I’ve always been a big fan of Tom Peters of ‘In Search of Excellence‘ fame and its because of him that I’ve studied McKinsey a ton. In fact, in many ways I’ve worked hard to build BrandMill as a mini marketing consulting model of the firm – and have always loved McKinsey’s 7-S Framework (developed by Waterman and Peters) too.
At the recommendation of Peters via a Blog post, I read a few books from former McKinsey employee Ethan Rasiel – ‘The McKinsey Way’ and ‘The McKinsey Mind.’ These books were a great help to me (still are) in building the processes of my marketing practice.
One little nugget that was worth a ton to me, was Rasiel’s insight about how company’s price their products. In short, McKinsey believes most companies price too low because they haven’t taken steps to quantify their value – to prove and clearly communicate their worth.
TELEGRAM ONE – Most brands need to do a far better job at value creation and value communication!
TELEGRAM TWO: Raising prices is the easiest, simplest and least expensive way to profitably increase sales!
McKinsey argues that most brands price too low because they haven’t done enough work to prove (offer real proof – or make brand improvements to add additional proof) that their products or services should demand a higher price. So, most brands lower and lower their price or, discount and discount to a level that customer’s will say, ‘OK, that price seems reasonable.’
In our initial brand engagements we nearly always find two alarming opportunities to profitably build a small business.
First, most brands simply price their products and services following the traditional cost-plus (mark-up) model and never consider these other 10+ ways to find their right price.
12 Pricing Models
- Cost-Plus Pricing – building price up from cost ‘floor’ generally on a percentage basis
- Elasticity Pricing – pricing to take advantage of known or perceived price elasticity or inelasticity
- Flexible Pricing – Pricing to meet changing competitive/marketplace conditions
- Follow Pricing – Pricing in relation to industry price leaders
- Loss-leader Pricing – Pricing an item/items low to attract buyers for other products
- Phase-out Pricing – Pricing ‘high’ to remove a product from the line
- Penetration Pricing – Pricing below the prevailing level in order to gain market entry or to increase market share
- Pre-emptive Pricing – Pricing to discourage competitive market entry
- Psychological Pricing –Pricing at a level that ‘sounds’ much lower than it is like $99.95
- Segment Pricing – Pricing essentially the same products differently to various markets
- Skim Pricing – pricing at inordinately high level to hit the ‘cream’ buyers
- Slide-down Pricing – Moving prices down to tap successive layers of demand
Plus, value-based pricing packages and pricing and revenue management software tools for dynamic pricing rock too!
Second, we find that most small business brands have a tremendous opportunity to improve their unique ‘WOW’ experience (a bigger, more unique and meaningful ‘WOW’ – clearly communicated – should justify a higher price), but lack the process/es and/or a desire to raise their bar of excellence because they get caught up in the day-to-day business at hand.
Face the facts.
You can’t control what your government or competitors do to negatively impact your small business (so stop your whining), but you can control and lead your brand to more profitable times with an improved approach to pricing and innovation.
Ok – back to pricing.
There’s certainly not enough time/space in this blog post to cover all you need to know about it (hey, we’re happy to help – just call us at 412.401.0555 – or email me at email@example.com), but we recommend that you make time to improve your ‘WOW’ (The Experience Economy is an oldie but goodie) and read a few good pricing books (and study hard) to help you more effectively do it.
Here are three excellent pricing books we highly recommend.
- Full Price, by Winninger
- Pricing for Profit, by Furtwengler
- The Price Advantage, by Baker, Marn and Zawada
We wish you good luck and great marketing!
And, he’s repeated it to me on a few other occasions too.
He said, “As someone who’s been in marketing as long as you, why do you hate advertising so much?”
I answered – and continue to defend myself – that it’s not that I hate advertising, it’s just that I hate bad advertising that’s created to try extort people into believing in or buying unremarkable products and services.
It simply doesn’t work. And, it gives my profession a bad name.
Remember…if you put perfume on a pig…it’s still a pig!
The facts support my argument that there has been a crisis going on in mass media for years and most advertisers simply continue to do the same sad things over and over again. That is, they spend too much money on TV advertising when they should invest those dollars in creating remarkable high-value products and services.
For example consider these facts*:
- Only 14% of people trust advertising
- Only 18% of television commercials achieve a positive return on investment
- The average ROI is just 54 cents per every dollar spent on TV ads
Now, let’s talk about the biggest joke and general waste of advertising dollars – the Super Bowl.
Just another advertising effort that gives my profession a bad name.
I dread tomorrow listening to all of the so-called Advertising experts and pundits on the national news and talk shows discussing which ad was ‘cute and funny.” Ugh!
For years, I’ve said that advertising on the Super Bowl is a waste of money. It still is a waste.
Back in 2008, E-Trade premiered commercials during Super Bowl XLII featuring a talking baby (the now infamous E-Trade Baby) in front of a Webcam pontificating about investing and finance in an adult voice. The campaign continued into the Super Bowl XLIII piling on with communications on other channels such Facebook, Twitter and YouTube.
And, it continues to this day. Why?
It has to be because it’s ‘cute and funny‘ because it hasn’t done anything to build sales and/or turn around its stock price.
For proof, check out this screen capture I took last night comparing the Dow Jones average (blue) vs. Schwab (green) and E-Trade (red). Still laughing?
Now back in 2008, I predicted that the E-Trade baby would rock in advertising recall and likeability and I was proven right. The 2008 E-Trade baby Super Bowl ad campaign earned high marks of 7th most liked, 3rd and 8th most recalled.
However, after the premiere of the E-Trade Baby campaign, I cautioned clients that now that the seed is planted, the E-Trade brand needs to ‘show and tell’ how it has helped real people more effectively perform with personal investing. They would need to show proof! And, to this day I say, “Where’s the proof?”
There is none and that’s one big reason why their stock is performing poorly vs. other averages. The E-Trade marketing folks must be getting away with this charade by saying, “But, look at our Ad recall numbers! Look at how many golfers know the word ‘shankapotomus.‘
To that rationale, I say, “Who cares!”
We do a ton of hospitality work. And, I bet you that we’d drive huge recall numbers by putting a dead body in the front window of any one of our restaurants with a banner stating, “People are dying to dine here!” I’d also bet that sales would rapidly fall.
There’s an old saying that, ‘The only person who likes change is a wet baby.’
I agree and also agree that the E-Trade campaign (and possibly product/service too) needs to be changed if it ever hopes to have happy investors.
Enjoy the game and make efficient use of your day today by getting a something to eat or drink or go to the bathroom during the commercial breaks.
*Source: Justin Kirby & Paul Marsden (2006). Connected marketing. Oxford, UK: Butterworth-Heinemann. xix
Jobs impacted my life in numerous ways through not only his great innovations and style, but also in his words.
Here’s my top 10 list of Steve Job quotes that have resonated with me over the years.
God bless you Steve and many thanks. You’ll be missed.
Steve Jobs Top 10 Best Quotes
- “We’re here to put a dent in the universe, otherwise why else even be here?”
- “Be a yardstick of quality. Some people aren’t used to an environment where excellence is expected.”
- “Innovation distinguishes between a leader and a follower.”
- “That’s been one of my mantras – focus and simplicity. Simple can be harder than complex. You need to work hard to get your thinking clean to make it simple, but it’s worth it in the end because once you get there, you can move mountains.”
- “I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.”
- Remembering that you’re going to die is the best way I know to avoid the trap of thinking you have something to lose.”
- “Stay hungry, stay foolish.”
- “The only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it.”
- “Your time is limited, so don’t waste it living someone elses life. Don’t be trapped by dogma – which is living with the results of other people’s thinking. Don’t let the noise of others opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.”
- We don’t get a chance to do that many things and every one should be really excellent because this is our life.”
…And, one more thing!
10+. “You know a design is good when you want to lick it.” … And, “Design is not what it looks like. Design is how it works.”
Earlier this week, I attended the Pittsburgh American Marketing Association’s annual kickoff dinner at Pittsburgh’s Grand Hall at the Priory. I was delighted to hear Duquesne beer president Mark Dudash talk about how his wife Maria and he are reviving the Prince of Pilsener, Duquesne Beer. Here’s the back story from their Website – it’s a great one too.
Mark’s an attorney and a proud city of Pittsburgh guy like me – in fact, we went to rival highs schools – South Catholic (Beechview – him) and Bishop Canevin (Westwood – 28th Ward – me). He might not be a “classically trained” marketer, but Maria and he are super smart marketers nonetheless – believe me. They didn’t jump into spending a ton of money in outbound marketing, but rather spent their money on creating a unique, high quality brand – a super premium Pilsener beer – at a fair price. And, with their inbound marketing efforts – via Faceboook – their raving fans are spreading their good word.
During his keynote, Mark repeatedly used words and phrases like, ‘loyalty, ‘having fun,’ ‘conducting your due diligence,’ ‘understanding your product’ and doing the right things right. Believe me…the Dudash’s are doing a ton of ‘right things right.’
When we consult with brands, we conduct a ton of research before we ever recommend marketing strategies, tactics and tools.
In fact, we start every new client engagement with a simple, initial 5 question exercise such as:
- Who are you?
- What’s your story?
- Why should someone care?
- What’s your dramatic difference?
- How can/do you passionately demonstrate and convey your dramatic difference?
Maria and Mark, may have not known the questions above, but more importantly, they sure know the answers and are hitting the cover off the ball!
I’m a big fan of Duquesne Beer – it tastes great and its a great brand – and will be rooting for them to “stick it to the man” – the man – or men – being the likes of Mr. Budweiser, Mr. Miller, Mr. Coors and more.
Good luck sweet Prince! We’re glad to have you back!
P.S.: Looking forward to you bringing back Ft. Pitt Beer too!