Epiphany Marketing's Strategic Marketing Blog

One of the questions many business owners are grappling with right now has to do with pricing strategies. We frequently hear it this way:

Should I lower my prices as a response to shrinking demand?

Conventional wisdom in most cases says, “Yes.”

But I want to challenge you to think this through carefully before indiscriminately squeezing what may be left of your profit margins.  Naturally, this question is quite involved and far too complex to address comprehensively in a single article. But there are some important considerations that we can highlight here to help you start to create a framework for your decision-making process.

First Things First

Let’s be clear. In this rapidly-changing economic environment, price is not the issue.

Oh I know it seems like it. Your salespeople and front-line staff may even be telling you that your prices are high. Your customers and clients may even be telling you that price is a big factor in their decision-making.

But this is almost always less than the truth.

The real issue is value.

So… to begin with, you must get to the bottom of what your customers’ needs really are. And if you’re working from data that are more than a few weeks or a few months old, you’re already out of touch.

Sadly, most businesses aren’t working from any real data at all. “Gut hunches,” sticking your finger in the wind to see which direction it appears to be blowing, and looking at your own sales numbers don’t count.

For this answer, you’ll have to get your hands dirty. You’ll have to make some potentially uncomfortable phone calls — perhaps even personal visits — and initiate the dialogue with your customers like this business owner did.

Your customers are likely not making decisions purely on price. Granted, there are always exceptions, but our tendency is to assume that our own businesses are automatically in that category when a remarkably few actually are.

The fact is that your customers’ needs and wants are changing faster than ever. And while you can’t afford to repackage products and services every single day, this is quite possibly where you need to start once you have a legitimate idea of what your customers really need and want.

Perhaps they need more confidence that their investment in your products and services will have a larger (or longer) payoff. In that case, extended warranties or different complementary products and services should be offered.

In some cases, your customers simply need more of a personal touch. Some buying decisions are being prolonged — not because resources aren’t available, but because confidence has been shaken. Don’t mistake hesitance for inability. But also don’t make the mistake of assuming that the drivers and motivations of your customers are what they were last year.

Assumptions Are Evil

Priority 1 for us when working with our clients and coaching group members is to put in place systems to measure what’s actually happening in their businesses. From a marketing standpoint, this means that your message — that thing that actually connects you with your target market — must be tested. I’d say that it needs to be tested more than ever before, but the fact of the matter is that it always needs to be tested. The money that you were leaving on the table a few years ago because your message wasn’t “spot on” was something you may not have noticed. Today it could be the difference between survival and failure.

The time is now to turn your entire organization into an aggressive listening machine.

What you learn will surprise you.

As salespeople and business owners, we’ve often been trained to communicate value. After all, if we don’t connect what we sell, produce and provide with the needs of our prospects and customers and do it in a way that helps them understand the return they should expect on their investment, we’re sunk!

But in times like these, it’s more important than ever that we communicate valuably!

What does it mean to communicate valuably? It means that the value is in the message. When you reach out to the people you’re in touch with — whether they are existing customers, suspects, prospects, or even the general public — make sure that what you’re communicating to them is valuable… to them!

Here are 5 ways to communicate valuably:

1. Find out what they need.  This can be time-consuming and demanding. But it pays off. When you are in touch with the needs of people, you can be best positioned to make yourself and your communications valuable to them.
2. Put a strategy in place to reach out regularly. We get annoyed when communicated with too frequently, this is true. But if your messages are concise and valuable to the people you’re reaching out to, then they will anticipate and even look forward to your messages. Whether this is done via e-mail, on the web, via voicemail, text message, Twitter, snail mail, or in person, having something valuable to say and doing it consistently helps build relationship, trust, and a desire to reciprocate.
3. Budget for it!  Treat this like an advertising expenditure: devote time, resources, and — yes, even money — to it.  Put a staff member on it (multiple staff members, if you can). If you’re a salesperson or a smaller company, then carve time out of your schedule on a regular basis to make sure you’re reaching out. The more you do this, the more efficient you’ll become at it. Learning how to use tools such as WordPress, RSS feeds, e-mail service providers, and even Social Media can have an astounding impact on your ability to reach out to more people in highly-targeted ways for very little cost. Many businesses are now wisely diverting money from traditional advertising methods to see to it that they are communicating effectively and regularly with audiences that are likely to produce new business.
4. Create feedback mechanisms. Hopefully it goes without saying that your communications should be highly measurable. Understand whether you’re reaching your target, whether they care enough to open/read/listen to/etc your communications. But, in this day and age, we’re without excuse if we aren’t going beyond measuring and tracking and into really listening.  Give the people to whom you’re reaching simple mechanisms to respond and let you know what they find useful, what they dislike, and what they want more of.
5. Reward those who participate in the dialogue. Amazingly, some businesses still don’t understand that if people care enough to provide feedback, it should be rewarded. Even if the feedback is negative and not presented in a constructive fashion, the point is that they cared enough to respond! Sometimes you may wonder why they cared enough. Find out! And by the way, the reward for participation should at the very least be an acknowledgment or a response. But you can easily go above and beyond… and you don’t always have to provide discounts, coupons, or the obvious financial incentives. Here are some ideas from Starbucks about creating rewards.

Do you have an intentional, strategic process in place to communicate valuably? If not, get busy! The marketplace rewards value. Make sure you’re delivering so they know who to reward!

Today I walked into a local Starbucks and was greeted by a prominently-placed offer for the new Starbucks Gold card. You probably know by now that I’m a Starbucks regular. But I’ll admit, I’ve spent a lot less time (and yes, money) in Starbucks locations in recent history.

A quick scan of my unread e-mail shows that they sent me something about this card a month ago. I missed that message. No big surprise, since e-mail has been a background process for me with a few minor exceptions in recent weeks.

Here’s the quick skinny on the card: $25 annual membership, 10% off (nearly) all purchases, sneak peeks and surprise offers via e-mail and postal mail. On top of that, you get a free drink (anything you can dream up) when you buy the card in-store, a free drink on your birthday (evidently an old-school card arrives snail-mail-style), and a very classy exclusive-looking card ensconced in a booklet with free “guest” offers you can give to friends. One added bonus: a gorgeous high-usability “private” website for members of the Starbucks card where you can manage your account and benefits, including up to 2 hours of free wi-fi at AT&T hotspots within company-owned stores.

Lessons for Businesses Working to Beat the Recession

The introduction of this loyalty program serves up a number of great takeaways for any business tackling the challenges in this economy. Here are a few:

Listen to Your Customers

Starbucks started by bringing back Howard Schultz, who is almost single-handedly responsible for creating the famous Starbucks experience. His first move? Start listening.

The company has engaged in any number of efforts to solicit and obtain feedback from its customer base to determine where it had missed the mark. The bottom line? It’s done a great job of listening.

Give a Little

Customers wanted free wi-fi (something the company had famously sworn off forever). The solution? It’s available for the company’s loyal customers only, and within reasonable limits. Others may continue to pay, thank you very much. Customers wanted free flavoring syrups and other little bonuses to help counteract the escalating prices of their addictions. Again: available for customers willing to use a prepaid rewards card.

These and other relatively low-cost accommodations will pay off handsomely for the company when given to those of its customers willing to give up a little bit of information (the rewards cards are certainly being tracked, more so when registered online).

Let Your Biggest Fans Self-Identify

Another important facet of this process is that those customers who felt snubbed as the company went through changes resulting from rapid growth were given an opportunity to identify themselves and sound off. The result? The company has elegantly reached out to them and strengthened its relationship with them. These are now the people who are receiving Starbucks’ most frequent e-mail communications. Remember: this is a very high ROI marketing medium.

Be Creative

Listening to your customers can be a risky business. Taken at face value, raw feedback and suggestions from customers — especially ones you may have injured — may not be directly actionable. They’ll ask for things you may not be capable of delivering. (And, your feelings may get hurt — especially if you’re a small business.)

Starbucks’ promotion belies a lot of intentional effort on their part to hear what was behind the complaints and the feedback they got. They worked to create a viable solution that capitalized on their own need to market to their customer base and to give where they were able to give while still delivering great value.

We all know it costs a lot less to keep existing customers happy than it does to acquire new ones. So, Starbucks used some of its marketing budget on discounts to loyal customers.

At the same time, charging a $25 annual fee for the Gold card created a great income stream while filtering out customers who don’t spend enough in the stores to justify the purchase. For me, between my occasional cappuccinos, the beans I go out of my way to purchase for my home brewing setup (burr grinder & french press), occasional entertaining at Starbucks locations, and the days like today where I want someplace different to work, the purchase was a no-brainer. It will pay for itself in short order.

Can you find creative ways to reward your loyal customers? Absolutely. And in times like these when your customers are vulnerable to being picked off by low-priced competition or by other economic factors, now’s the time to nurture those relationships like never before. But do yourself a favor: start by asking what they want and need. Customers who feel neglected are the first ones to go.

Personally, I’m feeling a bit less neglected by Starbucks. Now if only they’d bring back the almond syrup.

Now It’s Your Turn

What creative ideas have you seen (or used!) to reward loyal customers on a budget?

Use the comment box below to sound off!

Yesterday, we talked about focusing on your customers. I’ll be the first to admit that without intentional effort, it’s easy to begin to drift away from listening closely to them. But in business, this can be a costly mistake – even when times are good and business is strong. In those times, missing out on subtle cues from your customers can cause you to miss the opportunities to serve them that you’re leaving on the table.
In the 21^st century, however, we have some amazing new tools for listening to what customers want. If you have a website, for example, you should be able to monitor a variety of statistical information that lends remarkable insight into what your customer base is looking for and, in fact, how close to the mark you’re getting.

Visits

For example, which pages on your website are getting visited? Where is the traffic coming from. If your website is strategically set up (in other words, it doesn’t just “look” good), you’ll have different “pages” of content that focus on various product or service offerings. Websites that are set up according to the methods that I use are getting large percentages of their traffic from search engines. This means that traffic coming in to the site is arriving because our content is attracting them to the particular pages they are visiting. By evaluating traffic data to your site, you can see which offerings are doing all that attracting.

Search Terms

Your website statistical information should also tell you exactly someone typed into Google (for example) to cause them to arrive at your site. This helps you in a couple of important ways. First, it tells you if you’re attracting the folks you want to attract. If your website talks about auto repair in Indianapolis, and you’re getting traffic for the Indy 500, then you need to re-evaluate your content (or if better yet: sell ads!). If the search terms line up with what you have to offer, then the second thing those terms are telling you – very specifically – is what your customers are asking for. If you evaluate this data over a meaningful period of time, you can check your product and/or service offerings and see if you should consider doing some repackaging or some new promotions.

What I’m describing in today’s content is really the tip of the iceberg. But, this is the type of strategic information that most companies who have invested in the web have not been trained how to use. I hope you find it useful to you.

Yesterday, we talked about listening to your customers to pay attention to the “why” behind their purchases. Today, we’re focusing more on the “who.” It probably goes without saying that another critical component in getting to know your customers and clients is that you gather as much demographic and psychographic information about them as possible.

If you’re a larger company or if you serve multiple market segments, then you need to compile this data for each of your major product or service offerings. Look at factors such as whether they are businesses or individuals, single or multiple decision-makers, one-time or recurring purchasers, their age, gender, location, background, likes and dislikes, etc. My clients and students use a 16-point questionnaire as a starting point to build a profile of their typical buyer.

The main goal for this is that when you’re working to craft a message that will impact your customers (or future customers) meaningfully, you must be intentional about who you’re “talking” to in your marketing. Your customers will ignore (read: not take action on) your messages that they don’t connect with personally. This seems obvious, but for some reason we tend to get temporarily stupid when we get to this point. Many a potentially great marketing effort has been stymied when the intended audience is left out of the equation. We end up with efforts that are focused on us and not on them – in more ways than one.

I say it often: you are not your customer. I frequently have my clients and students find a photograph that represents their ideal customer, and hang it on the wall. Then we have them craft everything as if it were intended for that one person.

Take some time to look back at your previous marketing efforts. Be honest with yourself and ask yourself how narrowly focused you’ve been on your ideal customer. Notice any trends?

Tomorrow: why it’s so easy to focus on your customer in the 21^st century. Don’t miss it!

So far this week, we’ve focused on you and your identity as a business. Now it’s time to do something every bit as critical and just as important, if not more so: focus on your customer.

Something that continues to amaze me is how easy (and common) it is for businesses to lose touch with their customers and clients. Just as you must know your own identity, you must also get clear on the identity of your customer. This is both harder and easier than it sounds. Customers are diverse, which is why it seems to be a daunting task to keep in touch with who they are. That being said, it is critical to look for and discover the common factors in your customers that are keys to the big question: why are they buying from you?

One of the easiest – and most often overlooked – means of getting to that answer is to very simply ask the question. When was the last time you got a list of some of your best customers and called to ask them, out of the clear blue sky, “Why did you buy?”

Let me guarantee you something. If it’s been a while since you’ve done something like this, you may have some ideas about what they’ll say, but the answers will surprise you. You will learn something. And what you learn will be important.

The fact is, we tend to give lip service to the idea of listening to our customers. Listening to and getting to know them is something that occurs only deliberately and with focused, intentional effort. It’s a lot like a marriage. If it’s going to last, it’s going to take work. Sometimes it’s easier to let customers slip away due to neglect than it is to face the painful fact that they may tell you something that you don’t want to hear. I don’t know about you, but I’d rather hear that thing I don’t want to hear because I asked than by letting them speak with their dollars.

I may have to give up my pet project that is missing the mark. But, when there’s a good match between my identity (which I’m hopefully now clear on) and what the customers are begging for, shouldn’t that be my pet project anyway?

More on this subject next time…