Archive for the ‘Blogs’ Category
August 18th, 2010
My colleague, Nathan Kievman, who publishes the blog, Linked Strategies, recently posted an informative guide for executives about social media and why some executives hate it so much. I really enjoyed reading his article. It highlights some of the challenges/concerns to adopting social media and marketing that top executives often have. While it is important to acknowledge these challenges and concerns, the author goes on to show how quickly offline media is transitioning to online and social media marketing. The proverbial ‘bus’ has left the station. And executives need to get their marketing programs on board, if they desire to stay relevant to their customers.
The complete blog posting is attached below:
I’m an executive and I HATE social media. There, I said it. It’s finally “out there.” But before you Twitter a flaming flash mob link to assemble pitchfork-wielding Second Life villagers outside my door, I urge you to take a deep breath, put down your double frappuccino, remove your earpiece, step away from your iPad, and set your iPhasers to stun, for I come in peace. If you’ve ever wondered why your CEO ALSO hates social media, social networking and, well, socializing in general, I urge you to continue reading. Just as Fox TV’s Masked Magician series demystified the tricks of the world’s most famous illusionists, I offer the following as both a behind-the-scenes peak and a confessional of sorts, into the mind of the executive. For to truly understand the conflicting yet predictable stonewalling in this domain, one must search deep below the surface, plumbing the depths of the executive psyche, motivations, and worldviews, for only then will you be able to “crack the code,” engage us in our native tongue and communicate in a vocabulary and language to which we will respond. Consider this your own personal backstage pass to the inner sanctum of the Executive Suite.
Executive: More Perception Than Position
For starters, the term “executive” isn’t a title as much as it is a mindset or a set of attributes – often leading to career success and the achievement of such rank – but what might surprise most is that this ambition and executive mentality often begins to manifest itself early in life. For example, while most were partying and hanging out in high school, we were already taking college-level classes while holding down several part time jobs. And when most were “finding themselves” in college and still deciding on a major after three years, we were serving in student leadership, doing internships, or doubling up on classes to finish college a semester early. And when most were finally in the workforce, instead of clubbing and playing in multiple softball leagues, we were completing an advanced degree in night school, pursuing professional certifications, and framing out retirement plans.
Executives are high achievers – that’s just how we’re wired. Give me a mountain and I’ll climb it. And if you don’t have a mountain, I’ll find my own mountain and I’ll climb it. And if I can’t find a mountain, I’ll build one – just so I can climb it. But here’s what most people don’t get about executives. Once a CEO climbs a mountain, he doesn’t feel the need to Tweet to the world that he did it. He doesn’t have the natural desire to blog, “Look what a great climber I am” and include multiple pictures with links to his Facebook and LinkedIn account. He did it because it’s in his DNA. He doesn’t require the attention, approval, or applause of others, and therein lies the fundamental source of the problem – executives are non-narcissistic in a YouTube world. We’re outliers. In a society that brags, blogs, and Tweets about the tiniest personal minutia, we could care less because, frankly, we expect success, it’s normal to us. It’s like Vince Lombardi’s admonition to his running back after an overly exuberant display, “Next time you make a touchdown, act like you’ve been there before.”
Eagles Don’t Flock
Executives are “eagles,” and unlike seagulls, eagles don’t flock. We’re not joiners and we’re not groupies, which is why we overwhelmingly prefer challenging single-person sports like running, cycling, weightlifting, and our one concession to “group sports” – golf (which is still technically a single-person sport, but more fun in groups). Lance Armstrong didn’t win his titles without leaving the peloton, and ditto for greats like Sampras, Tiger, and Arnold. They had to go above and beyond the group to achieve greatness, and for this reason it truly IS lonely at the top (not that we mind).
Social Networking: The Problem is “Networking”
The reason we hate social networking is the same reason we hate REGULAR networking. Exchanging small talk for 2 hours in a room full of strangers, with a drink in one hand and a business card in the other, and a “Hi, I’m Doug” nametag peeling off my lapel, and standing – my goodness the standing – and looking unsuccessfully for ANY food with some protein in it, and wondering if this guy with the too-firm handshake is going to see if we can “LinkIn” after sharing an elevator ride, before glancing at my watch and counting the minutes until I can leave and get back to work. It’s a nightmare. Why? Because – surprise, surprise – most executives are actually introverts, who value their time and their privacy and are constantly evaluating the ROI tradeoffs of every hour of every day. (Quiz: How many times have you heard a CEO describe himself as a “People Person”?)
To say that we are ANTI-social would be a huge misrepresentation, but when you combine the word “social” with “networking” – let’s just say it sends shivers up my spine. Do I like the company of others? Sure I do – but I want the time to be well spent. Instead of random, shallow, unfocused SMALL talk, CEO’s would much rather sit around with a small group of peers for 2 hours and discuss BIG specific challenges – and their solutions. In fact, the reason so much business gets done on the golf course is because it’s one of the few places leaders actually congregate and feel relaxed enough to discuss what’s really on their minds.
Social Networking: The Problem is “Social”
The next hurdle for executives with social networking are the implications of the root word “Social”, and, by its very spelling, its association to Socialism. Socialism is defined as, “Any system of social organization in which the means of producing and distributing goods is owned collectively,” and further, “An economic and political theory based on public ownership or common ownership and cooperative management of the means of production and allocation of resources.” (At least that’s what someone wrote on Wikipedia). The premise and value of the “social media” movement is the power of the collective in the production, distribution, and ownership of goods, and the reason executives resist this model is that it flies in the face of their existing worldview which, quite frankly, has been pretty successful to date. If it ain’t broke, don’t fix it, right? Most of us have a pretty big chip on our shoulders, attributing our career success to the years of diligence, education, ambition, delayed gratification and sacrifices we’ve made to reach the leadership levels we’ve achieved. Therefore, the anti-capitalistic notion that my work and contributions would be homogenized with the uninspired masses, and that ultimately my value would be determined by the randomness of the collective is a jarring and unpalatable departure. I want to control my company! I want to control my brand! I want to determine my destiny! It’s too important to leave it to chance (or simply be outvoted by the uninformed bourgeois)! Unfortunately and tragically for us executives, the beauty and power of social media is only fully unleashed when we LET IT GO, and that, my friends, is the hardest thing for us to do (…and also explains why we hate checking luggage at the airport).
Beware of Geeks Bearing Gifts
Okay, I promised that this would be a confessional, so here’s a shocker. Over time, there is a tendency for CEO’s to get inflated EGO’s. Now granted, a healthy ego can serve as a necessary defense mechanism to provide protection from the relentless attacks from subordinates, peers, and the media, but too much amounts to just plain pride. We like to think of ourselves as a pretty smart bunch, and our position is such that even if we don’t completely understand something, we often project to our colleagues that we do. A classic example of this phenomenon transpired during the Enron debacle, where ranks of senior executives refused to admit that they couldn’t comprehend the mechanics of this powerful conglomerate, until it was too late. It’s the same with new advances in technology, which has accelerated during our careers from “hit or miss” to “mission critical,” going from bricks to clicks and from mortar to mindshare, while serving as a platform for everything from infrastructure, billing, and product development, to security, scheduling, and sales. The rapid rate of change in digital innovation has caused CEO’s to feel EXTREMELY vulnerable around technology because it is something on which we have become VERY reliant, but which we understand and “control” so little, and this vulnerability leads to fear, and this fear to irrational decisions and suboptimal outcomes. When CEO’s don’t have the confidence in their staff to delegate, or lack the humility to admit their ignorance regarding technology advances, they get defensive and act out in fear – or fail to act altogether.
Social Media: Justified Fear?
Executives justify their fear of social media by pointing back to a historic drumbeat of disappointment and unfulfilled promises. They recall with vivid detail the never-ending parade of new online engagement vehicles and “paradigms” introduced over the past 15 years by turtleneck-wearing gurus with names like Kip or Seth, which were then propagated by self-proclaimed “New Economy” experts sporting titles like “Chief Innovation Officer” and “Director of Chaos,” and then championed by sideburn-wearing hipster foot soldiers who never metafilter they didn’t like. In the 90’s, we were promised that customers would beat a path to our door if we created something called a “web page” and then “posted” it on this thing called the Internet or World Wide Web or something. Then they convinced us to buy electronic lists and send out “Email Blasts” to our target markets, and next it was a website redesign, push technology, pull technology, exchanged links, partner intranets, eBusiness, eCommerce, blogging, webinars, podcasts, search engine optimization, YouTube videos, LinkedIn, Facebook, Twitter, yada, yada, yada. Each time they promised that THIS TIME it would be different, and that this new product/protocol/portal/potion would somehow (magically??) drive revenue, increase efficiency, and optimize utilization (or some other buzz word or invented metric). You told me to blog, so I blogged. You told me to Twitter, so I Tweeted. What’s it going to be tomorrow – scan my body into a mashup simulator to create a hologram so I can telepresence myself into sales calls in Madrid via FourSquare using Flickr? All I know is that I’ve spent a LOT of time and money on a series of disjointed initiatives and campaigns and so far NONE have performed as advertised.
Don’t Feed Me Another Fad
Look, executives aren’t that complicated. While I can handle the many nuanced “grey areas” of business leadership, I prefer to see things in black and white; victories and defeats; profits and losses. I don’t mind making significant, strategic multi-year investments and committing to enterprise-wide initiatives which will improve the future performance of my company – in fact, I ENJOY it – what do you think got me to the Executive Suite in the first place? Just don’t insult me. I don’t want to waste any more time or money on the hype of “the next big thing” or the newest tool or toy, only to be disappointed when the latest flash-in-the-pan fad fades and goes the way of Harvard Graphics. It’s not that I have a fear of commitment – frankly, it’s just the OPPOSITE! I have a healthy fear and distaste for doing things randomly just to be doing something; or because someone saw an article in USA Today, or CNBC did a story on it, or out of fear that I’ll be the last one in my circle to “get on board.” (Believe me, the things that keep me up at night can’t be solved in 140 characters or less). The truth is, I would LOVE to commit to social media in a significant way, but so far nobody in my organization has stepped forward with a cerebral, strategic, multi-generational, integrated, systematic, and sustainable methodology and roadmap for synergistically capitalizing on this medium over the long haul.
Your Network is Your Net Worth
Executives are uniquely conflicted because we know better than anyone the power of relationships, and the truth of the old axiom, “Your network is your net worth,” yet we are inherently introverts, and gravitate towards solitude versus socializing. We understand on an intellectual level that none of us individually are “too big to fail,” and that even the Lone Ranger had Tonto and Batman had Robin, yet we find initiating conversations and exchanges with others to be draining, distracting, and exhausting rather than invigorating and inspiring. Hence we yearn; as a group we pine; for deep within our heart of hearts burns a great bright hope that somehow and in some way this social media movement or platform or culture or whatever could be harnessed and leveraged to cross that chasm and create valuable, authentic exchanges and relevant, real-time dialogue with stakeholders of all persuasions. If we could just develop an all-encompassing framework for how this would integrate into our enterprise-wide strategy, and manage it like a mission-critical project (complete with milestones, deliverables and accountability instead of fuzzy metrics like “buzz”), I am supremely confident that we could achieve escape velocity and – for the first time – truly establish and be able to articulate a synergistic, sustainable, and quantifiable strategy for leveraging “Best-In-Class” social media options to achieve desired corporate outcomes and maximize financial returns.
A Gift From Media To You
You know, it’s interesting. Somewhere in the convoluted catharsis of composing this confessional, I came to a surprising realization. Maybe I don’t HATE social media after all. Maybe I just hate the Quixotic context in which most social media conversations exist, featuring a perpetually moving target, combined with an obsessive, cult-like worship of the default worldview, “If Something is New = It Must Be Good”, and where subjective criteria like “mindshare” and “impressions” are considered quantifiable deliverables and irrefutable barometers of success.
Come to think of it, maybe it’s high time that a C-level individual engaged this topic, and – once and for all –created a high-level overview and synopsis, crystallizing all of the strategic benefits and critical value streams, and distilling them into a language that speaks to executives everywhere in our native tongue – bottom line stakeholder value. So here you go. I’ve done the work for you. What follows is an “Executive Summary” of my findings.
Social Media Value #1: Unfiltered Feedback
As you already know, some of the scarcest (rarest) yet most valuable information a CEO can obtain is honest, unfiltered feedback. Think about it. You interact all day with managers, employees, and handlers working to keep the boss happy and therefore keep their job. Sure, being surrounded by “Yes men” can be more comfortable, but it can also insulate you from the stark realities of your business. If done correctly, social media enables CEO’s to hear raw, candid feedback from real people – people who aren’t afraid of being fired because they CAN’T be fired. The truth is, leaders with their ego in check are already fully aware that they work for the customer – the customer is his boss – so if the customer doesn’t like dropped calls on their iPhone or the sauce on their Domino’s pizza, it’s their job to make it better. Now, every customer is not always right (or wrong), but if 850 out of 1000 user comments say that the new Sketcher’s Sport shoe caused them to sprain their ankle, then something needs to be fixed – and FAST! CoolCleveland’s Founder Thomas Mulready is a perfect example of a CEO with this customer orientation. After emailing out his weekly eMagazine for 7 years, he decided that it needed to be updated, and set about introducing a new format with much fanfare. In doing so, he also did something revolutionary – he asked all 90,000 of his readers for feedback on what they thought of the new style – and boy did they reply with scores of comments submitted over the span of a few days. But then he did something else revolutionary – he actually listened, modifying and improving the new site to reflect reader tastes and preferences. Yes, it takes humility (“Who are these people to give ME feedback? I invented this product! Don’t they know they can just click the links?) but the end result is an engaged audience who now feel genuinely empowered to provide even MORE feedback, emboldened by the knowledge that their comments actually impact (and can improve) the end product.
Social Media Value #2: Authenticity
Hand-in-hand with the unfiltered feedback above is the ability to leverage social media to authentically communicate with your employees, partners, customers (and non-customers), investors, and media, directly engaging ALL of your brand ambassadors efficiently and economically. Rather than layers of staff, spokespeople, and sterile press releases, social media now offers an elegant and effective medium for disseminating information either “straight from the heart” or “straight from the horses’ mouth” depending on your preferred idiom. Dan Gilbert’s recent LeBron James “rant” would qualify as both, capturing the owners’ anger, frustration, and competitive resolve just moments after James’ announced his departure. As you’ve probably noticed, NOBODY can tell the company story and embody the company brand like the CEO (think Steve Jobs) and by offering the ability to immediately and directly engage stakeholders – whether on a typical day, during a product launch, and/or especially during a time of crisis – social media provides an invaluable medium for maximizing brand value and minimizing potential brand degradation. Social media helps firms “Keep it real” but couches it in a positive brand-reinforcing context.
Social Media Value #3: Six Sigma (Low Cost)
In case you were wondering, executives LOVE things like Six Sigma because, 1. It reminds us of our Greek fraternity days in college, 2. The other soccer Dad’s don’t understand Value Stream Mapping, and 3. Six Sigma and lean processes are all about SPEED and COST SAVINGS, two of our favorite topics. By its very architecture, social media is positioned to leverage firms’ Six Sigma orientation by expediting interactions, exchanges, customer service, feedback loops, product launches, marketing, and advertising, AND enabling it at a fraction of the cost of traditional media, to a much more targeted audience, and in a far more nuanced and contextual value exchange. Social media options allow your message distribution format to evolve from shotgun to sniper, from billboard to message board, and from broadcast to narrowcast. PLUS, it takes your marketing posture from a one-way, blanketing, bullhorn approach to a more intimate, just-in-time interaction; offering the opportunity for a more detailed, valuable and more PROFITABLE conversation and connection with your audience (and you don’t need a Black Belt to do it).
Social Media Value #4: Balancing Transparency AND Privacy
The only thing worse than NOT using social media tools is using them in the WRONG way. Your firm could very easily invest time and money on social media, and then end up spending even MORE time and money doing damage control because you did it wrong the first time – talk about a lose-lose situation. With social media, there’s a “right way” and a “wrong way” to do things – so if you’re GOING to do it, do it RIGHT. Remember, anywhere-anytime-anyone social media channels must be handled as the “nuclear options” that they are, with the capability to destroy your brand value in a single Twitter, email, or YouTube video that goes viral.
With great power comes great responsibility, and a healthy respect for the global reach and impact of social media must emanate directly from the CEO, who knows better than anyone that the same programs allowing firms to connect and influence the marketplace can also be turned against you to alienate them. And just as social media can provide the market with a transparent window into the soul of your company, it can also showcase you at your worst, doing more harm than good. Let’s face it, your firm is ALREADY dabbling in social media as it is – so you might as well manage your risk and liability by codifying corporate expectations, establishing specific ground rules, and educating your stakeholders regarding proper use of these seemingly innocent yet powerful tools.
Social Media Value #5: Supporting Statistics
Executives rely on market research to support and substantiate any designated course of action, and devour facts, stats, and data-points like shrimp at a wedding reception. Summarized below are a few statistics buttressing the explosion of this social media trend, and detailing how Corporate America is leveraging it to realize significant revenue and market share growth going forward.
- In the last 7 years, Internet usage has increased 70% PER YEAR. Spending for digital advertising this year will be more than $25 billion and surpass print advertising spending (forever)
- Lenovo has experienced a 20% reduction in activity to their call center since they launched their community website for customers
- Blendtec quintupled sales with its “Will it Blend” series on YouTube
- Only 18% of traditional TV campaigns generate a positive ROI
- Naked Pizza set a one-day sales record using social media: 68% of their sales came via twitter and 85% of their new customers
- Software company Genius.com reports 24% of social media leads convert to sales opportunities
- Dell has already made over $7 million in sales via Twitter
- 37% of Generation Y heard about the Ford Fiesta via social media BEFORE its launch in the US and currently 25% of Ford’s marketing budget is spent on digital/social media
- 71% of companies plan to increase investments in social media by an average of 40%
- A recent Wetpaint/Altimeter Group study found companies that widely engage in social media surpass their peers in both revenue and profit
(Sources for Statistics: meyersreport.com lenovosocial.com George Wright Blendtec Mashable.com econsultancy.com businessweek.com )
Getting Your Board On Board
Lest we forget, even the Boss has a Boss – they’re called the Board of Directors – and these are the people that recruit and hire CEO’s for the purpose of serving as a charismatic and visionary leader of their organization. And so I urge you, don’t disappoint them when it comes to leveraging social media within your organization. The “Bang for the Buck” value proposition is too compelling to ignore, and the fact is – your competitors are already entering this arena and establishing new service baseline norms and minimum threshold expectations – so standing still amounts to losing ground and therefore is not an option. What you need is a plan.
An Offer You Can’t Refuse
My associates and I are going to go out on a limb and try something a little crazy, something we’ve never done before. We are going to offer senior leaders an exclusive, live, invitation-only Executive Briefing entitled “Maximizing Your Social Media Strategy” and presented by the top brass at DemingHill. This executive-to-executive webinar will feature a deep-dive into the ROI and business case for leveraging social media, and will allow participants to ask questions and interact real-time with the authors of this article. (Because there is no charge, we must limit this event to executives and/or members of their management teams. Held August 10 & 11th).
Do I STILL hate social media? No, BUT I’m only going to embrace it on the “executive terms” that have served me so well to this point in my career and they are, “If you’re going to do something, go ALL IN and do it right.” From now on, all social media, social marketing, and social networking will be discussed in the context – not of a CAMPAIGN (which starts and ends) – but as part of an ongoing, strategic, and systematic DIALOG with our stakeholders and marketplace.
Executives have the focus and vision to roadmap strategies playing out 3, 5, and 10 years into the future. But, we’re also “plodders” and are comfortable with short, measured, consistent steps – day in and day out – as long as we know that they are aligned with reaching a desired goal. When we discuss your social media strategy, the focus will be on consistency and sustainability over the long haul. Remember, executives don’t have the ego needs, risk profiles, or the TIME to be on the bleeding edge, or even the cutting edge. We just want it to work.
I can confidently predict that every month for the next 100 years there will be a new “Must Have” application, portal or community that one of your employees will discover, and then try to convince you that your company will implode if you don’t immediately join, link, or Retweet. In five years, all but three of these ideas will probably be forgotten. During our meeting, we will discuss how to frame out an enterprise-wide social media strategy, predicated on the foundation of proven tools and that have stood the test of time and offer “Best-In-Class” results, so that you will be empowered to handle these conversations proactively in the context of a larger roadmap, rather than reacting to these weekly ambushes in a dismissive defensive way. Remember, our goal for social media is not a lark, but a LIFESTYLE, and work-shopping a strategy which builds on stable, scalable tools, yet also affords the flexibility to address unprecedented “Black Swan” technology developments, provides you with a welcome buffer from being whipsawed by a weekly website. Between the two of us, we’ll finally take that reliable “80/20 Rule” and apply it to social media, and then spend time focusing on the 80% of stakeholder value that can be extracted with 20% of the effort (while knowingly and purposefully ignoring the remaining 20% of value which takes up 80% of the effort).
The Bottom Line
In the Forward of Geoffrey Moore’s bestseller “Crossing the Chasm” Regis McKenna writes:
“Fundamentally, marketing must refocus away from selling product and toward creating relationships. Customers don’t like to be ‘owned’ if that implies lack of choice or freedom. But they do like to be ‘owned’ if what that means is a vendor taking ongoing responsibility for the success of their joint ventures. Ownership in this sense means an abiding commitment and a strong sense of mutuality in the development of the marketplace. When customers encounter this kind of ownership, they tend to become fanatically loyal to their supplier, which in turns builds a stable economic base for profitability and growth.”
While there will always be a “me” in media – social media, social marketing, and social networking tools were designed to work best as a conduit for enabling information exchange, establishing a dialog, and creating a two-way conversation with your audience. At the end of the day, social media is simply about creating and maintaining relationships – and even and executive can do that.
So what do you think? Share your feedback.
About the Authors:
|Douglas J. O’Bryon- MBA
Chief Marketing Officer VendorCert
Executive & Startup specialist with 20 years in B2C & B2B .
|Nathan Kievman- MBA
Chief Executive Officer DemingHill
Business Owner & Executive for the last 8 years in B2C & B2B.
Executive Vice President DemingHill
Business Owner & Executive for over 15 years in Sales & Marketing in B2C & B2B.
April 30th, 2010
Is Pricing Your Friend or Foe (Part 2)?
In the last blog entry, we examined the roles of commodity vs. differentiated products, elasticity of demand, and relative market share play in pricing strategy. Now I would like to look at three more areas – your sustainable price premium, the use of product configurations, and participating in relevant price bands.
Your Sustainable Price Premium
Your ability to use pricing to your advantage is tied to what people are ultimately going to pay for your products. If you are highly differentiated, have a premium brand, deliver a great product, customer experience, etc., you should be able to charge a price premium for your products. The opposite is true as well. Technology examples of premium priced products include HP printers, Apple PCs, and Intel chips. Now let’s look the opposite situation. You can’t charge a price premium. In fact, you may even have to discount your products relative to average market prices. Can Kia charge as much a Toyota? Can Budweiser charge as much as Heineken? Can Lexmark charge more than HP? Even in the best situations, charging more than 10-20% higher than your nearest competitors (as a share leader and/or premium brand) is extremely difficult. There are notable exceptions. If you are a market niche player or luxury product with extreme product differentiation, and control distribution you may be able to sustain more substantial price premiums. Examples include Bose, Louie Vuitton, and exotic cars like Maserati and Ferrari.
The Use of Product Configurations
As a supplier of a product or service, your goal is to get the highest price per unit the customer is willing to pay. In technology marketing, products with attractive low base prices and options (multiple configurations) that contain additional features and accessories bundled together are typically used. The option prices are set up so that the sum of the parts of the bundle are less expensive to buy than buying them individually or are otherwise unobtainable features (if you don’t buy it in a bundle you can’t upgrade your product later for that feature).
See these two examples:
It is an art to decide what features should be included in the base product vs. the options. Customer-centered marketing insights will lead you to the right answer. But the net goal is to have attractive, entry-level price points on the base products then build such an attractive portfolio of options that people, based on their needs, will more than likely purchase a more expensive option. In addition to this product/pricing approach, there need to be compelling up-sell and sell across marketing communication, tools, and promotions to wring out these higher average selling prices.
Participating in Relevant Price Bands
Based on the above, you should be able to triangulate on your pricing, relative to industry averages and nearest competitors. It is helpful to calculate average selling prices or revenue per unit and compare your performance to that of the competition. Many third party companies track this data (like IDC or GfK for printers and PCs). Equally important is the concept of price bands.
As a company, you ideally want to sell products at all relevant market price bands (or customer- appreciated price points) – whether they are higher or lower. Why? As mentioned earlier, participating in more price bands opens up broader market access. Over time as a product category matures, lower price bands grow faster than higher price bands and there is a mix shift to lower price bands. This follows the trend of classic technology productlife cycles. This becomes important when you are managing your market share. For example, let’s say 50% of your market is priced over $300 per unit and 50% if your market is below $300 per unit. You don’t currently play in the less than $300 market because it is less profitable, cheapens your brand, etc. Let’s say you have 50% market share in that >$300 market. That would give you 25% market share in the total market (50% x 50%). Let’s assume you are gaining one share point of market share every year in the >$300 market and the <$300 market is growing 2X faster than the >$300 market. In this scenario, even if you gain market share in your traditional segments of the market, you are losing market share in the overall market. That may or may not be OK, depending on your business strategy. If you are the market share leader for the price bands you participate in as well as the overall market, chances are you will want to hold on to your share and keep prices as high as possible. But as new price (probably lower) price bands emerge, you will need to decide how to respond to them. There are ways to respond (but that will be another blog entry).
Equally important to this conversation is to develop the appropriate tracking mechanisms to measure and respond to your industry’s unique pricing dynamics. Appropriate measures can include revenue share, unit share, price premiums vs. average selling prices, market leadership indicators, brand metrics, and coverage of market price points and bands. Looking at these factors and carefully considering your pricing approach will yield better decisions and help you make marketing a more strategic, value-added function.
Often times, companies will make broad statements – that they would like to grow revenues, profits, and market share – all at the same time. Unless you are starting from nothing, this is almost impossible. At best, only two out of the three variables in play can be optimized. You need to make sure you wisely chose the best ones for your business.
So is pricing your friend or foe? It is you friend if it helps you grow revenues, has neutral or positive effect on market share, and helps you manage your overall profitability to goals. It is your foe if pricing decisions drag down your revenues, gross margins, profits, and market prices. While there are no easy answers to pricing decisions, a framework like this will greatly increase your odds that you are making excellent pricing decisions.
January 20th, 2010
Old Saybrook, CT (PRWEB) January 12, 2010 — Though there were a number of “Best of Blogs” lists offered by a variety of blogging connoisseurs to close out 2009, the Marketing Executives Networking Group (MENG) chose to survey their nearly 2,000 executive marketing members to determine which marketing blogs, written by non-MENG members for objectivity, were actually being read by marketing executives. Click to read more details.
- Case Study
- CMO Council
- Competitive Analysis
- Customer Engagement
- Customer Expereince
- Definition of Blog
- Marketing Communications
- Most Valuable Customers
- Product Management
- Product Marketing
- Social Media