to optimize previously discrete business departments. The objective is to link all the business processes among all these common elements into a smooth flowing cooperative endeavor. If successful, the end result will be the creation of a Customer-centric organizations.
We want to be one company, providing a single face, to the customer. Therefore, you must integrate all interactions to the customer to create the customer expectations and customer experience that is relevant and useful to that customer. Companies that integrate internally across those sales and marketing process see benefits exceeding 20 to 30 percent over those that do not integrate. The ultimate is thinking of sales and marketing as one and not two organizations linked together. Consistency is the key: to be viewed at all times through all angles by all customers the same way, providing the same message.
Integration continues to gain ground slowly and painfully. Necessity, not corporate vision, will continue to drive the process of improved marketing and sales integration. Silo-based management of sales and marketing resources promotes waste and thwarts results measurement. It also creates a procedural barrier to ensuring that organizational actions align with organizational goals related to sales and customer retention
Major barriers to integration remain. Don't bet on integrated marketing becoming a corporate fad. Unlike past fads, the process of integrating business development and retention faces some unique obstacles that actually might benefit the process in the long run. Perhaps the biggest obstacle is the lack of a clear champion, short of the chief executive. Integrated strategies span sales, marketing, human resources, and operations, and few people, aside from very senior executives, have responsibilities spanning this range.
Large companies such as IBM have created integrated marketing groups, but even these don't necessarily tie into the customer service and operational issues that go along with the need to fulfill marketing promises at the operational level. Large ad agencies for years have claimed to offer this service, but, with few exceptions, integration really means the offering of additional direct marketing, promotional, or other tactical services, and not high-level organizational consulting potentially needed to align organizational silos with organizational goals. (Coke recently announced that its next ad agency will have to come up with inventive new ways to promote the brand beyond creating new types of television ads.)
Companies with a results-oriented, integrated approach to business development and retention almost always run their businesses this way, because the bosses insist on it. In the meantime, more and more of the nation's business schools are turning out students with exposure in one way or another to the emerging area of integrated management,
which could eventually create a new group of leaders less wedded to a specific
tactic.
Integrated marketing is the wave of the future and the separator for companies that will succeed and those that will fail. Which will you be?
Tuesday, August 7, 2007
When Perfect is No Longer enough
Nadia. The name itself implies a senior moment. Nadia Comianci, as you who remember here would know, was a Romanian waif, a delightfully charming china-doll, who won our hearts in the 1976 Olympics in Montreal by posting the first ever 10 in Olympic history in gymnastics, not just once but several times. Those who watched and wondered saw history in the making, but not for the reason you would think. That unique experience made front page headlines all across the world. Perfect as it was once defined was the unachievable, always just beyond the possible. Only my old roommate Freak could ever claim to be perfect telling me, “ I thought I made a mistake once but I was wrong.”
But how times have changed. Nowadays, gymnasts routinely get 10s, so much so it does not even make the news in the local sports page. And perfect has changed in other events as well. I remember the once lauded academic achievement of “Straight As” was an honor that almost guaranteed an IVY league full—paid ride. Not one person had ever received a “Perfect 4.0” at my high school in the 100 years of its being in existence. That is, no one had before me (and certainly not me as I scored numerous Bs in gym and typing), but sometime about the early eighties it changed. Since that time, that once unimaginable honor has been given not a few times but many and often numerous times within the same class. It is hard to believe that today’s kids are much smarter than those in my day. If this is not the case, what happened?
Grade inflation. Score inflation. Inflation in general. A recent honors ceremony I attended provided some clues. Academic honors were given out for achievement in several basic classes: Math, English, Social Studies. As the names were called and students went up to get their awards, I noticed that almost every child received one. The reason, as I found out later, was “it helps their self esteem to get an award,” and “we don’t want any students to be left out.” (similar to what is happening in organized sports when every participant now gets an award regardless of performance.) Then the top ten were announced. As the principal read off the names and the ten students came up, he indicated, “The tenth place academically required a GPA of 11.319, that is, more than a straight A average.” Then it hit me. What once was an extraordinary achievement, one so high that no one had in the history of a school reached that level, was now so commonplace that doing so does not even guarantee a top ten ranking (My son received a Straight A on his final report with the footnote that he was now ranked 19th in his class).
When everyone is perfect, perfect has no meaning. How then can you rank and identify the top achievers. Why by creating an A+ grade, of course. This too has its limits as the award ceremony showed. When too many students start getting A+s, then the definition of perfect must change again. What then will be created? A++? When C was once representative of an “Average” Grade, it now for all practical matters represents failure and B has become the baseline average. When judges are scoring everyone as 10s (to not to hurt their feelings and hinder their self esteem no doubt), how can they then differentiate the outstanding from the just average. Are we trying to be a Lake Wobegon suburb where everyone scores above average?
Perfect once meant something. Almost perfect showed excellence and capability. But in a world where everyone scores almost perfect and many score perfect, what then does perfect really mean?
Is it time to return to the old days when perfect stood for something?
But how times have changed. Nowadays, gymnasts routinely get 10s, so much so it does not even make the news in the local sports page. And perfect has changed in other events as well. I remember the once lauded academic achievement of “Straight As” was an honor that almost guaranteed an IVY league full—paid ride. Not one person had ever received a “Perfect 4.0” at my high school in the 100 years of its being in existence. That is, no one had before me (and certainly not me as I scored numerous Bs in gym and typing), but sometime about the early eighties it changed. Since that time, that once unimaginable honor has been given not a few times but many and often numerous times within the same class. It is hard to believe that today’s kids are much smarter than those in my day. If this is not the case, what happened?
Grade inflation. Score inflation. Inflation in general. A recent honors ceremony I attended provided some clues. Academic honors were given out for achievement in several basic classes: Math, English, Social Studies. As the names were called and students went up to get their awards, I noticed that almost every child received one. The reason, as I found out later, was “it helps their self esteem to get an award,” and “we don’t want any students to be left out.” (similar to what is happening in organized sports when every participant now gets an award regardless of performance.) Then the top ten were announced. As the principal read off the names and the ten students came up, he indicated, “The tenth place academically required a GPA of 11.319, that is, more than a straight A average.” Then it hit me. What once was an extraordinary achievement, one so high that no one had in the history of a school reached that level, was now so commonplace that doing so does not even guarantee a top ten ranking (My son received a Straight A on his final report with the footnote that he was now ranked 19th in his class).
When everyone is perfect, perfect has no meaning. How then can you rank and identify the top achievers. Why by creating an A+ grade, of course. This too has its limits as the award ceremony showed. When too many students start getting A+s, then the definition of perfect must change again. What then will be created? A++? When C was once representative of an “Average” Grade, it now for all practical matters represents failure and B has become the baseline average. When judges are scoring everyone as 10s (to not to hurt their feelings and hinder their self esteem no doubt), how can they then differentiate the outstanding from the just average. Are we trying to be a Lake Wobegon suburb where everyone scores above average?
Perfect once meant something. Almost perfect showed excellence and capability. But in a world where everyone scores almost perfect and many score perfect, what then does perfect really mean?
Is it time to return to the old days when perfect stood for something?
Brands are Forever
Brands are forever
“All our factories and facilities could burn down tomorrow but you’d hardly touch the value of the company; all that actually lies in the goodwill of our brand franchise and the collective knowledge in the company.” Roberto Gonzueta, the late CEO of Coca-Cola:
Brands still matter, but not as much. Only 32% of respondents to an America's Research survey said that brands are extremely important for choosing holiday gifts, versus 48% three years ago, according to a recent New York Times article. This correlates with a report in the Wall Street Journal indicating increased demand for monogrammed or otherwise personalized items, suggesting some people may be more interested in branding themselves than adopting and promoting commercial brands on their clothing and personal effects. They may be of less importance, but they still are important.
In the meantime, brands still do have value, as proven not only by the continued willingness of consumers to pay more for names like Gucci and Louis Vuitton, but also the potential willingness of the likes of Donald Trump to invest in a scheme to save the FAO Schwarz -the major toy retailer in bankruptcy. The company failed, because it embarked on risky expansions outside of the FAO Schwarz umbrella and undercut the unique shopping experience and product selection that let FAO Schwarz charge a little more. The brand, however, still has value, as it is synonymous with unique items at the high end of the toy market.
A recent survey by the Henley Center indicated that the public trusts brand names more than government, the police, and the legal system. This research highlights the importance of the relationship that still exists between consumers and trusted brands. Three trends support this belief: individualism encourages self-identification through consumption and the brands you buy/wear/eat; globalization allows brands to become a worldly phenomena for consumers; and symbolic experiences are increasingly in demand—consumers are buying experiences, whose contents are largely image driven, intangible, and symbolic, rather than commodities.
Branding creates attachments between customers and the product: the stronger, the attachment, the better the branding. The brand creates awareness of your product and above all, differentiates it from other products (if you cannot provide differentiation to your product, you do not have a brand!) Make your brand/product come alive. Give it history, perspective. Give it a life of its own. Provide your audience with details of the product, its history, its development, the people behind the story, designers, engineers, support staff. Put the human touch on it. Bring it to life. Make it personal. Remove the all too often assumption of it being a commodity, one of millions coming off the assembly belt every day. Attach the product to real people (not just celebrity endorsers), the real people behind the story and people will see it as real, not just a thing. Caveat, though. Avoid over-slickness. Consumers are smart and becoming smarter every day. As cynical as they are, they will easily see through such puffery and your brand and brand image will suffer as a result.
Branding is all encompassing. Even the smallest of details goes into the branding. It is also a 24/7 endeavor. Employees wearing the brand or brand logo even on their off-hours or engaging in activities whether representing the company/brand officially or not can impact the brand and its position. For example, a Disney employee still wearing his Disney attire can harm the brand by uttering un-family like vocabulary or engaging in public activities that would go against the spirit of that brand. If your brand is belly button rings or tongue piercings, perhaps those forms of expression would equate to the image you desire for your brand. But certainly not for Disney, as well as most other brands in the world.
And remember, the brand is only as good as the product: it requires constant vigilance on your part to maintain the quality and functionality of the product, any lessening provides the consumers with reasons to breech the contract between you, the brand/product, and themselves. A brand should be focused on the long-term relationship between it and the consumer; any short-term gain you may attempt could well hurt the long-term value of the brand.
Brands can be forever. Don’t dilute its brand equity just to make next quarter’s numbers.
“All our factories and facilities could burn down tomorrow but you’d hardly touch the value of the company; all that actually lies in the goodwill of our brand franchise and the collective knowledge in the company.” Roberto Gonzueta, the late CEO of Coca-Cola:
Brands still matter, but not as much. Only 32% of respondents to an America's Research survey said that brands are extremely important for choosing holiday gifts, versus 48% three years ago, according to a recent New York Times article. This correlates with a report in the Wall Street Journal indicating increased demand for monogrammed or otherwise personalized items, suggesting some people may be more interested in branding themselves than adopting and promoting commercial brands on their clothing and personal effects. They may be of less importance, but they still are important.
In the meantime, brands still do have value, as proven not only by the continued willingness of consumers to pay more for names like Gucci and Louis Vuitton, but also the potential willingness of the likes of Donald Trump to invest in a scheme to save the FAO Schwarz -the major toy retailer in bankruptcy. The company failed, because it embarked on risky expansions outside of the FAO Schwarz umbrella and undercut the unique shopping experience and product selection that let FAO Schwarz charge a little more. The brand, however, still has value, as it is synonymous with unique items at the high end of the toy market.
A recent survey by the Henley Center indicated that the public trusts brand names more than government, the police, and the legal system. This research highlights the importance of the relationship that still exists between consumers and trusted brands. Three trends support this belief: individualism encourages self-identification through consumption and the brands you buy/wear/eat; globalization allows brands to become a worldly phenomena for consumers; and symbolic experiences are increasingly in demand—consumers are buying experiences, whose contents are largely image driven, intangible, and symbolic, rather than commodities.
Branding creates attachments between customers and the product: the stronger, the attachment, the better the branding. The brand creates awareness of your product and above all, differentiates it from other products (if you cannot provide differentiation to your product, you do not have a brand!) Make your brand/product come alive. Give it history, perspective. Give it a life of its own. Provide your audience with details of the product, its history, its development, the people behind the story, designers, engineers, support staff. Put the human touch on it. Bring it to life. Make it personal. Remove the all too often assumption of it being a commodity, one of millions coming off the assembly belt every day. Attach the product to real people (not just celebrity endorsers), the real people behind the story and people will see it as real, not just a thing. Caveat, though. Avoid over-slickness. Consumers are smart and becoming smarter every day. As cynical as they are, they will easily see through such puffery and your brand and brand image will suffer as a result.
Branding is all encompassing. Even the smallest of details goes into the branding. It is also a 24/7 endeavor. Employees wearing the brand or brand logo even on their off-hours or engaging in activities whether representing the company/brand officially or not can impact the brand and its position. For example, a Disney employee still wearing his Disney attire can harm the brand by uttering un-family like vocabulary or engaging in public activities that would go against the spirit of that brand. If your brand is belly button rings or tongue piercings, perhaps those forms of expression would equate to the image you desire for your brand. But certainly not for Disney, as well as most other brands in the world.
And remember, the brand is only as good as the product: it requires constant vigilance on your part to maintain the quality and functionality of the product, any lessening provides the consumers with reasons to breech the contract between you, the brand/product, and themselves. A brand should be focused on the long-term relationship between it and the consumer; any short-term gain you may attempt could well hurt the long-term value of the brand.
Brands can be forever. Don’t dilute its brand equity just to make next quarter’s numbers.
Revenge of the Neglected Customer
Revenge of the neglected customer
“He who laughs last . . .” anonymous humorist-critic-spurned customer
In this column I have often harped upon the lack of customer service that exists in the world and the all-too-present and persistent notion that chopping a few cents off a product gives a provider the right to offer poor or non-existent service. Well, it is time to discuss this topic once again. And I will continue to wail until I am blue in the face. It appears, like most prophets, the truth I speak may be heard but it is not soaking in. New evidence both indicates the continued presence of poor service and its ominous repercussions if continued. All those businesspersons out there who wish to remain in business for the long-term, ignore at your own peril.
The Retail Customer Dissatisfaction Study 2006, conducted by The Jay H. Baker Retailing Initiative at Wharton and The Verde Group, a Toronto consulting firm, surveyed approximately 1200 U.S. shoppers in the weeks before and after Christmas 2005 illustrates my point. When consumers have a bad shopping experience, they are likely to spread the word, not to the store manager or salesperson, but to friends, family and colleagues. Overall, if 100 people have a bad experience, a retailer stands to lose between 32 and 36 current or potential customers. The biggest source of consumer dissatisfaction? Parking lots
The Results show that only 6% of shoppers who experienced a problem with a retailer contacted the company, but 31% went on to tell friends, family or colleagues what happened. Of those, 8% told one person, another 8% told two people, but 6% told six or more people (This result duplicates other studies where the average number of contacts for a dissatisfied customer is five or more, and respondents indicating they told up to twenty people were not unusual). "Even though these shoppers don't share their pain with the store, they do share their pain with other people, apparently quite a few other people," says the researcher. Overall, if 100 people have a bad experience, a retailer stands to lose between 32 and 36 current or potential customers, according to the study.
The complaints have an even greater impact on shoppers who were not directly involved as the story spreads and is embellished, researchers found. Almost half those surveyed, 48%, reported they have avoided a store in the past because of someone else's negative experience. For those who had encountered a problem themselves, 33% said they would "definitely not" or "probably not" return. This storytelling has even more impact on the people the story is told to than the people who told the story. One reason tends to be that the tales of annoyance tend to increase with each telling (remember the game of telephone you used to play as a child and the considerable differences the message at the end turned out to be from that at the onset? Same principle applies here.) The unresponsive sales clerk by the end of the chain has become abusive and almost life-threatening. the exponential power of negative word-of-mouth lies in the nature of storytelling As people tell the story the negativity is embellished and grows Psychologists indicate that to make a story worth telling, some entertainment value must be present, a shock effect to keep the other party’s attention. Basically, this storytelling of bad encounters by customers entertainments their friends and families to the detriment of businesses.
Big Box retailers were rated particularly poor in the survey. Customers of Wal-mart and its ilk shared their negative experiences with an average of six people, double to triple the audience given those who shopped and had negative experiences at other retailers. The biggest gripe? Locating merchandise in the many acres of retailing fun that exists.
Moral of the story: cents off and miles of merchandise does not a happy shopper make. Cut the complaint off at the time it occurs and satisfactorily resolve the issue . . . then and there. Otherwise you are not faced with one unhappy customer but many.
“He who laughs last . . .” anonymous humorist-critic-spurned customer
In this column I have often harped upon the lack of customer service that exists in the world and the all-too-present and persistent notion that chopping a few cents off a product gives a provider the right to offer poor or non-existent service. Well, it is time to discuss this topic once again. And I will continue to wail until I am blue in the face. It appears, like most prophets, the truth I speak may be heard but it is not soaking in. New evidence both indicates the continued presence of poor service and its ominous repercussions if continued. All those businesspersons out there who wish to remain in business for the long-term, ignore at your own peril.
The Retail Customer Dissatisfaction Study 2006, conducted by The Jay H. Baker Retailing Initiative at Wharton and The Verde Group, a Toronto consulting firm, surveyed approximately 1200 U.S. shoppers in the weeks before and after Christmas 2005 illustrates my point. When consumers have a bad shopping experience, they are likely to spread the word, not to the store manager or salesperson, but to friends, family and colleagues. Overall, if 100 people have a bad experience, a retailer stands to lose between 32 and 36 current or potential customers. The biggest source of consumer dissatisfaction? Parking lots
The Results show that only 6% of shoppers who experienced a problem with a retailer contacted the company, but 31% went on to tell friends, family or colleagues what happened. Of those, 8% told one person, another 8% told two people, but 6% told six or more people (This result duplicates other studies where the average number of contacts for a dissatisfied customer is five or more, and respondents indicating they told up to twenty people were not unusual). "Even though these shoppers don't share their pain with the store, they do share their pain with other people, apparently quite a few other people," says the researcher. Overall, if 100 people have a bad experience, a retailer stands to lose between 32 and 36 current or potential customers, according to the study.
The complaints have an even greater impact on shoppers who were not directly involved as the story spreads and is embellished, researchers found. Almost half those surveyed, 48%, reported they have avoided a store in the past because of someone else's negative experience. For those who had encountered a problem themselves, 33% said they would "definitely not" or "probably not" return. This storytelling has even more impact on the people the story is told to than the people who told the story. One reason tends to be that the tales of annoyance tend to increase with each telling (remember the game of telephone you used to play as a child and the considerable differences the message at the end turned out to be from that at the onset? Same principle applies here.) The unresponsive sales clerk by the end of the chain has become abusive and almost life-threatening. the exponential power of negative word-of-mouth lies in the nature of storytelling As people tell the story the negativity is embellished and grows Psychologists indicate that to make a story worth telling, some entertainment value must be present, a shock effect to keep the other party’s attention. Basically, this storytelling of bad encounters by customers entertainments their friends and families to the detriment of businesses.
Big Box retailers were rated particularly poor in the survey. Customers of Wal-mart and its ilk shared their negative experiences with an average of six people, double to triple the audience given those who shopped and had negative experiences at other retailers. The biggest gripe? Locating merchandise in the many acres of retailing fun that exists.
Moral of the story: cents off and miles of merchandise does not a happy shopper make. Cut the complaint off at the time it occurs and satisfactorily resolve the issue . . . then and there. Otherwise you are not faced with one unhappy customer but many.
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