What is the value of habit?

What is the value of habit?

Jun 11, 2019 | Customers, Strategy

Yesterday I filled my car with petrol. There are a number of petrol stations near me, but I tend to use the same one, by habit, without any real form of comparative pricing with other stations in the area.

It is convenient, is in a backstreet, the bloke who swipes my card is pleasant, it is an independent, so I just assume the price is OK without checking. None of that stupid discount applied if you have a supermarket loyalty card, where you know the price is inflated to accommodate the discount, a practice I find is as irritating as it is immoral, so avoid them like the plague.

I wonder how many of his customers just use the place habitually, without checking prices as I do?

Consider the implications of pricing on the profitability of the station.

I will not try and do the maths, as I do not know the costs or the volumes involved, but two questions are relevant:

  • How many of the customers are regulars, like me, who do not check prices?
  • At what point do regulars, like me, check prices, weigh up the other factors that influence our behaviour, and move elsewhere?

Would it be worth knowing the answer to these questions, and managing price accordingly?.

At some point, you will lose the price checkers, those who  chase the cheapest price on the day, and seem to be prepared to drive around looking for the cheapest petrol.

How many added cents/litre will motivate a habitual user, like me, to actually check the comparative prices, and move to a less convenient station?

If I was running this petrol station, I might consider putting in a system that in some way recorded the regulars, those who seemed always to use the station, and those who just used it occasionally, and then experiment with the price elasticity of the regulars, assuming that the price checkers will never come in unless you are the cheapest  on the day

An added cent to the price would probably not be noticed by the regulars, not drive any of them away (poor pun there) but would drop straight to the bottom line. If the regulars were 60% of your sales, it might well be a great strategy. It gets rid of the lines at the pump, increases the chances for interaction at the cash register, and that extra sale from the grocery and confectionery lines, which is after all, where a lot of the profit hides. 

Every business, no matter what it is, should consider deeply the drivers of profitability in their business, and pricing strategies should be number one on the list of considerations.

 

 

To win, reverse the sales funnel!

To win, reverse the sales funnel!

May 31, 2019 | Customers, Sales

 

There is no gravity in a sales funnel!.

 Prospects do not fall down a sales funnel in an orderly manner, defined by some marketers picture of their customer journey.

Prospects climb up a chimney that gets narrower and more difficult the higher you go. There are points of friction, decision points, diversions, and often life just gets in the way. When a prospect falls out, sometimes they return, at another time, to another place in the ‘chimney’, and sometimes are never to be seen again.

At each point in the climb, the marketer has to get a ‘mini-yes’ from the prospect. Are they going to continue the climb to a conversion? Or is the friction greater than their motivation to climb further?

There are 3 points of extreme friction you need to address as prospects climb

  • Why should the prospect engage with you? This may be a PPC ad, a download, simply looking at a second page on your website, or not throwing away that brochure you mailed them. This is the first major point of friction, and conversion rates at this point are usually in single figures.
  • Why should the prospect buy this product in preference to any alternative solution to whatever problem they are facing? Most problems have many potential solutions, and many suppliers, so you need to be able to demonstrate why the solution you offer is superior to alternative solutions.
  • Why should they buy the product/solution from you, rather than one of your competitors? If the only answer to this question is price, you have just lost.

We kid ourselves if we think of this process as ‘gravitational,’ exerting gravity downwards towards the transaction. The process is the reverse of gravity, there is pressure from many angles to squeeze prospects out of the chimney, and it takes sustained effort to support them in their climb.  

 

 

Where is the gap to be filled in retail?

Where is the gap to be filled in retail?

Mar 8, 2019 | Customers, Marketing, retail

The range of retail format options is huge and multifaceted.

At one end of the continuum you have pure on-line retailers,  to full service bricks and mortar retail at the other, and everything in between.

It is the ‘everything in between’ where the development is happening, and the opportunity lies.

Apple ‘Zigged’ when everyone else was ‘Zagging’ and spent a decade and billions of dollars opening retail stores. While they are now the most successful retailer in the world on a turnover/square foot basis, the reason was more about brand building over the long term than just retail revenue. Brilliant.

Amazon has been the catalyst to the on-line gold-rush, but you have to ask yourself are they are retailer, or a data business first? They started as a retailer, simply using a different channel, but to enhance their position they have evolved into a data company that uses on line channels to sell and deliver product.  With Amazon Go, they have combined bricks and mortar retail with their data capabilities, which can only become more important as they evolve their purchase of Whole Foods.

Meanwhile, B&M retail is either hunkering down, cutting costs, and generally moaning about how on-line sales are cutting their margins, or investing in their businesses, some by increasing service levels, others by setting about ‘digitising’ to compete.

Any way you look at it, the gap is in the middle.

That gap will be rapidly filled by deploying digital tools already available, or in development, based it seems on two rapidly converging technologies:

  • Facial recognition, powered by our on line profiles and pattern recognition software, and
  • Location definition powered by our devices and GPS.

Amazon Go is able to recognise and record stock movements from the shelf to your shopping basket, and back, as it happens, and debit your card with the purchase. It is a small step to use facial recognition as you approach a store, or product category while inside the store, and match that with your previous purchase patterns to make exclusive, and immediate offers to you tailored to your history.   You do not need to be Amazon go to deploy the second part of that scenario, you just need the facial recognition and location data connected to your purchase history, and perhaps purchase intent identified by browsing history.

This combination of location, facial recognition, purchase history and browsing patterns will be the game changer in the current gap.

The question to be answered is how we as members of the public and consumers feel about this complete exposure of what has been to date private. On the one hand we seem to want the convenience and immediacy it can deliver, but on the other, remain very wary of offering up our privacy to the unknown forces that can tap the data in ways never expected or sanctioned.

However, I suspect the horse has bolted, and the gap will rapidly  be filled!

Photo credit: Kristian Dye via Flikr

Get stronger, then get bigger

Get stronger, then get bigger

Mar 6, 2019 | Change, Customers, Management, Strategy

Most businesses find themselves on the ‘get bigger or get out’ merry go round. Unfortunately, one of the characteristics of merry go rounds is that unless you hold on, centrifugal force  will throw you off.

Also, the faster you go, the more likely you are to be thrown off, and as you slip towards the edge, the momentum grows making it that much harder to reverse the trend.

The alternative choice is to get stronger, rather than just bigger.

This usually means you say ‘No’ to a lot of tempting, but short term ‘opportunities’ that will arise, as most will dilute the focussed and differentiated value you can deliver to your ideal customers.

The dual question therefore is: How do you get ‘stronger,’ and what does stronger actually mean?

To me, strong means a number of things.

  • You are commercially resilient,
  • Customers, employees, and suppliers are all aligned to your values and strategy,
  • You have a strong brand amongst your customer base who want what you have because you are the only one who has it, and
  • Your competitors employees wish they worked for you

In short, you have a ‘moat’ around your business that repels all boarders and pretenders, and resists the siren song that suggests the grass is always greener somewhere else .

When you have all that, you can get bigger, it will happen almost without you driving size, as the strength will attract suppliers, customers, and those great employees with energy and ideas. 

 

Time can only be productive, or wasted. Which will it be?

Time can only be productive, or wasted. Which will it be?

Feb 27, 2019 | Customers, Marketing, Operations

Time is our only truly non renewable asset, and it is absolutely finite. Therefore it makes sense to use it as wisely as possible.

In a management context, in measuring a process, time has two dimensions.

  • Clock time. Start to finish, how long does a task take to go from one end of the process to another.
  • Event time. How long does it take to go through the activities necessary to complete the process.

It might take a bank 3 days to process your loan application, clock time, but the event time may only be the few minutes it takes to check your credit history, current income and automatically calculate your ability to repay the loan. Event time.

In most cases, customers are only aware of the clock time, and when it extends beyond what they think is reasonable, they become cranky with you.

The difference between the two is the opportunity for improvement, and to ensure customers only get cranky with your competitors.

 

‘Brand Conversations’ are usually just a marketers wet dream.

‘Brand Conversations’ are usually just a marketers wet dream.

Feb 20, 2019 | Branding, Customers, Marketing

 

Brand loyalty and frequency of purchase,  are not the same thing, although we seem to act most often as if they were.

Sometimes we marketers believe our own bullshit, not recognising we are usually delusional, or at least subject to a severe case of confirmation bias.

When was the last time you actually came across a customer who was so loyal, they wanted to ‘have a conversation’ with your brand?

Perhaps they were just shopping around and wanted a ‘conversation’?

Never, right?

Yet the term is used often as we indulge ourselves in developing marketing collateral.

Frequency of purchase, read loyalty, can be the result of many things, awareness, market share, delivering better distribution, price, shelf position in a supermarket, big advertising budgets, and so on.

Only when you significantly increase the price, and some customers stick like glue, or  go from retailer A to retailer B for the single reason of being able to buy your product, do you have real loyalty. Even then, it is likely that rare, wonderful customer could not be bothered having a conversation with your brand, at the risk of the men in white coats carrying them off.

Even the exceptional brands, Apple is one, IBM used to be another, a deli in Flemington, Sydney, is another, known to a relative few who simply would  not go anywhere else, do not have conversations. 

Nobody in their right mind tries to have conversations with these brands.

They do have conversations with employees of the companies that own them, as they seek information, pricing, availability of spares, after sales service, and all the rest of the things we need, but nobody has a conversation with the brand.

Except in the mind of marketing dreamers.

They have conversations with people, your employees, their friends, and friends of their friends, people they meet in supermarkets and service facilities, the list goes on.

The real key is to ensure that when your brand is spoken about, in whatever context, people are telling others of the value delivered, the problems solved, and that it ‘delivers’.

Forget the frills, jargon, and self delusion, it is a tough world out there, and your product needs to perform as promised, then people will talk about you.

Header cartoon credit: Tom Gauld New Scientist.