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Setting your pricing, feeling their pain and thinking outside the you-know-what
All revved up for 2011? Good.
To get you going, here are just a few New Year ideas to kick-start your marketing, thanks to my trusty Nokia and good old serendipity.
Yes – it’s Copycam time again.
Run the numbers
Did you buy anything in the sales?
And what was it that made you rush out to the shops at the crack of dawn and jostle your way to the front of the queue? The weather? The great service? The indomitable Christmas spirit? The raging hangover?
No, of course not. It was the pricing. It’s always the pricing, stupid. 30% off. 50% off. Up to 90% off! (Yeah, right.)
Nothing, but nothing, gets us out of bed like a bargain. Or makes us take action right here, right now. Slap a cut-off date on the bargain and the frenzy increases.
But the numbers need to stack up for people to take action. A while back, I noticed this sign in the changing room at my gym:
So it’s £15 for a small locker, and £20 for a large locker for one month.
A bit steep, you might think. But you’d probably also think they’d have an incentive to get people to sign up for longer. Like mobile phone contracts do – or just about any other type of contract you can think of.
So let’s see. 6 x £15, anyone? Oh yes, that would be £90. And 12 x £15? That’s right – £180.
Same story with the large lockers. 6 x £20 = £120. 12 x £20 = £240.
Genius. So the incentive is… absolutely nothing.
People expect commitment to translate into rewards. Why sign up for 12 months instead of six when the money could be earning interest in your account rather than the gym’s?
The pricing should be a no-brainer. But in this case, it’s just brainless.
Lesson 1: when it comes to pricing, longer is cheaper. Always. Or, put another way, 6 x £20 is never £120. It just isn’t.
To add or not to add – VAT is the question
Last time, I talked about the opportunities and threats for companies of the VAT (value-added tax) increase from 17.5% to 20% at the start of the month.
Gyms seem (see above, and below) to be a lost cause when it comes to running the numbers. But not all fitness-related businesses are.
As I fought the crowds of swivel-eyed shoppers in central Cambridge, I saw a sign that warmed the cockles of my marketing heart:
Clever old Sports Direct.
So they’re still charging VAT at 17.5%? No, of course they aren’t. They’re charging 20% like everybody else and absorbing the difference.
Which makes a difference.
The store was packed with grateful shoppers who were getting a double whammy – reduced prices and reduced tax.
Lesson 2: feel the pain. Then the gain.
All change, please!
Then it was down to London for a playdate with my culture buddy S at the Royal Academy. (Haven’t seen The Glasgow Boys? Hurry – it closes on 23 January. And if you can’t make that, check out this clip on the BBC 2 site. )
But wait a moment – what’s this? The train pulled in to an unfamiliar part of King’s Cross station, at a platform I’d never seen before.
No, don’t get too excited: it wasn’t Platform 9¾. That’s right down the other end, through the brick wall, and leads straight to the Hogwarts Express.
But it was almost as unusual:
Isn’t that wonderful? A master-stroke of marketing.
Months of banging, drilling, cutting and scooping and they unveil a platform with the catchiest number ever. Everybody was talking about it.
Some people even took photos – well I did, together with a few trainspotting saddos with dirty anoraks and knobbly cable-knits. But still, you get the point.
It was new. It was news. It was inspired.
And yet it wasn’t always the plan. Originally, apparently, it was going to be called Platform Y.
Not so inspired. Y chromosome. Y-fronts. Why?
Obviously the planners asked themselves the same question, thought a bit about it, and came up with a simple, effective and… obvious solution.
Lesson 3: make a virtue of a necessity. And never ignore the obvious.
Clitch after clitch after clitch
Every New Year I play the game. And every year, there’s a winner, without fail.
Sometimes they don’t even wait for 1 January. Last year, I spotted the winning entry on 28 December.
And the aim of the game? The first outing of the perennial seasonal cliché: New Year, New You.
This year, the prize went to Optical Express:
But they only just won. For hot on their heels, just 10 minutes later, I spotted this:
Bad, right?
Well not necessarily. You see, at this time of year, even clichés have their place. Let’s face it: Christmas and New Year are pretty clichéd, aren’t they?
Same food, same TV programmes, same diamond cardies and super toiletry gift-sets from your gran. Clitch after clitch after clitch, as Bevin famously said.
Original isn’t always best. After all, if your tagline is freshly minted, it has no recognition value. Clichés may be tired, old and worn, but they’re also instantly recognisable.
And often, they’re just what people expect to see. So don’t disappoint them.
Lesson 4: embrace your inner copycat. Even if that means a cliché or two.
Death, taxes and missed opportunities
“I don’t know what to do,” said my friend on the phone, the angst clearly audible in his voice. “Should I or shouldn’t I?”
And this crucial decision he had to take?
Whether or not to buy a fridge before VAT went up on Tuesday. This was Monday, and my friend was paralysed by indecision.
“If I don’t do it today, I won’t beat the VAT increase,” he lamented.
Beat the VAT increase, I thought with a wry smile. He’ s obviously got swept along by the tide of hysteria surrounding the tax increase from 17.5% to 20%.
Take a deep breath, I counselled. And he did.
Then so did I, just for good measure, and to give my voice the note of gravitas of a primary-school maths teacher.
“Let’s look at the facts,” I said professorially.
And the facts are simple. If you’re buying a fridge that’s £400 before tax, then VAT at 17.5% adds another £70 to it. So it’s £470 in total. And when you add VAT at 20%? It comes to a grand total of £480.
So you’ve saved the princely sum of £10. Enough to put a couple of bottles of Australian chardonnay in that shiny new fridge, but not much else.
“Ten pounds?” my friend said scornfully. “Is that it?”
Yes. I’m afraid it is.
And there and then, he decided to stay in bed and watch a bit more daytime TV, on the last official day of his Christmas break.
The fridge could wait.
2 + 2 = 5
Let’s face it – we’re all a bit innumerate these days.
The decline started with calculators, and continued with digital watches, PCs and mobile phones. Who needs to do mental arithmetic when gadgets do it all for us?
I read an article earlier this week saying that prices were going up by 20%, and a rush of panic buying was expected. I’m not surprised, with that whopping increase on the horizon.
On Monday, 3 Jan – the last day at the old rate – there were reported to be queues at petrol stations around the UK.
Why? If it costs £40 to fill up your car before VAT, then on Monday, your total bill is £47. On Tuesday, it’s £48. So that’s a pound more.
Add a few more pence for the increase in duty, and you might hit £1.40.
And for that, it’s worth queuing in near-freezing temperatures, running the engine to keep the heater going, thus wasting even more fuel?
I don’t think so.
Number schnumber
OK, so we’re innumerate. So what?
Well although we don’t understand the detail (percentages, fractions, discounts, multiples) we do understand the bottom line. I do, you do, your customers do.
When you’re setting your prices and working out your discounts, bear in mind a few simple things:
- Customers remember: when the VAT rate temporarily dropped a couple of years ago from 17.5% to 15%, the manager at my gym told me it would be ‘too difficult administratively’ to change what I paid each month. So I paid the same, but they kept more, as they handed over less tax. Conversely, a year later, when the rate returned to 17.5%, that administrative difficulty suddenly vanished and I ended up paying more. So they scored – twice. Punters in the changing room were not happy, and it still rankles. Now it’s going up again, and it simply reminds members of the earlier sleight of hand.
- Customers aren’t taken in. Is £499 cheaper than £500? Yes, but not much. Enough to make a difference? Maybe, though perhaps not in the way you imagine. To me, and probably to more people than you think – the dyed-in-the-wool cynics out there – it’s a just a transparent ploy to get customers reaching for their wallet. It’s one of the reasons I never give anyone a quote that ends in 9. They’re cleverer than that.
- Customers notice. Now that we’ve gone from 17.5% to 20%, prices that were nice and neat last year suddenly look messy. That £15 mobile phone contract now works out at an unfortunate £15.32. And that carefully pitched £19.99 widget crashes through the pain barrier and ends up at £20.42. So what do you do? Well how about leaving prices where they are? First, you keep that nice round figure. And second, and more importantly, you endear yourself to your customers, as you take the hit, not them. I’ve already made a mental note of who’s leaving prices unchanged in 2011, and who’s increasing them. So are your customers.
Numbers are complicated if you let them be. And easy if you put a bit of thought into them.
In the words of Benjamin Franklin:
“In this world nothing can be said to be certain, except death and taxes.”
And he was right. There’s nothing we can do about death and taxes. It’s a numbers game – and when you’re number’s up, you pay the taxman (or the ferryman).
But opportunities?
Well they’re ours to lose. So let’s make sure we win them.
Happy New Year.
Easy, yes. Advisable? Maybe.
So it’s finally happening.
Last summer, I heard a radio interview with somebody from News International, who said they were considering charging for access to the online versions of The Times and The Sunday Times.
They were confident that people would pay.
Not me, I thought to myself. Not in a million years.
Why? Because I’ve been reading The Times online for free for over 10 years. And it’s good – but not that good.
And if I’m honest, I’m a bit of an online tart, so I also spend quality time with the Daily Telegraph and The Guardian (or if I’m in a more exotic mood, Le Figaro or Le Monde).
And then last week, the story was confirmed. From June, it’ll cost £1 a day or £2 a week to read the papers online.
I wondered what the reaction would be. I’m often out of step with the popular mood on these things. Perhaps other people – real, sensible, grown-up people – would think it was a good idea, and made sound economic sense.
After all, The Times gets 20m unique visitors a month. If even 5% stay with them, that’s a million people they can ‘monetise’.
Or perhaps not.
When I last looked, the story on the Times site had 472 comments, most of them negative. Some very negative.
And when I clicked on the ‘most recommended’ heading, I saw that a whopping 3,500 people had recommended the top comment. Which tells you how consistent the response was – for every one person posting, eight were simply agreeing with the most recommended (self-perpetuating, I realise) comment.
If I were James Harding, the editor, I’d be worried. Very worried.
Free and easy
Giving something away for free is a great way to attract people. But once they turn up, what do you do then?
A sprat to catch a mackerel is fine: you give a free e-book, or a free hour’s consulting, or a free website critique, because you hope to pick up more, bigger and paid work.
But if you’re giving away everything, as The Times was, then you’ve got a big problem.
It’s all a case of expectations.
Do you charge for your time? I do. So when somebody says “Let’s get together. I’m in Brighton – where are you?” I realise three things.
First, they’re a ‘meeting person’. Second, they don’t value my time – or at least, they’re not prepared to pay for it. And third, they haven’t checked on my website to see where I live and work (I’m often tempted to say “The Isle of Lewis. Why? Where are you?” to see what their reaction is.)
And almost every time, when people realise there’s a price tag attached, the meeting effortlessly morphs into a teleconference or a videoconference. Which is free, of course.
The thing is, people value what you value.
Just the other evening, I had a second helping of pasta at a friend’s house (tagliatelle carbonara, since you asked). And as I twiddled my fork, I suddenly thought how odd it would be to ask for seconds in a restaurant.
“Was everything OK?” the spotty waiter with the off-white shirt would ask.
“Yes, absolutely delicious,” I’d reply. “In fact, it was so good, I’ll have a second helping.”
“Certainly, sir – that’ll be another £11.50. I’ll be right back.”
Free. £11.50. It’s all a matter of context.
The naked truth
Would you walk down the street in skimpy underwear? Of course you wouldn’t (if you would, you should consider seeking help).
But what if that underwear was actually a bathing costume and the street was actually the pathway down to a shimmering blue pool?
But that’s different, I hear you say.
Is it really? Or is it simply a case of perception? You’re still as naked, but it’s just a matter of how it feels.
Free is the same. It’s a perception. You have to create the value first, before you can give it away.
And if you do go down the free route, remember a few basics:
- It’s a powerful weapon, but it should be used sparingly. Once, I worked for a company that constantly bundled ‘free’ software with much more expensive software. So often, in fact, that it came to be the norm. And when the freebies disappeared, guess what happened? That’s right – the paid-for software sales fell of a cliff. Now in reality, the free software was a gimmick, and probably sat on people’s shelves or on their hard drive – either way, it was unused. But it had the magic word ‘free’ attached, and that creates value. Taking it away has consequences.
- It works one way only. You can make something free that you’ve charged for, but it rarely works the other way around (as James Harding may well discover in June). Lotus, the software company, makers of the iconic Lotus 1-2-3, gave away their word processor, Ami Pro, to boost sales way back in the 90s. Then, they decided to start charging for it. Charging? For free software? You must be joking, thought customers. And nobody bought it.
- It should really be free. Not FREE* or Free (++) or even FREE^^^. If you’re going to hem in your offer with endless terms and conditions (what’s the difference, by the way?) then you might as well think of another offer.
So free is easy, but not that easy. You should think long and hard before you start giving things away, and make sure you have an exit strategy.
Much as I have with The Times.
There’s still another two months to go before everything disappears inside a walled garden, but I’m already weaning myself off their columnists, correspondents and diarists.
Easy come, easy go. And I’m going.
Happy Easter.
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We all like an attractive figure. So what’s yours?
It was late at night, and I was hunched over a laptop in my boss’s office. His ghetto blaster poured out the usual eclectic mix of tracks (Def Leppard, Handel, Iron Maiden, Corelli) to help get us in the mood.
“Got it,” I said, dragging and dropping into the appropriate cell. “Next year’s growth will be 15%.”
(This was back in the 90s, when anything less than 10% growth in software sales was grounds for corporate hara-kiri.)
“I think you mean 15.37%,” he mumbled, scarcely taking his eyes off his spreadsheet.
I checked the numbers. It was definitely 15% – and I told him so.
“15.37%,” he said again, with not a moment’s hesitation.
“Where do you get the .37 from?” I asked, peering at my figures to see nothing after the 15 but two fat zeroes.
“Made it up,” he mumbled, clicking to save his own calcs. He looked up at me, and then broke into a broad smile.
“Round figures make people suspicious. Whole numbers seem too…” he paused, “…whole. You need to break ‘em up.”
Def Leppard moaned approval from the silver dream machine on his window ledge.
“Nobody, but nobody, argues with two decimal places,” he said. “They simply wouldn’t dare.”
Think of a number – any number
There’s no denying it: numbers are powerful. When you’re buying, you want to know you’ve got the fastest, lowest, highest, biggest or smallest.
Even if it doesn’t matter.
If somebody promises me 16Mb broadband instead of 8Mb, I’m tempted. Now I’m not a gamer, and I don’t watch TV online, so I don’t need that kind of speed.
But the mere fact that it’s a bigger number is enough to make me stop and think.
The same goes for books. If my local branch of Borders is offering ’3 for 2′, I know that means one free – and that’s enough to make me buy.
And yet, it shouldn’t be.
Why not? Well 3 for 2 means just a 33% discount – and then, only if all the books are the same price. Remember, it’s usually just the cheapest one that’s free, so if the others are more expensive, then that 33% drops even further.
On Amazon, I know I could get a 40% discount on one book. No commitment, no struggling to find a third (has that happened to you too? I’m glad it’s not just me.).
So you see? If I analysed it, I’d realise it was a bad decision. But most people don’t analyse – they act, based on simple triggers.
£9.99 (or $9.99 or €9.99) is cheaper than 10. Not by much, but it’s enough to make a difference.
Buy one get one free is just another way of saying 50% off or half price. In this case, the simple – but endlessly powerful – word free trumps the others and clinches the deal.
And it works – I ended up with eight (count ‘em) bags of dates recently, simply because there was a buy-one-get-one-free offer. So I bought four, and…well, you can guess the rest.
And I’m not even that keen on dates. (Especially not now, after eight endless bags of them.)
Pick ‘n’ mix
If you are going to use numbers (and you should) then make sure they’re consistent.
Never, ever, fall into the trap that most journalists rush headlong into:
The Dow Jones climbed by 3%, while in London, the FTSE 100 closed 300 points higher.
So which rose more in percentage terms?
Or this:
One in six people say they’re not taking a holiday this summer, while 25% say they’re still undecided.
You can see what the journos are doing: they’re striving for variety. But in the rush to be different, they make their numbers meaningless.
So keep your numbers simple, make them instantly attractive, and keep them real.
But make sure you use them. It could make all the difference. In fact it does – in 87.34% of cases.
Trust me.
Is cheaper better? Sometimes. And sometimes not.
You walk into a shop. There are three pairs of shoes (for shoes, substitute your fetish).
They all look similar. But one pair is £50, one £100, and one an eye-watering, wallet-withering £325.
Which pair is best? Well, you say to yourself, there’s only one way to find out: try them on.
So you do.
The £100 pair is OK, but something doesn’t feel right. They’re not pinching, exactly, but something’s amiss. Like writing with the wrong hand.
So you take a deep breath and try on the £325 pair. Good heavens, you think. Now that’s just bizarre: they’re your size, they’re reassuringly expensive, and yet they constrict your feet, crush your big toe and either one of your legs has suddenly grown three inches, or the heels are uneven.
Well well, you say to yourself. More expensive isn’t better.
Finally, you pick up the £50 pair. The shop assistant cracks a professional smile – the one she’s paid to do 9-5. But you know what she’s thinking: cheapskate.
They fit beautifully. The leather is soft and pliant. Your toes breathe a sigh of relief. And your arches sing with happiness.
And all for £50.
Well well, you say to yourself. Cheaper isn’t worse.
“I’ll take these,” you say to the Ice Maiden with a triumphant smile. She puts them in the box, scans the barcode, and her smile dissolves into perplexed confusion.
“I’m sorry,” she says, “there appears to be a mistake.”
She calls a supervisor. They scan all three barcodes. And then the penny drops.
Oh, of course, they say. It was Sophie – the new girl. She put the price tags on the wrong boxes.
Your heart is in your (as yet unpurchased) shoes. Knowing your luck, the right price will be £325.
But it’s not. It’s £100.
With unaccustomed presence of mind, you remember what your friend Margo told you. Under EU Directive something-or-other, subsection 32/573B, the displayed price is the price you pay. And if they say no, they can talk to your lawyer – in Brussels.
And so, 10 minutes later, you stride out of the shop swinging a glossy tote bag with a pair of shoes inside. A £100 pair of shoes you’ve snagged for just £50.
What just happened? Well, you’ve learned something about price:
- Cheaper isn’t better.
- More expensive isn’t better.
- You’d rather that expensive was better – that way, you’d have got the £325 pair for £50.
- First impressions can be misleading.
- So can second impressions.
And (most importantly) price is often not related to quality, comfort or satisfaction.
A fistful of dollars
I’ve written about it before. There is no ‘right’ price. The right price is the one you set. Double it, and you’ll appeal to a whole different segment of the market. Halve it, and you’ll do the same (and in the process, you may discover the wonderful world of tyre-kickers).
Never sell on price. At least, not on price alone. Yes, I know it’s the credit crunch, and cheaper is better, but there’s one problem. And it’s a Very Big Problem.
However cheap you are, somebody can always undercut you. UK cut-price retailer Pound World discovered this recently to their cost.
Pound World was a skinflint’s delight. The principle was simple: everything, but everything, cost just £1. (I visited a similar outfit locally and saw grinning, swivel-eyed customers scooping products off shelves as if WW III was just around the corner.)
Then the inevitable happened: across the road, a 99p shop opened. One penny. And that was all it took to spell doom for Pound World.
One penny.
What’s your secret weapon?
Of course price is important – and never more so now that we’re the icy grip of the global downturn. People want value. But they also want service.
So make sure your price is fair, but add value by doing the simple things give people that little bit extra:
- Answer email sales enquiries as if the person was standing by your desk waiting for an answer.
- Smile before you pick up the phone. Keep smiling throughout that conversation.
- Deliver before the deadline you committed to.
- Give away something free: an e-book, 15 minutes of your time, a valuable marketing idea.
- Give away something that’s not free, but brings in more customers – like UK fast-food chain Pret, which now has free WiFi across most of its branches. No strings attached (well that’s wireless for you, isn’t it?).
If somebody asks you ‘What makes you different?’ and your first response is price, think again. You don’t want to be the cheapest. Neither do you want to be the most expensive.
You want to be the best. Because that’s priceless.
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