Does the Price REALLY matter so much to your customer?

The most common myth is that high price keeps customers away from your product. It is compellingly logical, and so backed up by economists that most consider it as an absolute truth. And the sales people are almost blind believers in this' "only if we could lower our price, we could sell a ton of our stuff."
 
Really? If the price really mattered so much; how come …

1. You are not wearing the cheapest shirt, trouser, shoes you could find?
2. Everyone is not buying generic drugs ?
3. People are watching more cable and satellite channels and not doordarshan ?
4. People are paying for the front seats in a stadium ?
5. People are buying BOSE audio?
6. Nano car is having difficulty in selling
7. Cafe Coffee Days still sells a lot of coffee?

It isn't the price… it's your ability to demonstrate your worth / value to your prospects.

If you do not understand your customer, or if you do not know how to create value for your customers, or if you do not know how to differentiate yourself from your competitors - in short, if you are bankrupt of marketing ideas - and if have no ideas who is your customer and how she buys your product - then yes - price is the only way you can sell!

How small and family firms can build a brand too

The Freight Forwarders' Association of India had invited me to speak to them at their annual convention in Goa in Jule 2009. The association consists essentially of small and medium sized family run businesses and they wanted to hear whether branding is a worthwhile and feasible option for them. I am hoping that you will find it useful too.

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Is Branding  a  good  strategy  for  your  business ?

Is  it  correct  for  me  to  speak  to  an   audience  of  Freight  Forwarding  companies  about  branding?  If  you  are  like  most  people  I  know  of,  I  am  sure  you cannot  conceive of  branding  without   advertising.  I  am  sure  you  would   automatically  assume   that  branding is an appropriate activity for a  consumer   product company but not necessarily for an   industrial  service  company  like  yours.  If so,  be prepared for this fact  : out of the  top 5 brands on earth, 4  are industrial brands and only one is a consumer brand.  The  figures  in  brackets  indicate  the  brand  valuation in 2003

• Coca Cola ( Rs 340,000 Crores )
• Microsoft ( Rs 300,000 Crores )
• IBM ( Rs 260,000 Crores )
• GE ( Rs 240,000 Crores )
• Intel ( Rs 180,000 Crores )

You  do  not  necessarily need  to advertise to  build your brand

It  is clear  that  these 4 industrial  brands  have  become  valuable  by  doing much  more  than  mere  advertising.  Advertising and branding are different.   Advertising may be pretty and attractive but it is more like the superficial clothes.  Brand  is  more  like  the  person  inside  the  clothes.  For  the  advertising  to  work,   who you are, and what you do,  must  be  worthy  of  advertising  in  the  first  place! Creating a  brand is not about spending on advertising but about 3 things 

• attracting customers by offering a unique value to them
• getting a better price out of  them than your competitors
• creating a stronger platform for your future growth.  

Anyone who is advertising but not achieving these three things is only advertising but not  building a brand. On the other hand, anyone  who is  achieving this is building a brand - and it does not matter whether he is advertising or not. The proof of branding is happy and loyal customers and not whether you are advertising. 

How a good brand will pay for itself 

Following 6 benefits of branding will add up to at least 10% - 15% of your Profit and Loss statement every year. Hence it is worthwhile to spend money to build a brand for yourself. Please realize I am not saying you need to spend money on advertising to build your brand ! It is possible that you are spending money on advertising and yet none of these 6 benefits are coming to you. If so, you are not building a brand even if you are spending a lot in advertising.  

1. New business :  You get more calls when new business comes  along.
2. Prices : Your  charging  becomes  the  norm  and  others face price comparison with you
3. Margins : are higher because your  quotes are  doubted  and  compared  less
4. Suppliers : more  keen to deal with you – even if your pricing is slightly unfavourable
5. Investors  are  keen  to  invest  in  your  business
6. Talented  employees  are  keen  to  get  experience  and  make  a  career  with  you

I do not know about you but, to me, these 6 benefits will add up to a benefit that is at least 10% - 15% of sales revenue. That is a pretty tidy figure for anyone! And, apart from these regular day to day benefits, you have to remember that there are 2 other benefits of branding you will get :

• BRANDING  APPRECIATES  WITH  TIME  :  physical assets like buildings, furniture and vehicles   depreciate with time  but branding is exactly the opposite. It gets more polished and more valuable with use.
• BRAND  BRINGS  GOOD PRICE WHEN SOLD :  shares  of  branded companies  are  sold  at  higher P/E multiples.  With  your  sales  and  profits  of  your  business  remaining  the  same,  your  business  will  get  much  more  valuation  if  you  are  in  possession of  the  brand. In fact they say that if Coke brand is sold, the buyer will not like to buy the physical assets of Coke like factories and buildings etc because 95% of the value of Coke brand is not in the physical assets. Where does the value of the brand lie then? It lies in the favorable opinion billions of people all over the world has of Coke!      

2 tests of a superior brand

The first test of a superior brand is the trust of “its customers” .  
The second test is that such customers must believe that the brand is better than its competitors. 

It is not necessary for a “superior brand” to be known by everybody! However "its customers” (we call them target customers in marketing) must know it well, trust it and believe that it is different and better than its competitors.   Let us take some examples of  such brands. The chances are you may not have heard of them but yet they are very strong brands among "its customers" 

1. Biogel is recognised brand in surgical glove business
2. Bill Shiner is a top brand in the industry of laser drill machines for the aerospace industry 

Case  study  of  an  industrial  service  brand

This  is  a  case  study  of  a  company  called  Forbes  Facility  Services  Limited  which  adopted  a  branding  approach  and,  in  spite  of  being  a  new  company,  and in spite  of  being  in  a highly  price  sensitive market,  showed  good profits and a high level of customer satisfaction.   

STEP 1 : HAVE A MARKET INSIGHT : An important step is to really know the different  types of customers there are; and to understand their expectations and buying behaviors.  After doing this, the company decided to focus on providing housekeeping and cleaning services to industrial companies and plants because it realized that slowly the market was changing from buying of "products" to buying "services" - because the customers did not want to have the hassle of dealing with multiple vendors like one for the products, the second  for product maintenance, the third for supply of  labor etc. They wanted to outsource the whole cleaning job to someone. The market was large and was estimated at Rs 4000 Crores and it consisted of all types of customers : offices, shopping malls,  guest houses, factories, airports etc.  

STEP 2 : to identify those customers to whom only you can make a  difference but your competitors cannot. These are called as the "target customers".  The CEO of this company identified that the company's offering was demonstrably clear to those customers who had 

1. large and uninterrupted floor plates (which permit mechanical cleaning )
2. situations where the dirt was stickier and more dangerous (which needed trained cleaning workers)

The company introduced a system for its sales force to administer a short questionnaire at the beginning of the sales call to establish if the customer fell in this slot. If not, the sales force was told not to proceed with the call because in that case the company was not sure of making a difference - and when you do not make a difference you do not get a better price.  The company chose to want to sell only to such customers. 

STEP 3 : when you are sure about which customers you are going after, it automatically becomes clear (1) what you need to do internally to satisfy them (2) who your competitors are and what you need to do to pr-empt them.  The CEO of this company realized that he needs to focus on creating and innovating on two key competencies  

• Being good at mechanical cleaning
• Giving a very good training to its front line staff  

EFFECTS  OF  BRANDING were several. The first is that the company aimed to go only to those customers who could not be satisfied by the competition because the floor could not be cleaned effectively by manual methods and by untrained contractual staff.  The second is that the company’s  business development  became more efficient because they knew which customer to look for and what to tell him. Third, once the customer was convinced that we were better than the competition, the price competition became less harsh. 

The last I know of, the company was getting paid double than its competitors.  Even its method of charging was different from the competition : competition charged on per person per month basis and hence their costs were completely visible to the customers. The company charged on per square foot basis and that too proportional to the consumer satisfaction (conformance to the pre-defined  level  of  service as per Service  Level  Agreement). Since the company sold performance, the costs of the company were never really visible to its customers. While competition sold people, the company sold performance.  The name spread due to happy customers : virtually every rupee worth of new business emanating from our existing customers came to the company. Not only that, happy customers liberally gave references and recommendations and brought the cost of new business acquisition down.

BEFORE BRANDING  BECOMES A STORY TO BE TOLD TO OTHERS, 
IT MUST COME TO LIFE  WITHIN YOUR COMPANY 

Branding is a story that you must tell and practice yourself. Only after the story is assimilated well can you go out and tell it outside your company. Going back to the example of this company, they not only told the story inside their company but wove it in the training, compensation and promotion of their employees.They created systems for customer satisfaction measurement and put it to use in how they laid out their contracts. They used this understanding to create their organization structure. Many things became simpler when the branding was understood - for example they realized that out of so many competitors  there was only one who was truly competing with them - this enabled them to evolve competitive strategies.  

Brand  Building  in  Industrial  Business

To sum up,  I  see  the  following  rules  for  building  brand  in  a  business  like  yours

1. Invest in studying and knowing the market -
   do this periodically because the marker changes
   Find the needs, expectations and behavior of different types of customers
2. Thoroughly analyze and choose those customers you want to go after
   for whom  you  can  make a difference and be better than your competitors
3. Plan to do better than your competitors
   on what matters to these chosen customers
   and plan to develop your internal competencies accordingly.
   Remember you do not need to do better than competition on all counts.
   You need to do better only on those things that really matter to your chosen customers.
4. Understand who  competes with  you  for  such chosen customers.
   You do not need to fear all competitors.
   You need to pay attention only to those who may take away your customers.
   Or to those whose customers you want to take away.
5. Monitor  your  sales, prices, efforts and also the customer satisfaction.
   Use this data to continuously improve.

I hope you noticed that advertising is nowhere in my list of brand building essentials! Please do give your feedback by commenting on this blog. Or call me on 9821046013 or send an e mail to me on skpalekar@hotmail.com

How to sell high priced niche / luxury products in India?

Many advertising agencies do not seem to get it right when it comes to selling 

• high priced products and services
• luxury products
• B2B products
• through new business models

It seems to me it is because today's communication agencies have learnt their practice and cut their teeth working on the accounts of "FMCG" brands and naturally the culture has seeped so deep into their world view that they tend to see everything through these goggles. 

It is no surprise that they find it very difficult to even recognize, let alone respond to, the odd/niche/new business models. 

Click on this to see the article.

How you too can beat big competitors (KevinKare Story)

I was quite inspired by this story of how a small company from down south took on international giants. I have edited it lightly but the credit goes to the journalist who created the story which appeared in Economic Times Mumbai on August 31 in "Corporate Dossier".  Click here

Reduce Sales Force Attrition - Use "Reverse Gear" Technique

The fact is that the real cost of sales force attrition is much larger than what the accountants will tell you. 

Second fact is that many companies are working under assumptions of the world that ceased at least 15 years ago. 

I recommend a "Reverse Gear" approach which has 4 parts wherein both you and the candidate get an equal opportunity to make a solid decision and start a relationship that lasts. Click here to get to know it...

12 ways to find more customers and 6 ways of filtering them

This always comes up. Whether in a real life marketing situation. Or in a class consisting of experienced people. HOW to increase the sale by HUNTING for new customers.

"Cold calling" is so very traumatizing to learned and dignified MBAs and executives that they would rather die than call cold on someone. In my experience it is not that difficult - but that is a different story for another day.Right now I wish to draw your attention to the fact there are as many as 12 ways of hunting for new customers (and none of them is cold calling)...

http://marketing-list.
blogspot.in/2012/08/12-ways-to-find-buyers.html

8 Do's & Dont's for selling "large projects"

Strategies for selling high value and customized products and services are very different from those used for selling soaps and shoes. Click here ... 

or copy and paste this address in your browser : 

http://more-customers.blogspot.in/2012/08/8-dos-and-donts-of-selling-large.html

Please leave your valuable comments on at the end of the blog post after you finish reading. Was it useful ?

What are you giving ? A quotation or free education and consulting?

Under the garb of finding suppliers, many customers are likely to ask you to quote only to get more educated , to compare if their current arrangements are competitive, and to fish for anything new. Although it is difficult to completely avoid it, you may at least try...

Click :
http://more-customers.blogspot.in/2012/02/are-you-giving-unpaid-consulting-time.html

100+ thoughts for managers (Each Less than 20 words)

CLICK THIS ...

GREAT QUOTES FOR MANAGERS TO READ THEMSELVES


These are not for presenting to others but for self reading and improvement.

A "Meter" to help you estimate how much it will cost you to market your stuff

Peter Drucker famously said; "The main business of any business is to find the customer and keep him happy". In any business there are mainly two types of costs

1. Customer acquisition and retention costs
2. Costs of fulfilling what has been promised to the customer

This blog post refers to first type of costs. Depending on the situation, these consist of the costs associated with market research, spotting the customers, meeting them, communicating with them, convincing them, transacting with them, helping them use the benefits from what you are selling etc. This also includes the costs incurred in appointing channel members and franchisees. All of these - non-mfg costs - add up to a pretty big chunk and can be anywhere from 30% to 60% or even more of all operating costs. 

Since they are so large, it makes sense to understand and estimate these costs  before you jump into a business. The meter given below tells you how difficult it will be to sell the product. The more difficult a product is to sell; the more will be the ratio of marketing cost to sales and hence you will need to keep more gross margin in your pricing formula. 

SALES CHALLENGE METER

The more you observe the following the more will be the difficulty and higher will be your costs

Awareness, Understanding & clarity of the customer

(Customer = Customers' Decision Making Group)

1. That they have a “problem” which needs a solution. There are many products for which the target customer does not know in the first place that he has a problem that needs to be solved! Such a person is obviously has no budget, no intention, no search activity and may not be even open to consideration. A very difficult selling situation to be in.  Insurance selling is difficult because of this.
2. They may be aware that they have a problem but they do not know what kind of solution will solve their problem and who sells the solution. In the annual  business gifts market, it is always a big question what to buy and whom from.  

Nature of the Product category

1. Whether the product is standard or customized : the latter costs more to sell
2. Some products are difficult to explain for the seller and/or difficult to learn for the customer because the product it may not be possible to inspect the product before purchasing : it may be possible to understand the product only when experienced (music concert).
3. Differentiation based on soft Ps ( 3 Ps of service : People, Process, Physical evidence) is more difficult to sell than the differentiation based on the traditional hard Ps (4 Ps : Product, Pack, Price, Promotion). Example : Restaurant. As the products become similar due to technology being available to many; it is the soft Ps that are increasingly differentiating the offerings. But their selling involves making people experience. It costs more.
4. Difficulty of making a choice and decision : Many competitors with seemingly similar options and a very wide range confuse the customers and increase his reluctance due to his risk perception that he may be buying a wrong product. The sellers need to spend extra money and time at the point of sale to stand out from the clutter and make the differentiation be known and understood. This happens in the apparel market.   
5. Difficulty in implementing the choice : selling is difficult when the product being sold needs the customer to make  changes in their habits and behavior. Before Eureka Forbes sold AquaGuard, people's perception was built on water filters : two drums : one sitting on the top of the other. AquaGuard acceptance was slow because, contrary to this behavior, AquaGuard needed to be fixed on a wall, attached to a water line and to an electrical socket. 
6. Seller needs to meet ambiguous / undefined expectations. This is the bane of all service sellers : whether an ad agency, an interior decorator or a teacher. Customers are notoriously poor in thinking through and articulating their needs and demands upfront. It is impossible to get final approval without reworking a number of times and all this adds up to the cost of acquiring customers and getting their approvals.  

Decision Making Group of the Customer 

1. It is difficult to sell to a large number of people on the client side. It is not easy for SAP to sell an idea of going in for an ERP to people ranging from data entry persons to CFOs because each has its own viewpoint. There are very few to say yes and very many to say no. The costs become high because you need to employ a whole team of people who can contact and deal efficiently at various levels in the organization. 
2. Risk perception is high when the customers consider themselves to be ignorant and have no prior experience in buying products from the category. And, if there is a social distance between the buyers and the sellers, the problem gets aggravated. Example : When a Vice President from the consulting firm is dealing with a Product Manager. The Product Manager thinks it must be a very risky decision !

Buying situation

1. Person-to-person selling is a comparatively easy situation. Person to group, group to person or group to group are more difficult situations. 
2. First to market 
3. Late to market
4. Size of the seller is much smaller than the buyer

On each of these 14 dimensions I suggest you rate your selling situation and then estimate whether your selling costs will be high or low. The more the challenge, the less you will need to spend on expensive means of customer contact like personal selling,  more on the type of salespersons, more on their salaries, more on motivation and training,  more on support from back-office and more on systems to track them and integrate their work with the rest of the company.