Charity: the trick to consumer-set pricing

This economic depression has forced marketers to be more creative.  It’s kickstarted a renaissance in pricing.  I wrote earlier on Daily Deals in I Can Get it for you Wholesale.  Another trend is letting the consumer set his own pricing.

The difficulty with such variable pricing is that there are no standards, norms, or techniques  to prevent freeloaders who wouldn’t normally buy or “selfish” consumers who maximize their own value at the expense of the seller and pay nothing or close to it.  This is a classical Tragedy of the commons situation.

Typical tactics to increase pricing include:

• Suggested price. Provide a minimum, suggested amount, or related guidelines, similar to donations in the public sector world.
• Peer Pressure. Displaying what other users paid.
• Premium. Award a bonus or publicity scaled by payment amount.
• Transparency. Disclose actual costs so the consumer can hopefully make an informed decision about how much profit he’s willing to let you make.

Add Charity share to the list.  Giving an amount or percentage to charity has long been a part of the marketing toolset to raise sales or conversion.  But it works especially well with consumer-set pricing.  The Freakonomics blog  points to a wonderful study in  How to Maximize Pay-What-You-Wish Pricing where donating a major share of the payment has a huge impact on both consumer sales and price.

Ayelet Gneezy, a marketing professor at the University of California-San Diego, conducted a field experiment at a theme park (sample size: over 113,000).  Gneezy presented four different pricing schemes for souvenir photos: a flat fee of $12.95; a flat fee of $12.95 with half going to charity; pay-what-you-wish; and pay-what-you-wish with half going to charity.  At a flat fee of $12.95 per picture, only 0.5% of people purchased a photograph; when customers were told that half the $12.95 purchase price would go to charity, a meager 0.59% purchased a photo. Under the simple pay-what-you-wish variation, 8.39% of people purchased a photo, but customers paid only $.92 on average. The final option — pay what you wish, with half the purchase price going to charity — generated big results: purchase rates of 4.49% and an average purchase price of $5.33, resulting in significant profits for the theme park. “When the charity factor is introduced, these casual freeloaders balk at the idea of paying nothing, because it’s more likely to reflect badly on them,” writes Ed Yong. “Rather than naming a higher price, their preference is to avoid buying altogether -– for them, it isn’t worth it. Sales fall, but the actual profits go up because the remaining customers are motivated by their desire for the product and for the cause, will pay for both.”

What other techniques have you seen?

I can get it for you wholesale

The Daily Deal bubble continues to explode.  VCs pour in ever more money.  Aggregators and white labellers build out the market.  Major estores and sites like have even joined the fun.  Amazon bought Woot. Twitter has @earlybird.  Marketers contrive 90% off packages that include “free” services, fake retail prices, and future discounts.

It’s no coincidence this product segment took off during a global depression.  It’s 2010-style coupon clipping.  This isn’t just a discount.  With today’s deals, you don’t just avoid paying retail.  You can buy at wholesale prices.

The deals started to move discontinued merchandise.  It was only a short hop to extend them to service businesses that have a high margin.  Now there are so many deals that you can get much of what you need –  such as PC … headphones … restaurant … massage … golf … trip – all at 50% off.  Or more.

This isn’t just promotional marketing. It’s deflation in action.  People have less money and are spending less.  Businesses have to cut prices.

When was the last time you paid regular prices for dinner when you could have used a 50% off deal?

Social Media for CEOs 2: Everything Old is New Again

Digital Conversations are not truly a “New” Marketing Paradigm.

A powerful global conversation has begun. Through the Internet, people are discovering and inventing new ways to share relevant knowledge with blinding speed. As a direct result, markets (people) are getting smarter — and getting smarter faster than most companies.

These markets are conversations. Their members
communicate in language that is natural, open, honest,
direct, funny and often shocking. Whether explaining or
complaining, joking or serious, the human voice is
unmistakably genuine. It can’t be faked.

Most corporations, on the other hand, only know how to talk
in the soothing, humorless monotone of the mission
statement, marketing brochure, and your-call-is-importantto-
us busy signal. Same old tone, same old lies. No wonder
networked markets have no respect for companies unable
or unwilling to speak as they do.

That and much  more were written over 10 years ago during the Internet go-go years.  It’s the Cluetrain Manifesto by Locke, Searls, Weinberger & Levine with an update here.

Social media and marketing is no longer a fad or hip.  It’s mainstream.  Customers aren’t ad targets.  They are beyond being  just stakeholders.  They are active creators and owners of your brand.

A Social Media High

I gave a presentation last week in Houston called Digital Conversations: The New Marketing Paradigm to hospitality industry CEOs (thank you, my HP friends!)

Social media today is where the web was ten years ago.  While the industry is far from mature, it also has had five years to bake. It’s power is undeniable.  Customer power is remaking entire industries.

Core technologies from video to blogging to twitting are well known.  But they’re at the bottom of the food chain.  The challenge to corporations is not simply having a presence, but in smartly integrating social media and thinking in the enterprise.

The keys to social media success are leadership, organization, structure, and strategy …  just like any critical business function.  The higher the corporate level at which social media is adopted, the greater its value.

Borrowing from Abraham Maslow, I created a Hierarchy for Social Media Success.  Click the image below to see it full size.

You can’t trust nobody

An eMarketer article’s title takes the high road in Room for Improvement in E-Mail Opt-Outs when it should have shamed marketers. Email lists that required 3 or more clicks to unsubscribe zoomed from 7% to 39%.  Single click opt-out lists shrunk from 9% to 3%.

It’s no wonder why businesses can’t be trusted. Industry self-regulation virtually never works.  Spam was so bad the US had to pass the federal CAN SPAM law.

And now companies are back to their old tricks, making it harder to cancel.  That’s a prime reason (from the article) “22% of US Internet users consider messages they once requested but no longer want to be spam.”

Breaking up should not be hard to do. What part of “leave me alone” don’t businesses get?

Know Your Customers IV: Lead nurturing

Lead nurturing is the culmination of this past month’s example of the Revenue Typhoon. By aligning and integrating marketing and sales you’ll be able to powerfully and predictably generate revenues.

The process to this point has been composed of the following:

1. The development of a Target customer.
2. Segmentation that meaningfully divides your prospects so you can tailor your marketing to them.
3. Lifecycle marketing for timely communications based on sales and product status.
4. A personal CRM tool like WeMeUs with contact management, tags, groups, lead forms, and highly personalized email.

Lead nurturing combines the data from Segmentation and processes from Lifecycle marketing to generate the highest level of personalized communications. It enables you to deliver the information your leads want when they need it. Establish you or your company as a leader, improve your credibility, and remove sales objections. It all leads to your bottom line as nurturing qualifies the lead and moves the prospect down the sales funnel.

Lead nurturing is a warm way to make use of the various marketing and support collaterals and programs you’ve developed, run across, or obtained, including your industry, application, and product web pages, news, help, research, demos, executive briefings, seminars, webinars, case studies, articles, blogs, video, social media, testimonials, free trials, executive access, and immediate sales and technical support.

Know Your Customers III: Lifecycle marketing

Lifecycle marketing is an effective program to reach current contacts and customers for repeat and referral business. It’s a special case of segmentation because it’s one you have direct knowledge of – the prospect and customer’s exposure to your product and the sales process.

Lifecycle marketing is strongest where there are clear and immediate signs of purchase intent, such as clicking an ad or filling a shopping cart. But it also applies in the B2B world for self-employed professionals and small businesses.

Your customer message depends on where they are in the lifecycle. Here are a few examples.

• After initial lead acquisition, send educational information and offers to help that reinforce your messaging, unique selling proposition, value, and special product features. Stage this over time or use an autoresponder to maintain an ongoing relationship during this crucial time.
• After initial use, such as first login, ask if there are questions or for immediate feedback.
• After different levels of use or different features are first used, send appropriate tips.
• After a positive transaction, such as a referral or purchase, send a thank you.
• Before an important service or billing date, such as subscription renewal or lapse, remind the user of your service value and upcoming transaction.
• Before an important date, such as service or use anniversary, send a personal email to show your appreciation.
• After a customer demonstrates that they’re one of your top customers, such as through usage, level of purchase, community support, or other engagement, send a loyalty email that shows your appreciation and recognition and turns them into an evangelist.
• When customers become inactive or at-risk, re-engage them to learn what happened and how you can recover their business.

TOOL TIP – WeMeUs contact management and lead generation is a personal CRM (Customer Relationship Management). WeMeUs both reminds you to stay in touch with top contacts and tracks the status of all your sales opportunities from initial contact through discussion and engagement. Use tags to further track customer segments and affiliation.

Know Your Customers II: Acquiring marketing data

Last week we covered customer segments.  In this issue we look at how to get this data from your contacts and prospects.

Here are a few techniques.

• Web funnel. Create different web pages for your various segments. For example, your home page may have links that let the visitor click to explore solutions for different professions, such as recruiters, IT consultants, etc. Each web page then would have a different lead inquiry form that automatically identifies the user from his self-selected page.
• Lead form. The lead form itself can directly provide options for the user to select his segment(s).
• Survey. To increase survey participation, make them short, make them relevant, provide an offer like a white paper or sweepstakes entry, and show a compelling benefit, such as survey information (where applicable) will be shared with all participants.
• Drip marketing. Drip marketing is an extremely effective data acquisition program. Send a regular and personal email that asks only one or two questions or a quick poll. Over time you will build both a strong customer relationship and powerful knowledge base.

Tool tip – use WeMeUs Contact Management and Lead Generation Lead Capture forms.

Know your customers I: Segmentation

This article kicks off a new series of marketing and sales tips. Subscribe to our blog or Twitter feed to receive future installments.

I earlier wrote about the Revenue Typhoon where the secret to generating revenues is creating an end-to-end integrated marketing and sales process. This Know Your Customers series will show how that happens.

The more you know about your contacts, prospects, and customers, the better you can tailor your messaging, communications, and products to increase sales. One technique is segmentation. There are many ways types of segments. The key is finding the ones that naturally divide your prospects by person and company and enable more targeted one-to-one marketing.

Typical B2B segments include:

• Location
• Industry
• Market
• Professional
• Organizational title

Segmentation is developed at the beginning of marketing and sales planning where your Market definition describes a target customer. If you don’t have a formal marketing plan, take your best shot and define one. Then look to your actual customers. You may find reality different from your original customer notions. If they diverge, update your target customer profile to match who actually is buying your product.

Tool tip – use WeMeUs Contact Management and Lead Generation.  Learn more about WeMeUs tag and group management so you can store segmentation data on your leads and customers.

Printing Money – The Revenue Typhoon

At Tribe Blue and our on-on-one consulting we teach that building your business is a process. Strategize, plan, execute, measure, and reload. Generating revenues is the same.

Sales consultants like to talk about the funnel. A bushel of leads enters the funnel. The leads are winnowed after qualification and prosecution until only a few exit the funnel as actual sales.

But the focus on a funnel is short-sighted. Let’s say you’re the guy in charge of sales. Your goal is 10 sales this quarter. You’re damn good and know that you can close 20% of qualified leads. Marketing generates 50 leads. So you’re set, right? No. That’s a separate funnel. If 20% of gross leads are qualified, you can only expect 10 qualified leads and to close 20% of that, or 2 sales.  Marketing actually needs to generate 250 leads for you to make quota.  Uh-oh!

Tactical funnels don’t exist in isolation. There are a series of operational marketing and sales funnels that encompass and qualify markets, prospects, leads, and accounts. Indeed there is one huge funnel that stretches from mass markets of tens of millions of business or consumers to the individual customers that trickle out the other end.

When you build a manufacturing plant, you don’t just engineer one machine. You design the entire layout, including machines and production line, from raw materials to finished product.

It’s the same in marketing and sales. Each step in the master funnel must be managed to ensure maximum sales. We call it the Revenue Typhoon because it’s the secret to printing money.