MARKETING
Make the Competition Irrelevant
Provide a variety of options and your customers won’t need to
even consider the competition.
IS THERE AN easy way to make the competition irrelevant? With so
much access to information, bombarded by advertisements and
commercials, is it possible to keep the attention of your customers?
How can you expedite a decision to buy? There is a secret formula
that works for e-commerce, retail, bids and proposals. It is a
simple formula that has worked since the days of bartering beads,
beans and burrows.
1. Create Differentiation. Create differentiation within your
own products or services. If you have an assortment of products or
services, you may have identified your differentiation already.
Examples of differentiated products are size, speed, color,
combinations or accessories. Examples of differentiated services are
speed, performance, quality, responsiveness, availability or ease.
You might differentiate by levels of shipping speed or delivery. If
you are in the unique position of having only one product or service
to offer, consider accessories, partners or other options to create
variety.
2. Focus on the Moment of Truth. This is the place or
position that products or services will be offered to the customer.
In a retail environment this may be the end-cap, a wall display,
shelf space or counter display. On the Internet this may be an
online store, auction site or website. It may be a catalog, brochure
or an email communication. The moment of truth may be a bid or
proposal. The moment of truth is the point at which the customer has
an option to make a purchasing decision. This is the moment that you
need to put your good, better and best foot forward.
3. Good, Better and Best. Give your customer three options.
Show your customer something good, something better and show them
your best. It is a simple formula that takes a little creativity in
crafting your message. The three offers should be based on the
foundation of a consistent theme that represents your core values.
The “good” offer should be the lowest cost option that demonstrates
your inherent value and differentiation from the competition.
Clearly define your basic value. This is the minimum price to buy,
and it should have good value.
Using the foundation established with your “good” offer, offer an
upgrade for a slightly higher price. The added value should be
easily distinguished and highlighted as more significant than the
slightly increased price. Make a clear comparison to the “good”
product or service. The “better” alternative is more expensive and
worth it. Some examples of upgrade offers are “additional 10 GB
memory,” “includes six months of satellite radio,” “includes 50 free
songs,” “150% faster” and similar comparisons.
The third option should be the best that you have to offer, the
cream of the crop. This is the most expensive option, and only for
the most discerning customers. It should have something in common
with the original “good” offer and the “better” alternative, but the
best option comes with a price that may be significantly higher.
Demonstrating a significant leap to a higher price point for the
“best” option helps to differentiate the comparative value of your
other offers. Do not expect a large volume of sales for your best
offer. Rather, use this to highlight the value of your lower cost
offers in comparison to your premier capabilities.
If you have more than three products, select three as your good,
better and best offers. In the decision process, human beings can
easily compare and contrast three options. The mind can juggle three
prices and three sets of features. Once you add a fourth element,
customers are more likely to become confused by a deeper level of
analytical comparison. With too many options, the customer spends
too much time considering alternatives. While weighing too many
options, the customer may start to consider competitive offers as
well. Limit your presentation to three options. Avoid introducing
too many new variables unless requested.
4. The Value Proposition. For each option that you present,
provide a value proposition. Your value proposition should be
conveyed in three to five bullet points or sentences. You should be
precise and succinct. Present the value proposition from the
customer point of view. For example, rather than say “We ship in
three to five days,” say “The product will arrive at your door in
three to five days.” Rather than say “We are fast,” say “You get
fast results.”
A value proposition typically contains the essential elements of
Feature, Advantage, Benefit, Image and Offer. Focus on a specific
important feature of your offer, the advantage compared to the
competition and the benefit to the customer. The Image is an
important element of your value proposition, as people generally
remember an image more readily than words. Images convey feeling and
often depict a lifestyle or emotion. The offer is a call to action.
Give your customer an offer to buy, and let them know specifically
how to conduct the purchase.
5. Plan, Do, Measure and Adjust. Carefully plan your three
offers and the value proposition for each. Measure the success of
each option and corresponding sales. As a benchmark, “good” offers
typically earn 25% of sales. The “best” offers typically earn 15% of
sales. Some customers want the lowest price, and some demand the
best. The middle of the road “better” offer customarily earns the
lion’s share with 60% of overall sales. The majority of customers
pay a little more for quality, speed or convenience associated with
the “better” offer if presented properly, even if they do not want
to pay the high price of the “best” option. Customers typically have
more confidence in the “better” alternative, while feeling that they
saved money by spending less than the most expensive “best” offer.
If you do not experience the desired result in your mix of sales, it
may be necessary to adjust your plan or value propositions. In any
case, as long as customers continue to make a selection between your
options, the competition is irrelevant. Your customers can get what
they desire, and they remain your customers.
John Mehrmann is author of the award-winning book, The Trusted
Advocate: Accelerate Success with Authenticity and Integrity,
available now at Amazon.com. John is also founder of Executive
Blueprints Inc., an organization devoted to the continuous
advancement of human capital. To get your copies of free reference
materials, or to contact John for speaking engagements, visit
www.executiveblueprints.com.
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T R E N D S
The new American way of life: frugality
For more than four decades, our shopaholic nation has shown an
insatiable desire to spend until our credit cards melt. Yet today,
America finds itself at a once- or twice-a-century economic tipping
point. A sharp slowdown, record-high gas prices, high consumer debt
levels, a plunging real estate market and the growing green movement
are combining to transform the economy and the American way of life
for years to come. “The process of bringing our wants and our needs
into realignment,” says Merrill Lynch economist David Rosenberg, “is
going to involve years of savings and frugality.”
Many consumers don’t have much choice but to scale back. On the
other hand, this new frugality might actually be OK with many of us.
Consumers were “so glutted on everything that they had acquired and
all the time that was robbed from them...that they almost saw this
[downturn] as a great opportunity to stop,” says Faith Popcorn,
chief executive of BrainReserve. In a recent survey, she found that
90% of respondents said they were considering options for “the
simpler life,” and 84% said they were inclined to buy “less stuff.”
Today, people rank being in control of their finances and living a
green lifestyle more highly as signs of success than having money or
a luxury car, and view having a paid-off mortgage as more of a
status symbol than having a beautiful home, according to a survey by
communications firm Manning Selvage & Lee.
New spending patterns are forcing companies to change the kinds of
products they sell and tweak their marketing to woo these new,
economy-minded consumers. For example, in April, Starbucks began
offering new rewards on its stored-value cards, including free
refills on hot and iced brewed coffee and complimentary syrup and
soy milk.
Sources: U.S. News & World Report, August 8, 2008; Chicago
Tribune, July 20, 2008
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N E W S
Who owns your loan?
Do you have a good relationship with your banker? Well, if you’re
late with your loan payments, it might not matter. Banks looking to
spruce up their balance sheets are selling off problem loans,
particularly if payments are overdue or borrowers are in violation
of bank covenants.
As of Mar. 31, 2008, problem business loans — those more than 30
days past due — are up 45% over the same period last year. Banks
wanting to sell off these loans are finding ready buyers in hedge
funds, private equity firms and finance companies. And while a bank
may look the other way if a company is briefly in violation of a
loan covenant, the new creditor won’t necessarily do the same. And
if a company is struggling, the business owner is often expected to
agree to a lower salary, to live more frugally and give up certain
perks.
While some creditors will be willing to work out a deal for
companies that seem healthy, others are likely to move quickly to
foreclose if a company seems vulnerable. The third option is “loan
to own,” in which the loan holder typically agrees to some
concessions in return for a sizable chunk of equity.
Entrepreneurs should move quickly to work out a deal with their new
creditor. Typically, that means a forbearance agreement, in which
the business owner makes a concession — perhaps by pledging
additional collateral—in exchange for lenience on the part of the
lender.
Source: BusinessWeek, August 11, 1008
Online ad rates drop like a rock
The banner ad is becoming cheaper every day thanks to increased use
in “ad networks.” Ad network usage surged from 5% of total ad
impressions sold in 2006 to 30% in 2007, according to a study from
Bain & Company. An ad network is a company that connects websites
that want to host advertisements with advertisers who want to run
advertisements.
Online publishers typically restrict ad networks to remnant ad
inventory. However, as these publishers experienced growth rates of
20% to 30% in ad revenue, the race to create advertising
opportunities has left publishers with excess inventory that they
are selling via ad networks at up to 90% discounts versus direct
sales rates. That trend is particularly foreboding for branded
online publishers, which traditionally earn $10-$20 per thousand ad
impressions and therefore risk severe price erosion.
“Online publishers are producing more inventory than the market
demands and risk devaluing the premium nature of their brands,
particularly in light of ad networks’ growth and their dramatically
lower pricing,” said John Frelinghuysen, a partner in Bain’s Global
Media Practice and study author.
Source: MarketingCharts.com, August 11, 2008
Online sellers facing new IRS rules
If you sell items on websites like eBay or receive payments through
transaction processors like PayPal or Google Checkout, be aware that
the Internal Revenue Service has modified their rules to make sure
taxes are reported on private Internet transactions. As part of the
housing rescue package, online payment processors will be mandated
to report annual gross receipts to the IRS for almost all Internet
sellers.
Under the merchant-reporting requirement, any organization that
accepts credit or debit cards or third-party network transactions
must report to the IRS the total number of credit and debit card
transactions for each merchant that has more than $20,000 in
transactions and more than 200 transactions per year.
The new rules, which will not go into effect until 2011, are
outlined in the new American Housing Rescue and Foreclosure
Prevention Act of 2008. The Government hopes to raise $9.5 billion
over the next decade in tax revenue.
Source: Internet Retailer, August 7, 2008
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T I P S
- Increase sales by offering “social proof.” In his book
Influence: Science and Practice, Dr. Robert Cialdini says “95% of people
are imitators and only 5% are initiators, so people are persuaded more
by the actions of others than any proof we can offer.” When you want to
make a claim about the value of your product or service, giving examples
of the experiences, or better yet, the exact words of others, carries
tremendous weight. This is the thinking behind Amazon.com’s feature
“Customers Who Bought This Item Also Bought.” You can offer social proof
through testimonials and with selling statements like “I’d like to run
something past you that others in your situation have taken advantage of
with us.”
Source: www.businessbyphone.com
- Journalists need your help. A free online service called
“Help a Reporter Out” connects journalists with credible sources to
interview. Reporters complete an online form and their request gets
added to a distribution list that is emailed to members three times
a day. As a member, if you see a request on the list that you feel
you could honestly contribute to, simply reply to the query.
Source: www.helpareporter.com
- Are your employees underpaid or “overtitled”? Nearly 50%
of people believe they are underpaid in their current jobs,
according to a Salary.com survey. But an analysis of those jobs and
wages reveals that less than 22% actually were paid below the fair
market value. So why do so many people wrongly believe they are
underpaid? The analysis also showed that 30% of the respondents may
have an overly inflated job title. Therefore, be careful when
creating job titles. You may think you’re being nice when creating a
fancy job title, but it can backfire if the employee ends up feeling
underpaid for his or her position.
Source: www.thehrspecialist.com
- Generate a 220% response lift in your next email campaign
by employing an old direct mail trick. A Johnson Box is a box
commonly found at the top of direct mail letters, containing the key
message of the letter. The purpose of it is to draw the reader’s
attention to this key message first, enticing them to read the rest
of the letter. Marketing consultant Jeanne Jennings tested this
technique with email marketing and discovered that the Johnson Box
generated more than three times as many leads as the control
version, resulting in a 220% response lift. When creating a Johnson
Box, make sure it appears at the top of the message, has more than
one line but doesn’t take up the entire width of the email, and is
around 20 words in length. The copy should consist of the product’s
key benefit and the incentive.
Source: www.clickz.com
- Do you stretch out payments to suppliers in order to
improve your cash flow? While this may sound like a shrewd business
move, it can hurt a valuable asset in today’s economy — your
relationship with your suppliers. Vendors may assume that your slow
payments are signs that you’re going out of business. They could
tighten credit policies or hold back shipments. A better strategy is
to pay your suppliers on time. If they learn to trust you they may
give you the benefit of the doubt if there’s ever a real problem.
Source: www.bizjournals.com
- Are your salespeople crying the blues about the economy?
How can you hang on to your best salespeople in times of strife?
First, encourage competition. Salespeople are naturally competitive,
so harness those instincts with a sales contest. Next, be open and
honest. Sometimes you can’t do anything about a tough situation. In
that case, sales reps may just need a little encouragement to hang
in there. Let them know that working as a team and trying new things
are paths to improvement. Finally, give feedback. Without objective
feedback, reps can lose focus and start wondering if anyone
appreciates their efforts. Let reps know where they stand and
balance constructive criticism with praise.
Source: Selling Power, P.O. Box 5467, Fredericksburg, VA
22403
- When trying to identify new customers, an
often-overlooked source of marketing research information is your
accounting and billing records. Plugging the details into a basic
spreadsheet program can give you an accurate customer profile in no
time. By looking at ZIP code information, neighborhood trends,
income levels or other information that you collect, you can shed
valuable light on just who your ideal customer is — and the kinds of
customers you’ve lost. You can then use this information as a sound
foundation for a marketing plan that will keep loyal customers and
attract new ones.
Source: Target Marketing, 401 N. Broad St., Philadelphia,
PA 19108
- Do you have employees on active military service duty?
Small business owners with fewer than 50 employees are now eligible
for a tax break if they continue to pay employees called to active
duty in the U.S. military. Employers may claim a tax credit of 20%
of wage differential payments as long as they continue to pay
reservists some or all of their former compensation and the payments
do not exceed $20,000. The credit applies to payments made after
June 17, 2008, and before Jan. 1, 2010.
Source: www.nfib.com
- Dramatically increase your website’s effectiveness by
cutting your copy in half. Online visitors are skimmers and won’t
read dense paragraphs and convoluted text. For example, cut the long
welcome paragraphs and company histories down to a few sentences,
and use bullet points when possible. One study shows that making
copy more concise can improve conversions and stickiness by 58%.
Worried that you might hurt your search rankings? Don’t be. Search
engines look at the ratio of keywords to copy to judge page
relevance. A page that is light on copy, with keywords in the right
places, often appears higher in search results.
Source: Internet Marketing Report, 370 Technology Dr.,
Malvern, PA 19355
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