Imagine that a customer you are trying to win uses the argument “the X company is selling it cheaper”. You check. There are a couple of answers you may encounter.
First: company X is really offering the same thing cheaper.
Second: the company X is selling cheaper a product that is only similar to yours but your client failed to see the difference.
Third: it’s not cheaper at all but the offer has been constructed in such a way that the consumer thinks so (or he is bluffing all the way just to get you to lower the price).
What do you do?
A standard reaction would be to lower the price. After all, you’ve invested so much into acquiring this customer, it would be a shame to lose him “during the final lap”.
Wrong. You may be thinking you’re profiting off this client but the truth is you earned less (or you did not profit at all) in the short-term. And the long-term consequences of lowering the price permanently will be even more devastating. To keep selling for less, you start to skimp on quality. You earn less so you spend less on advertising and R&D. Fewer people buy less innovative products from you. Can you avoid the price war?
Sometimes this is just what doctor ordered.
When not to react to the price drop?
The simple information that your competitors have dropped their prices should not warrant an immediate reaction. Try to dig deeper, learn the reason for lowering the price. Because these price drops may be prosaic and you’ll be best off by… doing nothing.
Question one: do the customers know about the price drop?
In psychology, we have these cognitive biases. One of these biases causes you to assume a higher probability of a phenomenon you encounter more often. That’s why the fear of flying the plane is greater than a fear of driving a car — you encountered a safe car trip more often than a safe plane trip. But the statistics say that it’s the plane that is the safest.
It’s the same with your observation of the market: you keep an eye on your competition and know exactly when and how much they changed their prices. And because you know, you think everybody is aware of this as well. Yet it doesn’t have to to be true! So, until your customers start complaining — do nothing!
Question two: is the discount local or temporary?
There are many reasons why your competitor may want to lower the prices. Perhaps he wants to move the goods that are expiring soon. Or they need a quick cash fix to pay a due loan. Or maybe it’s just a local sale of certain goods (because they’re opening a new store)? In all the above cases, you’ll be better off keeping your prices intact. Wait it out. Or answer with a precise strike, targeting exactly the same customers. After all, if your competitor is discounting only to students, why would you discount anyone else?
Is it really cheaper? Instead of lowering the price… try to make the comparison harder!
OK, you’ve done your homework and it turns out that you really need to lower your price. Or do you? You may still have some tricks up the sleeve that allow you to avoid the price war.
Look to what Amazon did: now you buy your own price discounts.
Price variations. If your customer is complaining about the price… introduce a more expensive version of the product! Thus the thing you want to sell appears as the cheaper alternative. But there’s more to it. For your customer, it’s easier to compare your cheaper product to your more expensive one than to a completely different product offered by your competitor. It’s called “-A rule”. And it works. More on this in this article on the psychology of pricing.
A different unit. Two cans of soda at two different stores cost 70 and 90 cents. Which is cheaper? The answer may be obvious, but you failed to ask about… the can’s capacity. The first one holds 200 ml, the more expensive one is 250 ml. Which soda (not the can!) is more expensive? If the customer pays attention to cans, you can offer a cheaper can but with less soda in it.
Packages. The price of gas is easy to compare between stations. But if you create a package (the gas with a sandwich) you can speak about the lower price for the gas (because your margin will be in the sandwich).
Split the price. When you “buy” a bank deposit, you look at “the price” — namely, the interest rate you are getting. The higher the rate, the better, right? But when you actually come to the bank it turns out that the high rate only applies to a chunk of the money. Or is available only when you buy an insurance or a credit card with the deposit. Split the price and show off only the part that your customers pay most attention to.
Make them… pay for the discount! Amazon allows its customers to pay extra for the Prime service — and then get free delivery with every purchase. WizzAir has a Wizz Discount Club — for 30 EUR a year you can… buy cheaper tickets. In both cases, customers pay upfront for the discounts you are going to offer them.
Lowering the price permanently and for everyone should be your last resort. If you don’t want to harm your business, treat the above analysis as a mandatory element of each discounting process. Because discounting is easy. Converting the customer back to paying the full price — not so much.
Do you think you’re creative? How do you define being creative? Many people would say that being creative means solving problems in a non-standard way. But I’m afraid it’s a little more complicated than that.
The American psychologist Mihály Csíkszentmihályi, who is famous for his theory of Flow, carried out some research on creative people and… creativity. Where did he find the people for his research? Of course, at an Art College. Students were given this task: look at a group of objects on a table and paint a still-life picture. So this was the same as they did every day at College.
Listen to the famous Flow TED Talk
Csíkszentmihályi observed that the students approached this task in two different ways: some quickly had an idea, set up the objects and started drawing. The others looked at the objects from all sides for a long time before actually starting work. Still the result was that every student fulfilled the brief and drew a still-life picture. But, was it possible to compare the value of the pictures?
The psychologists pulled in some experts and invited a group of artists to assess the quality of the pictures, naturally without knowing who drew which picture. And what happened? The first group, whose intention was just to complete the task, got significantly lower marks for their work than the second group. Csíkszentmihályi called this second group “problem finders”.
When we think about what makes creative people visionary and special, we don’t usually think about their ability to solve problems, but rather about their ability to see problems which no-one else saw previously. Coco Chanel with her “little black dress”, Steve Jobs with his iPhone and Mark Shuttleworth with his vision of a Linux eco-system: these are not people who solved problems which already existed nor are they solving problems which currently exist. They find problems which are waiting to be solved, and usually the solving itself is done by others.
Why am I writing about this? Because that’s the future for our line of business. Advertising agencies who only solve problems are doomed. Michael O’Leary, MD at Ryanair, claimed in an interview in the august edition of Marketing Magazine that “agencies are useless, expensive and serve up rubbish”. And I agree. I don’t agree that this applies to all agencies, but I agree that it applies to those agencies whose role is, as I see it, to “design logos and brochures”. A client comes to such an agency and says: “Design a logo and leaflet for me”. So what does the agency do? Of course, it designs a logo and brochure.
Click on the image to read more about Michael’s approach to marketing
But a client who sees clearly his or her problem is just one step away from solving that problem. In the era of the Internet and omni-present information, finding a solution to any problem often means … just searching in Google. But Google cannot solve a given problem if someone does not know that a given problem exists. Finding problems to solve is the future for all types of creative agencies, whether they are interactive agencies, advertising agencies, brand agencies or social media agencies.
When Rockefeller paid a car mechanic for some work, do you know what the mechanic famously said to Rockefeller? According to the story, Rockefeller paid him ten dollars. At that time, that was really a lot of money. The mechanic justified his bill: “For hitting something somewhere with a hammer: 1 dollar. For knowing which thing to hit and where: 9 dollars.” If you don’t know the story, check it out on Google. Actually that’s an easy fix!
My customers, who start a new company or begin their blogging adventure often ask me: how do I start? There are many advertising possibilities. How do you make sure you did not miss anything?
I want to show you a scaffolding that I use. It consists of two main parts: a digital strategy skeleton, and something called “the pirate metrics” (a popular tool in the startup world). But it’s their unique combination that creates a perfect tool for building your digital promotion strategy.
A skeleton of the digital strategy
What should your digital marketing strategy contain? The right answer is different things for different businesses. So, how does the skeleton below help you? First, it allows you to choose the elements you need to focus on. You don’t like the video? No problem. Your customers don’t enjoy social media? Don’t worry. Just pick and choose what’s valuable for you and your customers. Second, prioritize the components of the digital skeleton. It will tame the chaos that is ever-present in your day to day business activities.
Website
Use ThemeForest to find a great template
It’s the central information hub for your brand. It’s what people find when they google your name. Make sure it contains only the necessary information, and it has a clearly stated goal — what do you want from your visitors? What do you consider to be a conversion? Is the path to the goal clear? Are your texts understandable?
Decide if you want your website to be more original or more functional. I know, it would be best to combine both but most companies don’t have the luxury of paying for the great design that has also been extensively tested towards UX. The most popular website engine, WordPress, plus a properly customized template from ThemeForest may address most of your needs.
Email marketing
Email is still one of the most engaging forms of communication — even in today’s world of messengers and bots. Your email strategy should not be limited to sending newsletters. I would start with designing your business email templates: how are you going to thank the customer for his buy? What offers are you going to send out? Making money first, marketing later.
Save these email templates in free Google Docs or Dropbox Paper — then you can share them with the rest of your team.
Content marketing
If your company is not known, you can’t count on your customers rushing to your website to buy things after they’d read your cold email. You have to show your knowledge, prove your authority. Writing articles for your blog or educating your customers via newsletter courses, even answering questions via LiveChat or on Quora — all those are the elements of your content marketing strategy.
Creating content is complicated and I can’t describe this process in a single paragraph. But long story short: create personas to tailor your content. Make a list of general topics you are going to build your authority upon. Search for places you are going to be heard at (using only your blog that has little or no traffic is not the best idea). Talk to a content marketing expert. And familiarize yourself with tools such as BuzzSumo or Google Trends — they allow you to check what’s the most shared content at the moment. Can you ride those trends?
Take 10 minutes to learn what Google Trends can do for you
Search engine marketing & SEO
When you’ve set up your website, it would be nice to see Google drive some traffic there. The first thing you should do is to connect your website to Google Search Console. It’s a simple tool that will tell you whether your site has some serious errors that can get you banned from Google. It will also provide you with some simple tricks (such as creating a sitemap) to boost your website’s position. If you use WordPress you’ll get your basic SEO audit from plugins such as Yoast or All-In-One SEO Pack.
Further steps are not that easy so you’ll have to either learn your SEO or talk to an expert. But at the beginning just make sure there are no serious errors on your website and you’re good to go.
Social media presence
Facebook, YouTube, Instagram, Twitter — these are the four most popular social networks in the world. There are plenty of others: depending on where you live and what your audience likes you may want to tap into Reddit, Pinterest, Snapchat or Vkontakte. Do you have to be present in all of them? Of course not. Social media presence strategy answers this very question: which channels are you going to appear? What is the character of your presence? Remember: on Facebook, most people look for entertainment or treat it as a customer service channel. Your all-serious content does not always belong there.
Paid advertising, PPC
Your first customers will not appear out of thin air. But inviting your Facebook friends to your fan page is not a good strategy either. People who like your fan page should be the ones who are going to buy from you, not your relatives. Thus, you need paid advertising. There are plenty of choices: Google AdWords, Facebook ads, sponsored posts on Instagram, directed content on LinkedIn… It is important to know what you are going to achieve (set goals and KPIs, define conversions) and measure the results. Without measuring you’ll end up throwing the money away.
Lead nurturing
Paid ads and social media presence brought a user to your website, she signed up for your newsletter, and she’s potentially interested in buying from you. What can you do to increase your chances? No, we’re not talking about giving away discounts (you can do that but it’s not the only method). This is a job for your content strategy! Good thing we’ve prepared it in advance. But, this is also a job for your creativity. Just remember: a user must come across the brand’s message 4-7 times before she trusts you enough to buy.
Think: what can you give to your users so that they remember you? You have the knowledge, exceptional materials, or perhaps you can… make them laugh? Don’t underestimate the power of emotions in lead nurturing!
Marketing automation
Probably my favourite email automation software
In the previous paragraph, we were wondering what to give to your consumers for them to remember you. An equally important question is how to deliver it so that you don’t spend too much time or money doing it. Here’s where marketing automation tools come in handy. Some of them allow you to send automated emails (I recommend GetResponse or MailChimp for that) others enable your visitors to talk to you on your website (check out LiveChat or UserEngage).
Remember though: marketing automation is not about the tools. Plan your marketing knowing that there’s a real person on the other side of the communication channel. Plan not only the transfer of knowledge but also the transfer of emotions!
Video marketing
Your users spend more and more time watching videos. I even heard the saying “stories are the new wall”. If the attention of your users is drifting in that direction, you have to be there, too. I would consider three basic video formats:
Classic video — shot and edited, shared via YouTube, embedded on your website, posted on Facebook. My advice? Avoid “music videos”. It’s what I call these movie clips shot at conferences and events — they last three minutes, there’s music in the background and… nobody needs them. Tell a story instead!
Live — shot live, contain interactions with your audience and gain popularity fast. You can re-purpose them and use them as classic videos afterward.
Ephemeral (like Instagram Stories) — short clips that disappear after 24 hours. You can use them in a totally different context than classic videos — you can give your audience secret codes that are valid only throughout a certain day.
Analytics
Designing a strategy can be compared to planning a trip. You want to get from where you are to where you want to be using the means available to you at the moment. But even the best trip plan will fail if you… don’t know whether you’re moving in the right direction. That’s why you need analytics.
The bad news is in digital marketing you can measure everything. So marketers either drown in the data and decide they won’t be measuring anything or choose the wrong KPIs to measure. What good is the crowd of people on your fan page if nobody is buying from you?
When you have designed the important goals for your business, make friends with a Googe Analytics or a Google Data Studio expert.
I would definitely recommend HubSpot from experience
Sales tools, sales funnels
The sales process itself, realizing orders on time, answering your emails, and sending the offers — all those are the elements of your strategy, too. What good are the perfect ads that bring people to your perfect website if they get no answer after they’ve sent you an inquiry by email? Get a CRM and use it from the day one: PipeDrive, HubSpot or ZOHO — choose the one that suits your needs.
Pirate metrics
The other element of the puzzle is called “the pirate metrics”. Why that name? The first letters of the metrics (acquisition, activation, retention, revenue, and recommendation) make an AARRR!
When measuring your business, you should be thinking about four measurements categories:
qualitative — observing your users, their behaviors on small samples, deeper analysis, searching for problems;
quantitative — simple tests of certain behaviors on large samples (or representative samples);
comparisons — all kinds of A/B testing (different email headers, different layouts of landing pages);
benchmarks — is comparing yourself to your competition (who has more Facebook likes, how big is their email database).
Pirate metrics are applied to simple things: quantitative measurements and comparisons. Here’s how we stack them:
Acquisition — how do users find you
You can measure your website traffic here, different ways of acquiring that traffic, the effectiveness of paid campaigns or the effectiveness of your landing pages (how many people who started reading dropped off after a couple of seconds).
Activation — how do you engage your audience?
We’ve said that people will not buy from you during their first visit. So what else can they do? You measure the number of newsletter signups, Facebook comments (if you can turn them into further engagement), likes… You check how many decided to create an account (if you offer online services).
Retention — how good are you in bringing them back?
I told you that your user has to see your message 4-7 times before she’s ready to buy, remember? Throw here all the metrics on the returning users. How many returning users do you have on your website? How many clicks do the links in your newsletters generate? How many returned to fill in their profile after signing up? If your first contact was to send an offer — how many replies did you get?
Revenue — how do you make them pay you?
These are the metrics crucial to the health of your business. What percentage of those who created free accounts became paying customers? How many buy after receiving a discount coupon? How many of those with whom you’re negotiating decided to hire you? What is the average cost of customer acquisition? What percentage of your customers brings you profit?
Referral — do your customers recommend you?
From simple KPIs such as NPS (Net Promoter Score) through measuring the satisfaction levels in different stages of the sales cycle. How many of those who received recommendation coupons passed them to their friends?
Digital Strategy Matrix
Imagine a great table. Columns are marked with different elements of the digital strategy skeleton — you have a “website” column, an “email” column and so on.
Rows are marked with pirate metrics: there’s an “acquisition” row, an “activation” row — you understand, don’t you? The matrix you’ve just created is one of the most effective tools when creating a digital promotion strategy. Each field contains a set of ideas to implement and to optimize. Imagine the field “acquisition/video” — it naturally generates questions: how to get more people to my webinars, how to drive traffic to my YouTube channel? Or think of the “activation/email” field: these are ideas for increasing the number of clicks or replies to the messages you send.
You can place this table on one of the walls in your office. Fill it with color post-it notes and assign them as tasks to the members of your team. And if you don’t want to clutter the wall, you can use an online tool such as Trello.
Apple is no longer appealing to technology enthusiasts. This is an element of a well-known and perfectly executed strategy that is called “crossing the chasm”. Let’s try and explain what people who demand innovations from Apple just don’t understand.
In 1991 a book titled Crossing The Chasm appeared, with the subtitle Marketing And Selling High-tech Products To Mainstream Markets. The author, Geoffrey Moore had worked in McKenna Group as a consultant for tech companies from Silicon Valley. It is there that he noticed a peculiar regularity when it comes to implementing innovations. But before I tell you about this regularity, I must introduce you to yet another book, because it contains an idea that was fundamental to what Moore was observing.
Exactly 29 years before Crossing The Chasm a groundbreaking work on implementing innovations saw the light of day: Diffusion of Innovations by Everett Rogers. If you are working in a business that is even remotely connected to innovations, both these titles are required reading for you. Rogers’ key idea was called product life cycle — he divided implementing the innovations into phases (development, introduction to the market, growth, maturity & saturation, and decline), then he named four groups of consumers who would be interested in innovation at each of the phases. These groups are:
Innovators — technology enthusiasts, seeking new things, willing to sacrifice their convenience for the privilege of being first. Think of all those Dropbox beta testers or the ones who stood in line to buy the first iPhone back in 2007.
Early Adopters — the visionaries who had read some enthusiastic reviews from the innovators and want to implement the new technology as soon as possible. They may be not willing to sign up for the beta test, but they are eager to read the first reviews and… buy soon after.
Early Majority are pragmatics. They invest in technology when they see real benefits, and when someone has proven that it really works, the market is growing fond of it. Convenience and support are much more appealing to them than new features. They go to Radio Shack to buy a tablet and they choose the iPad “because everybody has it”.
A Late Majority is a group of technological conservatives. They approach innovations carefully, and only when the solution becomes a de facto industry standard are they willing to give it a try.
Laggards are very skeptical of innovations. If they could, they wouldn’t have changed a thing. The only reason they buy touch screen smartphones today is that they can no longer buy their favorite Nokias with big keys. The cloud in 2019? No kidding, there’s still time for that…
The chasm is where your innovative, disruptive products begin to spread among the mainstream users — the pragmatics are considering using it. And do you know what the problem is? Well, both groups on the left of the chasm want new features and performance while all the groups on the right of the chasm prefer convenience and reliability.
Abandon all your customers you who enter here
Quick question: do you know the name of the chip powering your phone? If you answered “yes” chances are you’re a technology enthusiast, you read the performance comparison tables, and it matters to you whether your phone has 64 or 128 GB of memory, whether it has a replaceable memory card. And if you answered “no”? You are more interested in a phone “just working” so you can do what you need to do with it (and by “what you need to do” you don’t mean “replacing the factory-issued ROM” or even “change the default system apps”). The first iPhone had apps (innovators were drooling over), yet it did not allow you to send MMS (pragmatics raise their brows in amazement). Crossing the chasm (i.e. targeting an innovative, disruptive product towards the mainstream market) means changing two things:
First, you have to change the product itself, and its communication. Disruptive innovations in each generation are gradually replaced with incremental innovations. What changed in the latest iPhone? Battery life and picture quality. No bells and whistles, no wireless charging of your AirPods. It’s exactly what the market demands.
Second, target customers change. And this means one of the most difficult business decisions you may be faced with: you need to abandon the people who were your customers so far. The very ones who brought you to the position you are in today. Simply because there’s just not enough of them to power your further growth.
Case in point: sir Jonathan Ive. Also a visionary who complained that there was nothing left to design at Apple anymore. The company is reusing the same shapes and forms of the iPhone because it works. Because scaling is now more important than innovating.
Instagram: yes. Twitter: not so much.
Twitter should have abandoned its hardcore users long ago.
There are many companies that struggle with crossing the chasm exactly because they are not able to implement the changes I mentioned above. Example? Twitter. The “other” social network not by their choice but because they’re struggling with increasing the market share. But it can’t be done without radical changes within the product itself, changes that will irritate the first, long-time, hardcore users. Twitter was trying. When they announced they were to abandon the 140-character limit of a single tweet, the hardcore users rebelled. The result? Twitter backed down a couple of times (though they shouldn’t have), implemented the change a couple of years too late.
Who did well? Take Instagram. I don’t know if you remember the beginnings of this app (it launched in October 2010) — also as a kind of “the other photo social network” (Flickr dominated the space back then). It differentiated itself with three functions:
Instagram was not afraid to innovate — despite the protests from the hardcore users.
It was available exclusively on iPhones;
didn’t allow you to add photos from Camera Roll (which meant you could only share the photos taken within the app, here and now)
the only proportions it allowed were square photos.
The first Instagram users were proud of this “eliteness”. Well, it didn’t last. One day they woke up to Instagram opening itself to Android (March 2012), and abandoning the “in-app photos only” policy, allowing professional photographers to share their professionally-taken photos… Hardcore users screamed “Betrayal!” but nobody listened because Instagram grew like crazy.
In April 2012 it was bought by Facebook for around 1 billion dollars — an investment that proved great because in the following year Facebook grew only 3% while Instagram grew… 23%. So abandoning the innovators turned out to be a good thing.
Starting from August 2015 the photos no longer need to be square…
A Company Led By Accountants
“The company forgot what it means to make great products,”
The pundits are comparing the above quote from Steve Jobs to Apple’s situation today. And this is exactly what crossing the chasm means. But there is one more thing… The recurring theme I often read is “Apple without Steve Jobs is not the same company. They lack passion and vision. Tim Cook’s Apple is a well-rounded tech company, but is it enough to keep a leader’s position?” The answer to this question was provided by Peter Robertson, an American-Belgian psychologist who specializes in management styles. Robertson took an analytical method called HBDI (Hermann Brain Dominance Instrument, developed some time ago for General Electric) and combined it with… Rogers’ product life cycle curve. HBDI is a tool that diagnoses which of the four parts of your brain is dominant when you’re making managerial decisions. These areas are:
Logic (blue) — your thinking is analytical, you are fact-based, numbers matter.
Vision (yellow) — you see “the big picture”, you rely on your intuition, you’re great at synthesis and connecting the dots (facts and areas that are seemingly not related).
People (red) — your interpersonal relations are very important, you build emotional bonds, you are a great negotiator.
Control (green) — procedures, planning, and details are what matters to you, you are a well-organized person.
Jobs was clearly a visionary, plus there were stories about his total lack of people skills. This — according to Robertson — is a perfect managerial style for the first phase of implementing an innovation: development. But when your product gains market share and you are faced with the challenges of growth, the “people” and “control” should be dominant factors in your decisions. And while Jobs obsessed over details, I don’t think he was a big fan of plans and procedures. Not to mention maintaining good relations with large groups of people. Yet this is exactly what Apple needed to leave the market niche.
Apple’s market share is bigger than BMW’s or Mercedes’ or Porsche’s in the automotive market. What’s wrong with being a BMW or Mercedes?
Jobs was good at making BMWs. Tim Cook is the perfect “peacetime manager”. He listens to the market, he creates products based on the demand, not the vision, intuition or “because I say so”. Innovators don’t find it attractive, but… Apple is not for them anymore. Just think what Porsche’s hardcore users said when they first saw Porsche Cayenne. “Betrayal!”, “It’s not a Porsche!”. Think Mercedes A-Class, BMW 1… Will the company from Cupertino return to the graces of tech enthusiasts? It will have to, one day… Will they do it with Tim Cook? Well, I have to tell you about yet one more thing.
Jumping The Waves
Every innovation comes to an end — that’s why the product life cycle is shaped like a wave. And the company that intends to survive on the market has to behave like a surfer: it has to know when to jump to the next wave, the one that is on the rise. “Closing sails” on a market (since we stick to marine-and-ocean analogies) requires — according to Robertson — yet another type of a manager (or: management style). The one who ignores interpersonal relations when making critical business decisions. “Logic” and “control” are to dominate. No surprise there, “jumping the wave” means restructuring and often layoffs for the company. I’ve never seen Tim Cook’s HBDI test results, but I suspect he is more of a “peace-time manager” than “war chief”. So he’ll need substantial help from the rest of his team when the time arises. But — as they say in “Game of Thrones” — not today.
I’ll leave you with some more food for thought: perhaps it’s wise to listen to Publius Flavius Vegetius, a Roman historian who — in his De Re Militari (Latin for Concerning Military Matters) treaty wrote: Si vis Pacem, para Bellum. And perhaps this is exactly what Apple is doing right now. Automotive and health market are ripe for the taking when it comes to innovation.
