Price Sensitivity

With gas prices higher than they’ve ever been (and the obvious consumer discontent associated) it got me thinking about the threshold that exists for price increases. Gas is obviously a commodity that people need to get around, but at what point do people get so frustrated with the cost that they look to alternative forms of transportation? In some cases high prices are bearable and not worth the additional effort necessary to change a daily routine. However; there has to be a threshold at which people decide enough is enough. In most cases that threshold will probably be dependent on the cost of switching to a different brand or in this example, method of transportation.

Often publishing companies that operate on a subscription model battle with the best approach to annual price increases. As a product’s readership decreases the price needs to increase to maintain consistent revenues. But at what point will the customers that purchase the product look for an alternative because the cost of the product is simply no longer worth the value they receive in return?

The Van Westendorp Price Sensitivity Meter is an approach to researching pricing that asks the following 4 key questions to set a range within which people will continue to purchase the product in question:

1) At what price do you begin to think a product is too expensive to consider?
2) At what price do you think a product is so inexpensive that you would question the quality and not consider it?
3) At what price do you think a product is getting expensive, but would still consider it?
4) At what price do you think the product is a bargain?

In the digital age, one thing publishers have struggled with is putting a value on “content”.    Most consumers expect that the cost of a book be significantly less on a tablet because there are no costs associated with a physical product.   By implementing a Van Westendorp Study, you can more effectively use customer feedback to set prices in the range that optimizes sales and keeps customers satisfied.

Failure to Launch

Today, the Harvard Business Review featured an article by Umair Haque on the importance of failure.  While it is often difficult for people to look at failure positively, it’s usually failure that allows us to grow both personally and professionally.   Failure gives way to new learnings, new solutions and ultimately, innovation.

“A system that fails to fail lacks the capacity to evolve — much less to gain resilience, or, above all, wisdom.”

Similarly, Seth Godin’s book “The Dip” discusses the importance of knowing when to quit.  A product marketer that spends too long on projects that are likely to fail will have less success than a person that identifies the projects that are unlikely to succeed earlier in the development process.  The difference is that the second person fails faster, allowing them to get to the good ideas quicker.

In a perfect world we’d all be successful at every attempt we made.  Unfortunately, without failure we’d never gain the insight required to come up with truly innovative solutions. 

Besides, without failure we’d never have discovered the post-it note!

Guy Kawasaki: Enchantment

In the video below, marketing guru Guy Kawasaki talks about his latest book “Enchantment:  The Art of Changing Hearts, Minds and Actions”. Guy discusses what he views as the pillars of enchantment; likability, trustworthiness and great cause.

It’s clear that while marketing contributes to the bottom line, it’s great products that are the cornerstone for any company’s success.  Marketing can optimize the success of a product offering, but without quality products it’s unrealistic to expect enchantment be achieved. What makes your products great?

The Key to the SME

The key to the SME?  Turn-key, easily implemented solutions.

Small to medium sized enterprises generally do not have the time or the man power to focus attention (or scarce resources) on functions that fall outside of their “core business”.  In these types of organizations the marketing manager may have responsibility for the company’s human resource function, or the CFO may also serve as general counsel.  With more responsibility, each employee is forced to prioritize the tasks they believe contribute most significantly to the bottom line. 

Companies that cater to the SME market need to provide affordable solutions that save their clients’ time.  Groupon has found a way to turn group buying power into an opportunity for consumers to test products and services that they would not typically have the opportunity to experience.  Group buying networks exist for some B2B products and services as well, but could a similar concept be applied to a wider range of offerings?  While this could account for the “affordable” part of the equation, easy implementation and fufilment might be more difficult propositions.

The SME continues to be a relatively underserved market.  Though they do not have the same resources as a large multinational, they will spend their money on solutions that they believe will improve their businesses.  With over 2 million small businesses in Canada – they may still be worth your time.

OpenTable Does Valentine’s Day the Right Way

In my most recent post I asked readers what Groupon could have done differently to avoid the grief they received from customers as a result of a misleading Valentine’s Day coupon.

But whose responsibility is it to indicate that prices may be higher than normal on Valentine’s Day?  Should customers be expected to know that prices are subject to change on certain holidays?

After booking my Valentine’s Day dinner through OpenTable I recognized a disclaimer at the bottom of my confirmation e-mail:

“Holiday Reminder:  This is a confirmed reservation for Valentine’s Day.  Given that some restaurants create special menus, you may wish to contact the restaurant for details about any prix-fixe menus and pricing.  Thank you.”

This simple disclaimer about a seemingly obvious condition protected OpenTable from potential Valentine’s Day scrutiny. OpenTable took the opposite approach to Groupon recognizing that it would be ill advised to assume a customer’s understanding of special circumstances. With new channels of online distribution at our disposal, we mustn’t forget the increased complexity of sales transactions and the importance of clear communication with potential buyers.

Groupon: 50% Off What?

Recently valued at over 5 billion dollars, Groupon has taken the impact of collective buying power to new heights. Customers receive 50-90% off coupons to some of their favourite products and services under the condition that a deal sells beyond a set “tipping point” set by Groupon and its partnering suppliers.

Today; however, Groupon was under scrutiny for a deal with FTD that offered 50% off flowers over Valentine’s Day.  The coupon redirected customers to a site that sold flowers at a higher price than on their regular website.  Groupon has since cancelled the offer and have been working with FTD on a solution to remedy the negative publicity.

While it’s good to know that Groupon is listening to its customers and taking corrective action, what do you think Groupon should do to prevent this in the future?  Though many subscribe to the belief that customers are always right – should they have been surprised that there would be a mark-up on flowers on the week of Valentine’s Day?

I’d love to hear your thoughts.

It’s About “How” Not “What”

Today information can be found pretty much anywhere and more often than not it’s free.  Increasingly consumers are less concerned with what information they’re given and more about how it’s presented to them.  Wolframalpha is a perfect example of site that has revolutionized the way content gets displayed within a search engine.  It doesn’t just tell you where to find your answers – it gives you your answers.  In fact, in many cases it gives you more than you asked for (see image below).

As we consider new products and new ways to reach potential customers it’s important to consider how people want products delievered to them.  Sometimes a new product may be right in front of us in existing products, just asking to be shown in a different light.