Marketing: November 2005 Archives

David Cowan of Bessemer Venture Partners has a few ideas on a concept called the Sales Learning Curve Who Has Time For This?: The Best Startup Advice I Have. The concept was developed by Mark Leslie of El Dorado Technology Ventures. Here's the link to his original paper The thing is - Sales and Marketing, stay highly subjective. It takes time, effort and science to probe and try different methods to reach your target audience. During that time, you need to keep your sales and marketing staff lean. To quote him:

As my erudite partner and Harvard Business School Professor Felda Hardymon likes to instruct, "run the business like a one story whorehouse" (with no fucking overhead). Hire only two or three creative, guerilla-style reps and a VP who knows how to experiment with multiple channels.

The amount of attention paid to pricing is turning out to be quite remarkable. Here we have Seth Godin weighing in on the stuff. Seth's Blog: On pricing I kind of agree on this view, but I feel that while pricing signals to customers the "value" of the product or service, it also signals back to marketers that some features that they thought were high value are now commoditised or not that valuable any more. Marketers need to come up with newer ideas to bump up the value of the service, communicate it effectively and thus maintain or increase price. In the case of the record industry, I'm pretty sure that iTunes will increase prices on some hot numbers. Music companies will go beyond just music. They will bundle other multimedia together with the song to create a richer download for the music lover. They will sell collectibles in stores that consumers who download from iTunes can buy at discounted rates.

Now this is very useful. It seems an assistant vice president of Citibank went around door-to-door selling business banking checking accounts: Seth's Blog: Not what it used to be. I think this is great! It's an excellent way to get to know your customers, and if you find someone who needs a bit more than a checking account, I'm sure that Citibank will respond quicker than before! A hell of a lot of very good people beat the street selling financial planning products. These people are folks who have worked in senior positions in banks. They now control client relationships. This is a good way for the bank to get back its clients.. :-) Another thing is that often enough - folks who join banks after a brief consulting career get appointed as Asst. Vice presidents. hmmm.. I doubt that those folks know a lot about banking per se, but they do bring a wealth of good network clients with them. Lastly, Just imagine the ideavirus he's unleashed - Move over from Everybody markets -- to -- Everybody sells. I salute this brave Asst. Vice President who in my eyes is a true entrepreneur, and a real sales guy.. I hope he gets to run Citibank some day.

A really interesting article on trade pricing has been put on the BBC: BBC NEWS | Business | Firms 'ramping up online prices' The beef of the online retailers is - why are they being charged more than the high street retailer for the same product? I would argue that the product that a customer buys online is not the same as the product that she buys in the high street - purely because of the different shopping experience in both cases. Besides this, the two types of retailers differ in how they spend on product specific expenses, which affects the shopping experience. In the case of the high street retailer, the retailer holds inventory, provides shelf space for display and branding purposes, allowing customers to touch and feel products, and most importantly instant gratification to the customer. These are all "high value intangible components" of the "product" that a customer buys. These in turn fuel the brand of the product, and influence buying behaviour - not just in the high street stores, but also online. High street retailers are thus correct in demanding concessions off the list price of the product from manufacturers. Online retailers don't do all this. They require that manufacturers hold inventory. Thus they spend less "on behalf of the manufacturer" than high street retail stores. While recognising that they do have high costs - especially in customer acquisition and retention, they don't spend on branding the product. They spend on branding themselves. Thus I'd say that from a value perspective and an activity based costing perspective, manufacturers would be wise to give high street retailers greater discounts than online retailers off the list price, but calculate this after carefully analysing the impact this would have on prices that customers pay!

I'll be the first to admit it. I've been lazy today. I was thinking of how to help a prospect collect information - Whether to use excel sheets, build a database powered website, install a wordpress blog. I had heard about wikis being used as knowledge management systems, and thought hmm what's that all about? Well I paddled over to wikipedia to get some info on wikis and to while away my time, I searched for pricing. And guess what.. I found a really nice introductory resource on the subject. Take a peek! Someone worked hard on this. Pricing - Wikipedia, the free encyclopedia

I was looking for knowledge bits on pricing and ran into a post on John Clingan's blog: The Clingan Zone. John works at Sun Microsystems, and is one of their evangelists. He also points out their shortcomings, so he's one of the good guys... :-) The question was: Are there any new insights to price new software? Here are some of my thoughts I haven't dabbled with software pricing, but have worked as a programmer (on Unix and Windows), I did have an experience that I'd like to tell you about. Normally, most software vendors assume that the useful lifetime of their software is around 3 years, seen that most people also upgrade their hardware in 5 years, and if it's leased, they upgrade in 3 years. This may not be the case! I visited a client who was running Windows 2000 on some machines and Windows NT on some others. Instinctively, I told her to upgrade - to a non windows platform of course. But on the long ride home, I got to thinking. In a lot of places, especially India, the price of a license of a windows operating system of the "previous generation" which is still supported falls drastically. So when the Windows 2000 system costed x amount, the cost of a Windows NT was x/5! Given that you can find a lot of people who can administer such a system well, their cost falls as well. So upgrading to the older operating system becomes incredibly financially attractive - for people who use it for normal office type applications AT WORK. (Most folks who use it at home in India pirate the latest version.. no question of that.) The second thing was - if you compared feature to feature on a pretty high level - Wordprocessing on a previous platform versus Wordprocessing on a new platform, there isn't that much value addition for a basic user. And given that economic advantage of older platforms, the cost to consumer of a new platform actually increases. So here's my notion - Make newer releases of platform software cheaper (for some customer segments) than the original ones. Stick the higher value add-ons in a separate bundle, which can be purchased if someone buys utility computing or support contracts or so. High value applications should never be introduced in a suite, since a suite automatically becomes a platform. They should be on the utility computing / Application service provider model. Once you find that the rate of subscriber growth on that service has flattened, and has stayed there for awhile, move the service to the suite. Could this perhaps be a case for software companies like Oracle - not to acquire smaller companies?

Another irresistible titbit from Christian Mayaud. Apparently NBC has been sticking yellow "removable" stickers on dollar bills and passing them out in department stores, and other places. These stickers have advertisements to shows on NBC or other marketing messages. People tend 'not' to remove the sticker from the dollar bill, and pass it on. Each person who gets the bill will be exposed to the message. Think about it - This is literally "putting your money where your mouth is". Christian has analysed this "pretty old" trend. Do take a look at this link! Sacred Cow Dung: Let George Washington Spread Your Message | A Clever Analog Promotional Technique