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.

Want to be the Best in the World?

I recently had a debate with several colleagues about the following question; would you rather be the best in the world at one specific task or a jack of all trades? Viewpoints on the question were mixed.

On one hand, being the best in the world makes you an authority on whatever it is you are the best at. A jack of all trades may have a wide range of talents, but is unlikely to be called upon for knowledge on one particular subject.

On the other hand people that are the best at what they do spend endless hours perfecting their craft, but are often one dimensional. What does a professional athlete do after his or her career is finished? Malcolm Gladwell’s title “Outliers” suggests that it takes 10,000 hours for someone to master their craft. That’s over five years (based on a 37.5 hour work week) of working on only one specific task.

Product Management is one career path where it’s viewed as beneficial to have expertise in a number of areas. As the link between a number of organizational functions including technology, marketing and sales – having broad knowledge is important for developing the trust and support of the stakeholders Product Managers work with on a daily basis. A Software Product Manager without technical expertise may have difficulty communicating customer needs to the internal technology team. An effective product manager though, must also be able to communication benefits to the product’s end user in a way they’ll understand.

In Product Management, being the best in the world is not a matter of mastering one particular task. What are the key factors to perfecting your craft?

Where Do You Post-It?

If you’ve seen 3M’s latest efforts to sell Post-It Notes, you might be puzzled by what seems a non-traditional approach.  Post-It Notes’ current marketing campaign has targeted what was once a secondary customer group; the at home user.

In an increasingly paperless world Post-It Note usage in office environments will undoubtedly continue to decrease forcing 3M to proactively consider what other potential customers will contribute to revenue going forward.  While it may be some time before Post-It Notes are considered completely obsolete, the brand is smart to push for market growth in alternative customer segments.

Facing similar problems to the publishing industry, 3M is clearly attempting to make the most of it’s traditional business model while it searches for new revenue streams to fill the void that will one day exist in it’s office product line.  Innovative publishers must take a similar approach as they search for new opportunities in the digital space.

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!

The Daily

On February 2nd, the Daily became available on Apple’s iPad app store with a mission to provide a unique online news experience specifically for the iPad.  For some time the publishing industry has struggled to monetize online news content because of the availability free information on the Internet, but the creators of the Daily appear to be taking a step in the right direction.

Below is an overview of the Daily and some of it’s unique functionalities:

Described as living news, the Daily “combines text, image, sound, video and movement to tell stories that come alive the more you touch, swipe, tap and expolore”.

3 Reasons It’s Different

  1. Much of the Daily’s content is opinion-based, differentiating it from free sources of information that focus primarily on “the facts”.
  2. The Daily has been built specifically for the iPad, offering a superior viewing experience to competing offerings.
  3. It’s customizable and interactive; customers can indicate preferences including local weater and their favourite sports teams.

Recognizing that potential customers may need to experience the Daily to understand it’s value, the product is available for free on a two week trial.  Regularly the Daily is sold for only $39.00 a year or $0.99 a day.  If you don’t yet see the value proposition, I suggest you give it a try.  If nothing else you’ll get a taste for the direction the publishing industry is heading and the new formats publishers are testing to enhance the value of their content.

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.