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The power of measurement

Despite Chris’ assertion that information wants to be free, some of it just isn’t. Sorry.

In fact, some information is worth far more than the paper it is printed on (or the pixels it lights up).

For example, imagine that your company publishes technical articles. Short, sweet, fine-tuned to a specific purpose for a very specific audience.

The trick is making money from them, so maybe you’ve found that the best way to do that for your company (vs all other models) is to charge for access to your publication.

The Wall Street Journal does this. So does Investor’s Business Daily, as do a number of publications (online or print) in technical fields like auto mechanics, programming and FOREX trading.

Prove it

One of the biggest challenges these firms have is proving their publication’s worth at renewal time.

When renewal time comes up, or the charge appears on the credit card bill, the customer thought process goes something like this:

Come on, why should I pay $300 a year for a technical investing article resource when I can find everything Google has indexed for free?

The answer these businesses might commonly respond with include some of these:

  • Because it’s well-indexed so you can quickly find the exact trading info you need.
  • Because it has a search engine that understands investing terminology so you can quickly find exactly what you need
  • Because our publication is fine-tuned to the audience’s investing style (or whatever). It’s as if it was written solely for day traders with between $4200 and $6500 to trade per day.
  • Because it includes proven step-by-step guides for trading without losing my shorts (pun intended).

All of that is warm, fuzzy but not so exciting.

#3 and #4 aren’t bad but #1 and #2 are Google’s domain. They get better at it every day and paying you for it is going to get less and less likely unless you are much, much better at it in your specialty area.

I got your proof right here

Bottom line, almost all of that is pretty subjective. Bean counters (and spouses?) want hard numbers: “Why do you need this?”

Why not let them tell you?

If your article instructs them and provides them with a skill or offers a way to discover a new technique, make sure your feedback mechanisms (on the site or whatever) allow a way to say “Dude, this article saved me 2 or 3 days of struggling with this task”.

And yeah, it’s a lot like a Digg or a reTweet, but it’s more accurate than that.

The mechanism that works for you might need to be a number they can type in, or it might be a radio button with selections like “Waste of my time”, “Saved me maybe an hour”, “HUGE, DUDE. This got me back on track after a week”.

Whatever it is, it provides them with a way to tell you how much time, money, etc your information, your service, your product, your help saved them.

Think about where you could go with that info, even if it is largely anecdotal and not scientifically defensible.

If you have 100 clients and they (on average) provide feedback via a mechanism like this that says you save them 112 hours per year, seems to me that your prospects might want to know that information.

It also seems like it would be a great way to totally defuse the “your price is too high” argument (and maybe a number of others).

It might tell you how outrageous you can make your money-back guarantee. If it’s 30 days but it should be a year or 5 years, these numbers will give you some insight into it.

Who knows, you might even find out that your pricing and your value proposition are in vastly different places.

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Ryan Air cant even afford to flush?

last signal
Creative Commons License photo credit: _sarchi

So you’re probably sick of me talking about the fact that basing the success of your business solely on the ability to beat everyone else’s price is a mistake.

Some would hold out Wal-Mart as an example that I’m dead wrong. Rhetorical question for those people: How many businesses *other than WalMart* run that way and are successful with that business model?

You may not realize that I’m talking about small businesses, not large, multi-national global corporations large enough that if they were a country, it has been said that it would be the 4th largest country/economy on the planet.

Yet today isn’t about beating up on those guys, so let’s move on.

Instead, here’s a little twist: Let’s talk about how depending on price ends up hurting your service, which ends up revolving back and hurting your price because you can’t seem to find enough margin to flush the toilet.

Airline, Castrate Thyself

Most airlines keep looking at it backwards. Rather than adding value, they are castrating themselves in an attempt to trim another time from their cost per passenger-mile (CPM).

Why? Because they’ve created a “permanent” price war by virtue of the way they position their service. They’ve left themselves with no choice other than to constantly be on the lookout for places to cut costs.

  • Like cutting services, making it less and less pleasant to travel – actually getting to the point where it has become *unpleasant* to fly, not just occasionally annoying.
  • Like alienating their most dedicated customers by gutting frequent flier programs.
  • Like getting rid of their most experienced, most skilled personnel in favor of employees who don’t have to be paid as well.
  • Like cutting back on things are fundamental as maintenance on airliners.

Don’t get me wrong, there is a time and place for cost cutting and being careful with your expenses, but there are right and wrong ways to do so.

The problem with that is that someday, you’ve trimmed to the point where the only thing you can trim is the baseline service: which they can’t do. It’s not like you can charge someone to fly from New York City to Los Angeles and then drop them off in Vegas:)

Not so extra extras

So what happens next? You charge for trivial things that people take for granted.

Like buying a ticket on your airline.

Or going to the bathroom at 35,000 feet.

While the bathroom comment was said to “maybe” be tongue-in-cheek, Ryanair later confirmed that they have been in discussion with Boeing about making it a reality.

Wonder if they’ll charge extra for additional flushes? Wonder if people will flush 2 or 3 times as a protest against the fee? People will find ways of silently paying Ryanair back for their transgressions – I don’t think I have to elaborate<g>

Maybe they think those extra fees won’t be considered as part of their price, allowing them to be the low price leader.

I don’t know what they’re thinking, much less if they are.

Alternatives?

My analytical side says they know how many times the toilet gets flushed per flight, on average – if not per route. Given that they know the cost, they can easily add .25 per passenger per ticket (or .07, whatever it might be) to cover those expenses.

Meanwhile I have to wonder why that isn’t already built into their overhead.

Imagine a future airline ticket receipt that looks like this:

ryanairreceipt

As for charging you a fee to sell you an electronic ticket, I’m hard pressed to find a defense for that, much less an alternative.

What I can say is that even today, with travel spending curtailed by so many businesses, it would be a great time to be competing with businesses who make misguided decisions like these.

I don’t know their management. I have little doubt that they are smart people or they wouldn’t have gotten to where they are.

But this? Somewhere along the line, they’ve been derailed and seemingly forgotten what business they’re really in.

Meanwhile, there’s Branson

If a different entrepreneur ran these airlines, what would they do differently? What would they do to compete? One alternative is Richard Branson’s way, but there are others.

Your turn. If a different entrepreneur ran your business, what would they do differently?

And why exactly can’t you do those same things – even it’s only a few of them? Start with one.

The photo? You’ve probably figured out by now that the photos in my posts have some meaning. Sometimes they’re a message to a specific person who reads the blog. Sometimes it’s a puzzle for everyone who reads Business is Personal. Sometimes, they’re just another form of sarcasm<g>

Today is different.

I want to recognize a strong photo that I found on Flickr. It’s the last photo that someone took of their dad before he passed away. Such a strong image, I thought I should share it.

Thanks to HR wizzo Tom for passing along the airline stories.

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Stampedes and shootings: Just another Black Friday

It’s hard to imagine why big national retailers continue to play the fools game, thinking that by discounting their prices 40-50% or more they’ll increase their profit.

Perhaps they think they’ll make it up on volume.

When you cut prices, the first thing that you give up is a piece (or all) of your profit.

Retailers who spent the weekend falling all over themselves catering to an upscale clientele don’t have this problem, especially if they’ve cultivated and groomed the relationship with that clientele all year long.

They didn’t have to go to the home of an employee and explain how a young employee was trampled to death, simply by having the misfortune of being the guy who unlocked the front door to his employer’s store.

When price is the only way you have to differentiate yourself from your competition, you deserve any pain you feel on your financial statement at the end of the quarter.

Is that the only competitive edge that you can find? If so, you aren’t looking hard enough.

Is there a Wal-Mart in Pamplona?

Another “competitive edge” – one that contributed directly to last weekend’s trampling death and injuries at a Long Island WalMart – is the special sale that starts at 0-dark-thirty in the morning and offers limited items at the special pricing. 2010 update about stampede.

Our store is better because we can get our people to the store before yours. Woooo, impressive.

If your competitors’ move their start time to an hour before yours, when does it end? Do you start a Cold War over who can open their doors first? In an ultra-competitive environment, is that really how you want your clientele to choose who their vendor is?

Do you really have to stir up a frenzy over one (or 10, whatever) $299 plasma screen TV to get people into your store? Is that the only edge you have?

Don’t get me wrong. I’ve told you to read Cialdini and will again. We’ve discussed scarcity and will again. However, we’ve also discussed common sense. Hopefully, we don’t have to discuss making sure your staff and clients leave the store alive.

Is it really worth having 300-400 people stampede over your staff and each other as if their survival depends on it? This isn’t the first time it has happened. Human behavior is not a surprise in these circumstances.

Yeah, sure. You can blame a small percentage of morons for this ridiculous behavior, but it isn’t just the customers in that store who were in the wrong. But… big retail, in their typical lazy way – they continue to confuse the customer with the sale as the most valuable part of their business.

All this focus on creating temporary insanity among your prospects for one transaction on one day illustrates the lousy, if not non-existent, relationship that most large US retailers have with the buying public.

That’s where the problems really lie. When you commoditize your marketplace by competing solely on price, you’re one of two things: Wal-Mart or crazy.

Wal-Mart can afford to do these things. Their entire business – and the systems that drive it – is built around that premise. They have the logistics, automation, buying power and mammoth size to make it happen.

If you aren’t Wal-Mart or crazy, you have to do something different and better. I don’t mean to suggest that you can just double your prices, do nothing else and expect all to go right with the world.

You can’t.

Remember, Business is Personal. Build the relationship. Deliver the value. When nothing else matters, they’ll shop on price.

Make other things matter.

[audio:http://www.rescuemarketing.com/podcast/StampedesAndShootingsBlackFriday.mp3]
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The Wharton School agrees with me: Focus on upscale loyal clientele.

My regular email from the Wharton School of Business just arrived. Seems the folks at their recent Marketing Conference agree with what I’ve been suggesting here for some time. Maybe it’s worth trying…

Here’s a summary:

Chasing aspirational 16-year-olds and new money in emerging markets is “out,” while pampering the wealthiest and most loyal customers is “in,” according to luxury retailers at the recent Wharton Marketing Conference. Said one panelist: “The core for a luxury brand is a customer with very considerable wealth.”

Read the rest of the Wharton Marketing Conference story here.

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Buying local: Bigger than the bailout

In today’s guest post, America’s Best Companies made a series of videos that do a great job of illustrating the potential impact of box stores and similar entities on a community’s small businesses.

I think they’re worth sharing, so here they are.

Each of these videos are about 90 seconds long, or thereabouts.

Food for thought, my friends. Where are you spending your money?

Britney’s Lemonade Stand, part 1 (1:26)

Britney’s Lemonade Stand, part 2 (1:37)

Britney’s Lemonade Stand, part 3 (2:06)

Britney’s Lemonade Stand, part 4 (1:45)

Britney’s Lemonade Stand, part 5 (1:43)

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Marketing Positioning Pricing Sales Small Business Strategy

Comcast: Choosing the wrong way

Comcast appears to feel that it’s a problem that their customers actually use their service. OK, that’s a little vague.

More accurately, they have a problem with that small percentage who use their service *a lot* despite doing so within their (current) terms.

Their new solution to this “problem” is to cut off that customer and probably motivate them to avoid being a Comcast customer forever. I don’t imagine that this sort of action will contribute to good word of mouth marketing by former Comcast customers.

While their bandwidth limits seem rational, history has proven that customer needs will expand beyond that – and quite often more quickly than Comcast would respond with policy changes or additional billing options.

In contrast, Time-Warner is testing tiered pricing. The more you use, the more you pay. That makes sense, particularly beyond a certain level.

In every group of customers, there’s a percentage of high-use customers.

You have two choices

  • Cut them off. Tick them off. Run them (and probably their friends) off.
  • Find a way to bill them that reflects their use and the value you’re delivering.

Think about that for your business. There’s probably a small percentage of high profit customers (or potential high profit customers) who might benefit from an additional level of service.

Running off the customers who need your products and services the most seems a little crazy, doesn’t it?

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Competition Management Marketing Pricing Retail Small Business Strategy

Rocky roads and retailers

Today’s guest post comes from the Wharton business school at the University of Pennsylvania (aka Penn).

Yep, the same place Donald Trump sent his kids to learn about business.

Today’s discussion involves something from a little over a week ago – the impact of inflation on retailers big and small – and what smart retailers are doing to make things work.

Registration may be required to view the article, but a) I highly recommend the Wharton site and b) it’s free. Strongly recommended.

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Competition Creativity ECommerce Entrepreneurs Management Marketing Media Motivation Pricing Small Business Strategy

Quitting for the wrong reasons

Sometimes, it’s necessary to make the decision to close a business. It isn’t easy and it isn’t something that is done without pain and suffering in some form.

Yesterday in Small Business CEO, I read a story about a small business that was calling it quits due to “high oil prices and the economy” (my paraphrase).

A couple of comments in that blog post really rubbed me the wrong way, mostly because the owner appeared to be stuck in a mental trap about the state of the economy (more on that in a minute) and the economic conditions that she felt forced her to close up shop.

A poisoned mind

The first quote was the most poisoned thing I could think of that a business owner could get stuck in their head:

Small home based businesses like mine really donâ??t stand a chance in the current market.

Horse hockey.

In the Great Depression of the 1930s, more than 25% of Americans were out of work. On the other hand, 75% were employed and continued to buy. While that doesn’t make life easier for the 25%, it does mean that the market didn’t simply disappear, even in times as bad as that.

For every stock broker who leaped from his Wall Street office window, there was at least one who did well, and the same for investors.

The reality is, a lot of businesses got started back then. In the so-called worst of times. In fact many of today’s most successful businesses had their roots in those “bad” days. Krispy Kreme, Saab, T. Rowe Price and many many more local businesses. Try Googling for “founded in 1930”, “founded in 1931” and so on. Tons of new businesses that exist to this day that were started during that period, more than SEVENTY years later.

They didn’t give up or quit because of their state of the economy. They saw opportunity in it.

BUT, thing is, the state of the economy really isn’t the point. Your market, your products, your clients and your prospects are. Your focus, your marketing, your creativity of thought and action. Those are far more important than the state of the market.

Raise prices or quit?

The second quote wasn’t much better, but I do have to admit that I have heard this from other businesses this year – from restaurants to craft-type businesses like this one:

Forced with the decision of either raising my candle prices sky high or temporarily closing, I chose the latter of the two.

The problem with this isn’t a lack of concern for the client, it’s that she is projecting her own mental limitations about her pricing onto her clientele. In other words, she’s saying “No” for them without giving them a chance to consider their purchase.

First of all, everyone understands that prices have gone up with fuel prices, either due to shipping, due to petroleum-based ingredients, or just because those two things roll downhill to the buyer. By making the decision to stop producing items because one of the component prices went up 40% assumes that the clients don’t feel the items are still worth that much without even asking them.

While these are primarily mental issues, there are also practical ones. Because I am tangentially involved in a business that uses beeswax, this isn’t armchair quarterbacking.

Due to Colony Collapse Disorder, I’ve seen 40-50% increases in the price of (among other things) beeswax over the last several years. In fact, prices have done so more than once. What was $3 something a pound is over $5 a pound. Not to mention that beeswax is dense. It’s heavy. Yes, Virginia – it costs a lot to ship.

Yet the clients who buy those beeswax-based products not only haven’t complained, but they’re buying more than ever. We didn’t make the decision for them, we simply raised prices to reflect the economics of the product line and let them decide. They decided to keep buying.

Sometimes quitting is the right thing to do. Just don’t do it for the wrong reasons. Don’t let the pundits, the media and Presidential candidates poison your mind.

Make decisions for the right reasons. I hope she decides to get back in the game for the right reasons as well.

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Marketing Positioning Pricing Small Business

Why do prices end in .99?

Today’s guest post from the UK offers more insight on why prices with .99 work in the US and UK and why .88 works in Asia.

There are long-standing rules of thumb that advise how to set prices, but the wise business owner knows to test everything, including pricing.

The only results that count are the ones you see from your clientele.

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Chipping away at your clients – Bad idea

During our stay in Missoula for the granddaughter’s arrival, we had the pleasure of spending the night at the Missoula Comfort Inn.

When I arrived at the front desk to get a receipt for the visit, the bill came with the now-obligatory $1.75 charge for using the safe in the room.

The buck seventy five isn’t the point.

It’s the annoyance of constantly having to be vigilant so that you aren’t the one getting taken by the corporate hotel chain management group who thinks that slipping this little charge (or some other little fee) by the majority of their clients is going to  make their profit numbers.

And maybe it will, but it’s a bad idea.

Yes, I’m well aware that you know that most people are too timid to say anything about it. Heaven forbid that we get pissy about a 1.75 fee on the bill. It might make us look cheap or chintzy to the desk clerk.

It’s not just the timid.

It’s the busy or inattentive clients who don’t notice it.

It’s the express checkout clients who never see the receipt.

Your defense is limp. It really makes no difference that you notify us at the front desk (via a sign) that you will charge $1.75 per night and that it can be removed by asking at the front desk. This is particularly so since it is automated and can only be removed at checkout, NOT at check in time.

The point is that chipping away at your clientele with sneaky little charges like this – particularly for services that they rarely use – is a bad idea and leaves your clients with a bad taste in their mouths about your business.

Is that what you really want?

If that extra $1.75 is necessary for your business to reach the necessary profit margin to pay the front desk staff minimum wage, then just do it. Add it to the room fee. These days you could call it a fuel charge. At least that is believable, when it floats with the cost of fuel.

Do you really think your guests are going to choose another motel because you charge $125.75 instead of $124?

Answer: Only if you do it by Post-It noting it onto the bill at the end.

Not only do you waste your guests’ time by forcing this little “please remove it from the bill” exercise, but you also slow down the checkout process and waste your employees time.

You aren’t tricking anyone. You’re just ticking them off.

Your little $1.75 fee – and really not even the fee, but the act of how you tried to get it, regardless of how common this technique may be – is the one tiny little negative aspect of a trip to Missoula to meet my first grandchild.

Just because everyone else does it doesn’t mean it’s a good idea.