Customers have a bias. They are self-centered, selfish, and as it should be totally focused on themselves and their needs. They could care less about you, your company, and what you have to sell. Only when they are able to connect the dots between their needs, wants, and what you offer do they start to think about you.
Biggest marketing error a business owner can make is assuming that you understand your customers needs because from where you believe that "I understand my customer, I AM the target market. They are just like me." Perhaps, but what you lack is perspective. The advantage new entrepreneurs have when starting a new business is their raw curiosity and their desire to please. They ask lots of questions and are able to see past their need to make a sale and put the customer's needs ahead of their own. Bottom line they have a fresh perspective because they are witnessing everything for the first time.
To build a really effective market strategy you first need to set your agenda aside and let your customer teach you how, what, when, where, and how they want to do business with your firm. Anyone can jump in and spend a bunch of money but that does not make it a marketing strategy. All you may end up doing is spending money on something that totally fails to generate any leads or new business.
STOP thinking like a business owner and start thinking like a customer. Ask questions, get involved, and find out why people choose your business instead of the competition. The most expensive marketing you will ever do is when you spend money on some sort of campaign and learn nothing new about your customer. Fail to understand your market and you will fail at making a connection.
Before we go to far into marketing strategy we need to come to an understanding of Marketing.
My definition of Marketing is the process by which information about a product or service designed to meet a need - real or otherwise - is communicated to those who have the need. The goal is always the same to get people to seriously consider the merits of your products or services. There are five steps to creating a marketing strategy for your business plan.
- Identify All Target Markets
- Qualify the Best Target Markets
- Identify Tools, Strategies and Methods
- Test Marketing Strategy and Tools
- Execute Marketing Strategy
Starting with the customer in mind first define WHO is your ideal customer or target market. Most companies experience 80% of their business from 20% of their customers. It makes sense then to direct your time and energy toward those customers who are most important to you, and really get to know them and to understand their buying patterns, interests, tastes, attitudes and hot buttons!
Your strategy is to position your business at the same level as the majority of buyers (majority of revenue) you are targeting. It is critical to figure out where you are positioned and where you would like to be positioned in the marketplace.
TRAP: You can go just as broke positioning your product or service above, as below, the marketplace! Remember to look for the biggest profitable bulge of buyers for your product or service. Then package your product or service to meet their needs.
To accomplish this you need to understand and identify the key characteristics of your potential prospects. What are the key characteristics that will help you identify your prospects? Make a list of the following data, traits and characteristics:
Demographics: location, age, sex, occupation. Lifestyle: interests, attitudes. Buying cycles: identify any cyclical trends. Psychographics: what is the intrinsic motivation that is driving your customer?
Remember, your target market is made up of:
Primary target market: These are your best and most profitable customers. They have a strong interest in your product/service and are highly motivated.
Secondary target market: What other markets show good potential?
Tertiary markets: What other potential markets exist for your products or services? They could be new or emerging users, people that are using a totally different product/service.
TIP: Make a list of the customer characteristics you identified. Identify as many unique characteristics as you can think of. Work hard at it. Ask your friends and relatives for ideas. Document and group the characteristics of the buyers by primary, secondary and tertiary.
Remember, the definition of marketing. The process by which information about a product or service designed to meet a need - real or otherwise - is communicated to those who have the need.
Another way to look at this issue is to consider yourself as being employed — by the customer.
Consider these points:
- If they are the ‘boss’, you will let them tell you what they want to buy.
- How do they want the product or service delivered?
- How much are they are willing to pay.
- Where and when do they want it provided and other expectations they have of your company, in exchange for buying your products/services.
In the first step, you defined your ideal customer or target market. The purpose of this step is to further qualify and determine which customer profile most meets the best odds of success. The strategy is to position your business at the same level as the majority of the buyers you are targeting. It is critical to figure out who your best customers are and how to best position your company in the marketplace. You can go just as broke, positioning your product or service above, as below the marketplace.
TIP: To have any chance at targeting your best customers, you must know them well. You must understand their needs, wants, emotions and perceptions. Do not short shrift this part of your business plan.
You want to make sure that your products/services and business systems are in alignment with the customers’ point of view. To do that successfully you need to create a customer profile. To help with that task I recommend using four tools to define and categorize customer needs.
The four tools are; Needs, Wants, Emotions and Perceptions (NWEP) are the criteria your customers use to make a purchasing decision. By understanding them better you will be able to organize your business, marketing, and advertising to be in alignment with them. Here is a description of the four tools:
Needs (The most urgent or essential feeling): The customer identifies a need. Something has happened or prompted a new awareness of a specific need. It is usually something that the customer does not have or a need that is not currently being met. Make a list of those unmet needs.
Wants (Desire, wish or deficiency): now the prospect is seeking information to meet a specific need. Remember, people buy things to solve a problem. What problems does your product or service solve? No problem = No need = No sale. Make a list of the problems your product solves.
Emotions: Any major purchase is made based on specific emotions justified with logic. Identify them and evaluate how emotions help or hinder the customer to evaluate the alternatives. Remember, the larger the purchase, the greater the role emotion comes into play. What emotions do you observe in the decision making process? Make a list of those emotions and how they help or hinder the purchasing decision.
Perceptions: What are the negative and positive perceptions that customers have about you, your company and its services? How do they affect the purchase making process? Make a list of the positive and negative perceptions.
To succeed in business you have to stand out from the crowd. Good enough isn't enough. You have to be outstanding and the only way to be outstanding is to know and serve your customers better than anyone else. That requires an intimate knowledge of the customer and how they make a purchasing decision, which will means getting inside their head to understand their thinking. The best ways to make that happen is to interview them and ask a series of open-ended questions.
TIP: Sales and marketing is not only about the battle of companies, products, and services. It is a battle of perceptions. There is no real right or wrong product or service. Truth or best are simply subjective perceptions. The only reliable way of uncovering their perceptions is through the consistent application of PROBING QUESTIONS that cause the prospect to explain and reveal what they really think.
Interview as many potential or real customers as possible and tell them you are trying to improve your business and how you operate. Ask them to help you by answering a series of questions.
The goals of these questions are to uncover how the customer becomes aware of their need for your product or service. With this information you will be able to get their ATTENTION in a way that educates and excites potential customers.
If you had the opportunity to create the ideal __________ (company, salesperson, product etc.) what would be the characteristics that you feel would be absolutely essential for you to feel comfortable doing business with them.
What do you look for in a _____ company? What do you see as valuable in ________(product/service)?
What problem (need, want) do you see that ________ (product/service) is actually solving? Why is that important to you? How does that make you feel?
What are your perceptions about the ________ (industry)?
Who have you dealt with before? What do you like about their product/service/people etc? What could be improved?
What is your perception of what you are really buying when you buy ________ (your product service)?
How specifically does ______ (what the customer says they are really buying) meet your needs?
How do you know that ______ (what they are really buying) is actually meeting your needs?
TIP: Create a worksheet to record their answers to these questions. Feel free to modify them to fit your situation except be sure that they remain open-ended questions. Questions that cannot be answered with a simple yes or no answer but requires a more detailed explanation to properly answer your questions.
To gauge if you are getting the information you need, ask yourself these questions: Have I uncovered what the prospect thinks his/her most urgent needs are? What is this prospect feeling? As it relates to what I am selling, have I uncovered a need we can fulfill?
Any major purchase is bought with emotion and justified with logic. Uncover what the prospect WANTS in your product or service. It will be some sort of desire, wish or deficiency. In a real world situation a customer that WANTS a product or service is curious and seeks more information. By asking these questions the customers will explain to you what they need to know (information) if they were going to buy your service or product.
Where do you feel is the greatest problem/opportunity is for a business like mine to meet really serve you well?
What do you use/buy now? How does that solve your problem?
What is great about that?
What could be improved?
Any major purchase is an emotional decision that we justify with logic. Emotion and motivation are very closely linked. You can have a buyer that knows he/she needs your product or service and if they are not motivated to solve the problem, cannot and will not buy. The goal of these questions are to identify and understand the role of emotion in the purchasing process.
TIP: Ask yourself these questions.
Have I uncovered a specific, legitimate problem that our product/service can solve?
Do I understand what the prospect wants? What he/she desires?
Is there a deficiency that our products/services/myself can help the prospect overcome?
Have I uncovered something specific that the prospect is dissatisfied with the current supplier/situation/solution?
The questions at this stage are designed to get the customer to discuss the problems and observe the prospects EMOTIONS. Watch for any strong outward expression about a specific topic.
As it relates to _________ (need from previous questions) how does that affect you/staff/company etc.?
Of the all the things we talked about, what is your most dominant (or recurring) problem in operating your _______? What are you doing about it? (If nothing is being done about it... ask why?
If this problem, is not resolved, what would the implications be? How does that affect you?
What would the cost be? ($$, time, energy, reputation, dissatisfaction) How would you feel? What would ________ (person) think?
The key in this step is to have staying power. You may feel uncomfortable while asking the questions, don’t give up! If you are going to get people in touch with a bunch of emotions (some negative) don’t leave them there without completing the rest of the questions in the process.
TIP: If this were a real world scenario the customer would be trying to decide whether or not to test the product or service.
Look for the things that create DESIRE and help them evaluate the product or service.
What are the implications of the problems you uncovered in the answers to this series of questions?
Have I uncovered the most dominant & recurring issue as it relates to your products/services and the customers needs and wants?
Have I observed specific emotions around any specific types of questions I’ve been asking?
Does this prospect understand the true cost of problem? Is he/she more motivated to buy now?
At this stage we want to find out their perceptions, rules, and ways they make a final decision. To discuss how they’ve tried to solve this problem before to see if we need to alter our approach.
Thinking of _____________ (problem), what type of solutions have you explored in the past. What worked and what didn’t work?
What other solutions are you investigate?
We agreed that ____________ (problem) comes up due to ________ (educate/implication). Left unsolved the cost would mean _________ (implication). What do you feel would have to change or what do you feel the ideal solution would be?
If we had a solution that _____________ (customers idea) solved your _______ (problem) is that something you would be interested in implementing?
What other solutions would you consider?
The purpose of this step is to uncover the buyers' perceptions and rules about how, if, when, why they would buy your product or service. The best indicator of how a buyer makes a decision is how they have made purchasing decisions in the past. Probe and ask them what the deciding factors were in making a similar purchasing decision before.
TIP: Answer the following questions to make sure that you have the information you need.
Do I have a clear picture of the prospects perceptions of the solution (s) is? Who would be our competition?
Do I have a clear picture of how this person makes a decision? i.e. what are their rules, ideas of how they would solve the problem, what were their reasons for making a decision to go with the previous supplier/solution or your services?
Human behavior is remarkably predictable. Each of us have patterns of thinking, speaking, doing and being that are distinct and yet very predictable and measurable.
Look at how the insurance industry relies on our behavior everyday they go to the bank with the results. Through the study of past and present behaviors insurance underwriters and actuaries can predict with profitable accuracy how long you will live, how many car accidents you will have and how much that will cost them.
A manufacturer of wood preservative in Canada, has a meteorologist on staff to predict the weather so they can time the airing of their television ad campaigns to follow a rainstorm.
Everyday these patterns reveal themselves when we observe how people conduct themselves in a given situation. We are constantly observing, judging and analyzing each other's behavior. This is neither right or wrong it just is.
We do this either consciously or unconsciously in how we analyze each others demeanor, style, manner, habits, methods and customs. Using this information we make decisions, judgments and form a bias toward people, events, products and services.
The ways in which we act, react, talk and judge what action to take in any given situation is based upon our own view or perception of the truth, as we know it.
Depending who/what we judge (perceive) as being superior, right, better or stronger we can sometimes begin to see our position/opinion begin to change. There is a word for this... INFLUENCE!
Influence IS marketing and selling. We do it each and everyday to someone or ourselves we know. The NWEP questioning strategy is based upon 16 years of practical experience observing human behavior in the arena of transacting business, marketing, and making a sale.
TIP: Review all the answers to your NWEP questions and create a description of your ideal customers' Needs, Wants, Emotions and Perceptions. Write a profile of your ideal customer.
To be able to market successfully to them, you need to understand your customer and be able to put yourself in your customers’ shoes. This will enable you to better market and sell your products/services to them. Look for the biggest bulge of buyers for your product or service and then package your product or service to meet their needs.
Describe the different attributes of each service/product and how it adds value for each segment of your target market. To some degree the demographics, psychographics and geographics of your primary, secondary and tertiary segments will dictate their preferences for a specific product or service. In the markets you have chosen, what do they want? For example, for a moving company the customer might want to have less stress, save money, experience a smooth transition, more safety, and simplicity.
TIP: When you compare the ideal customer profile to the products or services you plan to sell where is there a mismatch or a direct match? What do your customers want from the products and services you provide? What is missing?
Some information on preferences will come from the industry and market analysis. Some of it must come from speaking directly with your potential customers. Another way to think of this is: What is the intrinsic motivation that is driving your customer to buy your product/service? What do they want to learn?
When a customer thinks of buying your product/service, what thoughts come to mind?
What goal do they want to achieve?
What do they want to experience more of or less of as a result of doing business with you?
TIP: Identify the primary drivers causing your customers to investigate purchasing your goods and services.
No business can meet the needs of everyone. Neither is it realistic to expect you can meet the needs of everyone who visits your web site. Choose your target audience carefully. Overlook this area and I guarantee you will be disappointed with the performance of your business. Get this right and you will be more than pleased with the response. Here are some more questions to ponder:
What do you know about your target market?
What competitors do you have?
How are competitors approaching the market?
What are the competitors’ weaknesses and strengths?
How can you improve upon the competition’s approach?
What are the lifestyles, demographics and psychographics of your ideal customer? (Check out HYPERLINK "http://www.sric-bi.com/VALS/presurvey.shtml" http://www.sric-bi.com/VALS/presurvey.shtml it is a great site for psychographics).
It is based upon the self-orientation and resource dimensions that make up decision-making patterns. On this web site you can take a survey and find out what psychographics segment you fit into and then look at the other segments. This will help you to better understand the primary motivation.
Remember the definition of Marketing? The process by which information about a product or service designed to meet a need - real or otherwise - is presented or communicated to those who have the need. This process can take place on the spur of the moment or be planned. However, the goal is always the same. To get people to seriously consider the merits of whatever is being marketed.
Now it is time to focus on which strategies to use to reach your target market. I suggest that you build and use as many tools or strategies as you can afford. No one has an unlimited budget. However, choose the tools that best fit your style and business model. For example, if you intend to use sales people to sell a broad line of products, a printed catalogue or a real time on-line web site/catalogue would be essential tools. In fact, if your competitors do not have a real-time database where customers can check inventory and place orders, this might be a significant advantage in certain markets.
TIP: Considering the needs, wants, emotions and perceptions you uncovered in step two, which of the tools below would best facilitate effective marketing and sales communication?
Remember, a market you cannot access is a market you cannot serve. Which tools will get your advertising message directly to the CUSTOMER? Marketing is the process of finding, communicating and educating your primary market about your products and services. Choose a combination of tools and strategies, that when combined, increase your odds of success.
Consider everything. Your location, colors of the interior design, attitude of staff and products and services all contribute to creating an ‘experience’ for the customer. Take the time to identify how your marketing and sales process works, then choose the right tools for the job:
Location: if your business appeals to a certain demographic, then locating your business in an area that has a high density of those potential customers will increase your odds of success. Proximity of your primary competitors: depending on the strength and image of your competitors, it may be beneficial to locate nearby. You would be able to tap into the traffic they generate with their advertising and promotions. Your presence might encourage comparison shopping.
Distribution methods: i.e. wholesale, retail, manufacturers agents, strategic alliances. Credit policies: easy payment terms such as no payment, no interest will work in certain retail sectors that sell large ticket items.
Product & service guarantee/warranty: extended warranty or guarantees of performance may help to reduce buyer resistance to trying a new company or product.
Sales model: direct sales staff will need tools to do the job. A brochure, catalogue or product sample, for example.
Pricing strategies: using a low price penetration strategy might allow you to win some market share. However, are you able to maintain the low price strategy, long term? Another strategy is to gradually raise prices as you become more established and have had an opportunity to build relationships with your customers. If you have established that your customers appreciate quality and have an above average income, a high price strategy could be effective. Try combining this strategy with a great ambiance.
Special events: using this strategy to reward customers and build a sense of community.
When marketing is executed elegantly the prospect will be motivated to investigate further and/or acquire the item or service. Accomplishing this objective will involve the use of numerous tools and strategies.
TIP: There are a lot of different ways to market and promote your business but the key is to have at least ten different marketing strategies working at any specific point in time. The more tactics and strategies you have tested and work the more diversified your leads and less risk should one of them stop working.
Marketing Calendar/Plan: create a 12-month marketing calendar with projects, tactics, dates and costs recorded.
Identify Customer Needs: focus groups, surveys, interview customers, man on the street interviews, shop your competitors.
Back-End, Up Sell: add new/complimentary products and services, create back-end products including CD's, DVD's, product of the month.
Media: includes television advertising, infomercials, radio advertising, on-hold messages, billboards, and cable channel advertising.
Internet Marketing: your own website, search engine marketing, pay-per-click advertising, pay-per-call lead generation, videocast, podcast, weblog, RSS article distribution, ezine subscriptions and distribution, email marketing, autoresponders, social bookmarking and online networks.
Branding: packaging your company; name of company, USP/Slogan, consistent and congruent logo, testimonials, features, history, guarantees, awards, press releases/public relations, brochures, business cards, letterhead, community and sports team sponsorships, uniforms.
Print Advertising: options include local newspaper, daily newspaper, magazine, trade journal, industry newsletter, strategic alliance newsletter, local school or university newspaper, flyers, catalogs, posters and other newspapers or newsletters, yellow pages and white pages advertising.
Signage: building and vehicle signs, window signs, taxi backs, display, wrap advertising, and in-store signs or Point-of-Sale (POS).
Host-Beneficiary relationships: Piggy-back mailing, joint ventures, complimentary businesses due to proximity, and complimentary businesses due to similar target market.
Promotional items: include pens, clothing and other items with your name or logo imprinted on the item, calendar, stickers, tags, golf balls, and magnets.
Direct Mail: personalized letter, flyers, postcards, newsletter, Christmas and birthday cards, reminder cards.
Networking: strategic alliances, Chamber of Commerce, trade associations, tip clubs, barter clubs, sponsorships, and club/association memberships.
Special Events: special closed door sales, in-home workshops, teleseminars and day long seminars, industry expert seminars.
Loyalty Marketing: record and track all purchases by customer, reward system, service contracts, birthday cards, special offers, offer lifetime "oil change", holiday cards, special offer on next purchase.
Lead Generation: Build target market database, referral system, cold calling and telemarketing, trade shows, gift certificates, free trials, referral rewards, contests/sweepstakes, write & publish articles, and fax-outs.
Brochure: supports sales people in the field. Left behind they can become a silent salesman.
Post Card: great for follow up or to introduce your company and its products or services to new prospects.
Business Card: standard equipment. Adding information on the back or using a fold over card can set you apart from your competitors.
Newsletter: excellent tool to educate prospects and add value before the sale.
Logo: a well-designed logo and corporate image can make a new company look like it has been around a long time.
Web Site: there are many different web-site design models and uses. They can be ecommerce to sell products on-line. Disseminate information and educate prospects about products, services. Build an on-line community and build relationships. Boost your image by creating a high image web site. Display photos of past projects: for service or construction businesses this can provide a great opportunity to show past work and testimonials.
Telemarketing Campaign: when combined with other marketing tools, such as direct mail, they can substantially increase your conversion ratio.
Direct Mail: can be just a letter or a complete package with brochure, letter, response card, sample or even a coupon.
Advertising: certain types of advertising can be very effective, if used as a part of an overall marketing campaign. Do not make the error of thinking that an advertising campaign is your marketing campaign. It is simply a tool and part of your overall approach to communicate your marketing message.
Networking: many service businesses rely heavily on this strategy. In certain industries, networking is marketing.
Press Release: if you have a newsworthy story that will help a medium’s readership, a press release can be a powerful way of getting some publicity and market exposure.
Book: writing a book can provide prestige in a way that no other marketing tool can do. It allows you to share your knowledge and educate potential customers on important issues.
Newsletter: similar to a printed newsletter delivered through e-mail directly to the customers inbox. This strategy allows you to capture the e-mail address of a potential and interested prospect.
Action: Make a list of the tools you plan to use to market your business or add your own. Enter them into a calendar format or at least into a spreadsheet with costs and timelines. Then you can use that information when it comes time to create your financial plan.
Prepare before you venture out into the world. Test, test, test, test. Test marketing. Test your assumptions. Test your ideas and your pricing. Test your sales pitch. Test your advertising. In a word, TEST!
The assumptions that we do not test or verify are typically the ones that have the potential to create business problems. Unfortunately I see this often. I think Billy Graham the evangelist once said “No smaller package have I ever seen than a man totally wrapped up in himself.” To a certain degree that can also be true in business.
TRAP: It is very easy to get so wrapped up and committed to getting a certain goal or result that we miss seeing the errors in our assumptions.
Business planning is 50% explaining what you know and what you will do. The other 50% is confirming key assumptions and success indicators.
I know from my own experience that I was resistant to creating a business plan. It seemed like a lot of work and I would rather be working IN the business than ON it, through a business plan. I finally relented and discovered many benefits:
- I got new ideas.
- It confirmed some of my assumptions were correct.
- I found out some of my assumptions were quite frankly, wrong.
Any one of these three results would make the whole business planning process worthwhile. I have found that most entrepreneurs will learn something new, confirm an important assumption and discover that a specific strategy would have failed. This makes completing your marketing strategy very worthwhile.
Before spending your entire budget creating the tools and implementing strategies, conduct some preliminary market testing. How?
Try selling your products/services to a friend that has a similar profile of your ideal customer. If no friends meet the profile, go out into the marketplace and find them! Ask them to help you. Explain you are in startup mode and ask for their cooperation. One of the best places to find potential customers is in the parking lots, sidewalks and neighborhood where you would like to set up shop.
Prepare a questionnaire and ask them a series of questions. Tell them you would like to get their answers to a series of questions about their needs and would like to get their feedback on your goods, services and pricing:
Interview them. Tell them you want them to be honest and tell you their first reaction or response. Try your sales pitch. Show them sample advertisements or anything else that you plan to use in your promotions/marketing mix.
TIP: Ask lots of questions! Listen for subtle differences or suggestions. These are ‘gold nuggets’ that you can study and use to modify your approach to the marketplace.
Thank them! If they expressed an interest in your products/services ask for permission to contact them when you are operational
Let’s assume for discussion purposes that you were going to rely heavily on direct mail campaigns. Mail a small number of direct mail packages to prospects. Try to sell them! Just like you normally would, then:
See if/how much response you get from the mailing.
Follow up: do a telephone follow up to survey and try to quantify the readers attitude, beliefs and behavior as it relates to your mailing.
Take the feedback, study it and modify your approach, test again. You will find that as you test and modify your approach your response rates should climb substantially. For example: perhaps you mailed 300 and got 0.05% response on your first mailing. Second mailing of 600 the response was 1.5% and the final test (mailed 1000) brought in 3.5%. This represents a significant increase in revenue and profits. It takes time but it pays off in the long run.
TIP: When you test like this you do not burn up your entire database with a direct mail campaign that failed or brought in low response rates. It allows you to keep your losses low and increases revenue.
After some testing and trial runs and you are feeling confident in your approach, try doing a Press Release and some inexpensive advertising. The important points to remember are:
Media: The media isn’t interested in giving you free promotion. They are interested in telling people about information that will help the subscriber, viewer, reader. You must have a unique angle that helps them help the subscriber, viewer, reader.
Local papers: do some test advertising in the classified advertising section of your local newspaper or community newsletter. These ads are text only and low cost. You can afford to run lots of them and test different attention getting headlines.
Networking: find some networking groups, leads/breakfast clubs and mixers to attend. Usually, they allow new members to do an infomercial. This will provide you an opportunity to test your approach. The infomercial should be full of benefits and clearly explain what business you are in or what products/services you provide.
After you have done some initial testing and modified your approach and have confirmed you are on the right track create a 12 Month Marketing Action Plan. It should include:
Description of promotions, marketing strategy and advertising tools.
Exact costs and budgets.
Timelines: set specific dates to prepare, train staff if necessary and campaign launch dates.
TIP: Write how you will test and evolve your marketing strategies.
If there is one issue that will kill a marketing or advertising campaign it is not having a well defined ‘Market Pricing Strategy’. This strategy is central to the overall development to a successful marketing strategy. Price objections can kill your business. Generally, the less personal interaction you will have with a customer the more accurate you need to be about your pricing strategy.
Remember, marketing is communicating the benefits of a product or service. If your price is too high or low, your prospects/customers may not take you seriously or dismiss your proposition outright. The entire purpose of marketing is to communicate and create a perception of value! Choosing the correct price is essential to creating the right perception of value.
Generally, the less personal interaction you will have with a customer the more accurate you need to be about your pricing strategy. Even if you have a lot of personal interaction with a client pricing too low leaves money on the table. Your money! Not only that but your price creates a perception and communicates value or the lack of it.
Remember, marketing is communicating the benefits of a product or service. If your price is too high or low, your prospects/customers may not take you seriously or dismiss your proposition outright. The entire purpose of marketing is to communicate and create a perception of value! Choosing the correct price is essential to creating the right perception of value.
Creating a Market Price Strategy is the art of balancing the role of price as a means of attracting and keeping customers.
Every price creates a ‘perception of value’ in the mind of your prospect or customer. Your goal is to find the fine line between a price that is low and unsustainable vs. too high which handicaps the marketing and sales process because a price that’s too high or low can still create a perception problem.
Over priced products or services do not have enough ‘value’ in the mind of the customer or your marketing and sales system has failed to communicate the 'real' value of your products or services. Whereas, a price that is too low could create the perception that the product or service is of poor quality.
The point is this - both scenarios create a ‘perception’ problem. An effective market price strategy strikes a balance between real perceived value and the maximum sustainable price for goods and services for a particular market segment.
A Market Price Strategy that works well in one market segment may fail in another. You cannot assume, you must research your competitors pricing strategy, test your own with real live customers and then adjust to fit the market.
TRAP: Pricing your product or service to achieve maximum profits and market share is a delicate balance. The problem is that most companies do not have a Market Price Strategy or policy. If you choose to ignore this important marketing principle you do so at your own peril.
For example, if your price is too high, you may not be able to achieve enough market share and lose important sales and profits. If your price is too low you may be leaving money on the table and you would not have enough profit to sustain your operations.
The solution? Find a balance between these three factors:
To make a decision on your Market Price Strategy you will need to consider the following points: Determine an acceptable range of prices: based upon your corporate values and objectives do you want to establish a discount image, or a quality image? The key is to make sure that your decision is in keeping with your corporate values.
Set a target price for a specific target market: based upon your understanding of this market and the estimated demand you next set a price that will maximize sales and profits.
Estimate the demand: compared to your competitors will your price bring you enough market share? If the share is too small either adjust the value in the proposition or select a new price.
Try to determine competitor's reaction: if your price and expected share generate enough volume you will want to anticipate your competitor's reaction. If your price is too low a price war could break out. If your price is too high it might stimulate a new competitor with a lower price.
Compare and test the price against your financial goals: can you meet an acceptable level of return on your investment or will the pay back period be too long? It is best to test your price against your financial needs and goals as early as possible.
Is your price congruent: the price must be evaluated based upon a number of factors. Such as: comparable products or services, distribution channel, advertising expenses, any personal selling strategies that will be used.
Develop a Profit Plan: create a spreadsheet that looks at the cost of production plus the cost of marketing and distribution at the anticipated sales levels. A lack of profit will require establishing a new price or finding ways to reduce costs or add value.
Finally, set your final price. Take into account the price of competing products or services and adjust your price to fit. For example a price of $91.56 may have been established but the final price may be $89.95 for psychological reasons. If you plan to use a high price skimming strategy you may want to be ready to anticipate lowering prices so that market share does not dip significantly. Generally speaking, the more mature your industry the more aggressive you may need to be in your pricing strategy.
TIP: Research, test and crate your market price strategy.
Marketing can be a complex and overwhelming process, but by understanding your ideal customer and developing a solid marketing strategy, you can successfully promote your products or services to the right audience.
The goal of this implementation plan is to provide a step-by-step guide to successfully implement a marketing and promotions strategy for your business. This plan will cover everything from identifying your ideal customer to developing a pricing strategy.
- Use market research to identify the demographics, psychographics, and geographics of your target market.
- Conduct focus groups and surveys to gain insight into customer preferences and motivations.
- Describe the different attributes of each product and service and how it adds value for each segment of your target market.
- Determine what customers want from the products and services you provide.
- Identify and evaluate various marketing tools, strategies, and methods.
- Choose the tools and strategies that best fit your business model.
- Create a 12-month marketing calendar with projects, tactics, dates, and costs recorded.
- Test marketing strategies before implementing them.
- Determine an acceptable range of prices based on your corporate values and objectives.
- Set a target price for a specific target market.
- Estimate the demand and compare it to your competitors.
- Determine competitor's reaction and test the price against your financial goals.
- Create a profit plan and set your final price.
- Execute marketing strategies and tactics from your marketing calendar.
- Monitor and track results to determine what strategies are working and what needs to be modified.
- Adjust pricing strategy based on customer feedback and market demand.
By following this implementation plan, you can successfully develop and implement a marketing and promotions strategy that will help you better market and sell your products or services to your target audience. Remember to continually monitor and adjust your strategies to ensure your business stays competitive in the marketplace.