Is Your Pricing Strategy Anti-Customer Centric, Creating Distrust?

Pricing anything about services – food, SaaS products, etc. – is a delicate balance between creating margins and what a market will bear. I’ve always referred to it as an art and a science.

In most sectors, competition is high, and companies are always seeking ways to prohibit or dissuade customers from making a jump, while retaining them as valuable purchasers.

One would think, regardless of how a top tier or economy company was positioned, they would want to make their customer experience as seamless and friendly as possible in order to capture those dollars.

Here’s one example where it didn’t work.

A few days ago,I was pricing flights for a long weekend trip to visit friends who had relocated to a new city. As it was going to be relatively quick flight, although not quite commuter, I decided to price out major carriers against the economy no frill carriers.

Using comparison sites such as Kayak, Cheaptickets and Expedia – I was surprised at how prices shown can vary amongst them, I decided to purchase from a the no frills carrier as they had reasonable flight times and the tickets were about $40 less per person.

Navigating their interface, I selected the flights and proceeded to the next screen, where they asked for all the extensive information you need in order to fly these days. I then entered my credit card info, no problem.

Expecting a confirmation screen at this point, I instead was presented with another screen of things I would need to pay for in conjunction with my flight, which included picking a seat, as each one had a dollar amount tied to it, and paying for my carry on bags.

This immediately created a sense of distrust for this airline. If I was getting charged after the fact when purchasing a flight, what other costs would I incur that I didn’t currently know about? What level of comfort did I have trusting them with my credit card info as well?

All told, the options added $100 extra to the flight, pricing it higher than the major carriers on the same route.

Cancel.

Customer relationships are the most important key to sales. If the purchasing process isn’t seamless and forthcoming with information that’s clear and easy to understand, companies lose their competitive edge with selling. It also creates a situation where they’ll have to answer a higher amount of customer questions and likely, complaints, adding overhead, as well as lost time and opportunities due to frustration.

Me? I’ll be cattle herded to the back of a plane in a few weeks, but at least I consciously know what I paid for when I bought the ticket.

What situations have made you distrust a company or service?

Play to Your Strengths – Strategies For Product Positioning

The past few months have had me thinking a lot about product positioning. Several projects that I’ve had, and more than a few business plans I’ve reviewed recently, struggle with the concept of their product’s strengths. This can apply to companies as well as a positioning message of what they offer over competitors. Product positioning is all around us, whether you notice or it or not.

The goal of product (or service or company) positioning is to keep you in the customer’s mind at the time they are looking to purchase. A positioning strategy feeds into the marketing message in terms of how you talk about the product. The strongest brands and products you know about have succinct positioning statement.

But how do you get there? Define, then refine.
Much, if not all, of the data we’re going to look at below can be used for other product areas – price forecasting, operational improvements and marketing messaging around the product; but for today, we’re looking at positioning.

Define as much as possible about the product:
Product attributes and market segmentation: is it a luxury item, a mid-tier market, or economy based? Obvious examples of this are hotels: the Ritz Carlton (luxury), the Hilton (mid) and Comfort Inn (economy); each are positioned within a market segment.

  • Benefits to the customer: what will the customer gain from your product or service? The affluent traveler looking for an experience (Ritz Carlton). Ideal for ease of business travel – cookie cutter accommodations/amenities (Hilton). Inexpensive, and won’t break the bank for quick trips or family vacations (Comfort Inn).
  • Characteristics of the customer: define a couple of scenarios of ideal customers, including demographic information. What target features are they looking for? Where would your product ideally reach them? What would drive them to purchase from you?
  • Characteristics and strengths of competitors: conduct analysis using publicly available data; company annual reports, industry news and blog posts. Create an evaluation of their strengths and weaknesses to determine your competitive advantage. Opportunities for competitive pricing, improved distribution and product refresh cycles can be derived from analyzing your competitors.
  • Analyze gaps between your product and your competitors. Understanding these gaps will help you determine where your product positioning strengths stand out. These are areas which your product (or service offering) can easily target (to become)? market leaders.

Note, in some market segments the product gap could be very small, in which case your product might be competing with an established brand if it’s new to the market. Incumbents to a marketplace could be entering a profit-limiting segment.

To arrive at a product positioning statement, refine the ideas from the analysis narrow it down. Identify the top 10 items/concepts from the exercise. Then hone to the top 5, then finally the most important 3. Those 3 should be distillable into 3 words. You’ve arrived at the product positioning and the basis for your product/service/company’s marketing message.

Put it out there on all the channels used to connect to customers.
Do the concepts resonate with customers? Are you getting more sales or inquiries?

Market positioning for products change over time. Changes,whether economic or innovative, are constant in marketplaces and customers’ needs. Assessing your product positioning at regular intervals allows for retaining the competitive edge of customer needs in your market area.

Is your product playing to its strengths?

Q&A: I failed. Again (and again). What […] am I supposed to do now?

If you saw the above posted in a forum, how would you answer it? Media, blogs, and pundits have continually proclaimed that entrepreneurship is a long, lonely, tough journey and getting your start-up off the ground is a gut-wrenching experience on a good day.
But what happens if it all comes to an end? 

You can read the rest of it hereI’ve excerpted from the post and added my thoughts below.

I’m exhausted and broke. I need a job. But am I even deserving of one?
Absolutely, but maybe not yet. The author above has been on a roller coaster ride for the past two years. Besides exhaustion, they’re most likely burned out from the experience. While I’m not advocating maxing out one’s credit cards, this person should give themselves a break to clear their head.

I can hack stuff together, but am I a good enough developer for a Silicon Valley startup?
The first question I would ask is: do you want to be a developer? The author should start by making a list of all the skills they’ve acquired over their two years and rate them by likes/dislikes and strengths/weaknesses. Does it still equate to a developer job? There are other opportunities where having developer skills are a bonus (or required) – program/product management, evangelism, etc.

Conversely, the author could also take on consulting work to see what type of projects and industries would be the best fit.

I have no investor network to fall back on.
Ok, but what other networks does the author have? Take a look around and leverage who you do know and in what sectors.

I thought I knew what it took to be successful.
The concept of success isn’t black and white. Is the author defining it by the fact that he didn’t have a high-dollar exit at either of his companies? If that was the metric, then no. However, the author was mostly likely “successful” in other areas: expanding their knowledge capabilities in team-building, hands-on running of a business, product planning and development. These skills build with experience to propel you toward your next venture. Just because something went awry, doesn’t mean it can’t be learned from and turned into an opportunity.

What the heck am I supposed to do now?
Well, since very few get paid for sitting around and navel-gazing, take some time to breathe. Step back, assess what you’ve gained from the experience over the past two years, and create a few options about where to head next.

The upside to the author’s situation is that at least there are options, and recognizing what those are and where to best use them is a pretty powerful tool in itself. 

One defines oneself by reinvention” – Henry Rollins

How would you have responded?

 

 

 

 

 

Opportunity Cost Analysis – How Much Will You Give to Get?

Over the past few months (and even before that, with mentoring), I’ve been evaluating businesses in the many stages of inception – including getting to becoming a start-up. One of the questions I ask of whomever I’m meeting with is, what is the opportunity cost?

An opportunity cost analysis is a useful exercise to run for a company/product idea, a new project or simply assessing a decision to be made.

Conducting an opportunity cost analysis allows you to study possible benefits and risks associated with taking one action instead of the alternative action in an effort to determine if the possible benefits would be worthy of those risks.

This allows you to take assumptions you’ve made about the company/project/decision and run through scenarios with some of the following questions.

How much will it cost in estimated outlay; labor, hard costs (computers/equipment), and time vs. what (revenue/exposure) can be gleaned from the idea in a space of time, such as revenue and/or exposure.

Who else is in the market space? Would you be first? (and can you set the pricing based on being first?)

What is the risk of not doing it? Less revenue, lower market share, or another company will execute the idea. Could the time and money be used elsewhere for a higher benefit?

Like most other information freely available on the internet, there are many examples of analysis questions and examples that could be run through (many including calculus equations).

However, when you own, (or are a part of), a small business (or start-up), determining an opportunity cost can be a challenge. Here’s a marketing example of a friend who owns a photography business.

The photographer is looking to grow their business in the corporate market space within 60 miles of their location. One idea they have to accomplish this is through a direct mail postcard campaign.

Let’s say the postcard cost $2500 to print and mail 500 pieces, ; the mailing list purchase of businesses in the area adds an additional $500, and the graphic designer another $200.

Total money outlay $3200 + time the photographer spends choosing images and writing copy.

My first question is: Is direct mail still an effective marketing tool? Do people still look at their physical mail? (And if so, are there current response rate statistics out there?)

How many jobs booked at what dollar amount would need to occur to recoup the postcard cost? To make a profit?

Are there other marketing avenues opportunities the same $3200 (and time) could be spent at for less risk and higher return?

Are other photographers in the area marketing this way?

Once they she gathers all the information, my friend will able to make a more informed decision based on an opportunity cost analysis.

In looking at the example above… what would you do?

 

 

 

 

 

 

 

 

Three Words for 2014

In mid-December I had planned to do a round-up of my top blog posts (other people had written), but then I started reading everyone else’s round-ups and realized I’d need Cliff Notes (you remember those, don’t you?) to get through them all. Thusly deciding to go forth and just enjoy the holidays.

The one trend (or meme) I want to participate in is my three words for 2014. 2013 brought inspiration and community, as well as some tough challenges for my business life. However, it spawned growth on many levels and I am grateful for many of the connections I’ve made along the way.

Looking forward to 2014 (literally), here are my three words for this year.

Create. Create invokes the phrases to build, to generate, to initiate. Grab an idea out of thin air and give it shape. Look at the opportunities created by challenges. Put a stake in the ground.

Momentum. I like momentum because it’s synonyms are strength, energy and motion. Build on lessons learned and keep moving forward. Approach things with fresh energy.

Thrive. Regardless of the fact that Kaiser Healthcare has co-opted this word as their marketing campaign, thrive describes a bunch of concepts I aim to keep in mind this year – develop, grow and prosper. I don’t doubt there is much to be learned and built  upon this year. Prosper is just a nice added touch.

What would be interesting for this meme, is to check in at 6 months, (which would be about June,) and see if the words still resonate with the authors.

What are your 3 words for 2014?

 

5 Questions for Matt Heitzenroder of Orchestrate.io

Kris’ note: Orchestrate was acquired by CenturyLink in April 2015.

This week’s blog post is an interview with Matt Heitzenroder, COO of Orchestrate.io.  Orchestrate is an API interface to databases aiming to allow developers to concentrate on building their products. Their private beta has been gaining traction amongst the developer community, and Matt generously took a few minutes out of his busy schedule to share his experiences with being part of PIE (Portland Incubator Experiment), the origins of their product and adapting to life in Portland.

1. Of all the incubators and accelerators out there, how’d Orchestrate end up at PIE?

We were actually accepted to a few of different accelerators, so we had to think about what we really wanted out of the experience. We chose PIE because of its location, and who and what we had access to. We definitely wanted to be in and support our HQ location – Portland – so that was key. Since we had already raised our seed round back in May, we weren’t looking for investors so that wasn’t a factor. We chose PIE because we wanted to be connected to Portland and because of the access to Wieden+Kennedy. This ended up being a major win for us in many ways we expected, and in even more ways we never would have expected.

2. Orchestrate was seen as sort of the outlier of the PIE group, as you guys closed a round of funding prior to walking in the door. What have you learned from co-working in a space with very early stage start-ups?

A TON.  Seriously.  While we might have been further along in raising money, we weren’t necessarily so far along in building a company, customer-base, or product that being around other early-stage companies didn’t help. Specifically, we learned more of the nuances of marketing a SaaS business from our peers. I think it was a good combination of people, and I’m extremely grateful for the opportunity to work next to them.

3. The three of you came from Basho, developers of Riak – what made you all decide to take the plunge and develop Orchestrate, was there one defining event?

There wasn’t a single defining event. At Basho, we believed that databases meant installing, running, and maintaining database software. We knew that Riak was an awesome Key/Value database, but depending on the use case, we were the first to tell a prospective user that there might have been a better tool for the job. It turned out that many times, it required multiple tools (aka databases) for the job.  We were repeatedly helping users build systems with multiple types of databases.  The first few times it was novel, but deeply and painfully coupled to application code. It wasn’t elegant, that’s for sure. After building these data systems several more times, we had learned a lot. At Orchestrate, the solution was obvious; the only way to simplify databases was to make it an abstract service. The way developers are consuming services now, it meant for Orchestrate that *now* is the time. I love Riak – the engineering is amazing. It’s truly a rock solid database and there was a time when all I could ever imagine working on was Riak, but now, with the vision of Orchestrate, I couldn’t imagine building anything else.

4. What’s Orchestrate’s strategy for getting companies to adopt the product? Most seem committed to their favorite “stack” these days.

I think people are far less wedded to a stack than they might have been ten, or even five, years ago. Nowadays it is really a lot more about pragmatism. Users select Amazon or a hosted service, NoSQL or RDBMS, Ruby or Java, based on the need at the moment. We are just part of that trend. If we can make something easier, make something ship faster, or allow users to add a feature much more quickly, then we get put into the mix.  Our strategy for now is to be put a lot of focus here in our back yard, in Portland, where we find a lot of users with a very pragmatic attitude. Portland is home to a ton of design and development firms, and creative agencies – these are perfect early users and a great test bed. We want to provide them with lots of education (docs, docs, and more docs) and proactive support.

5. Portland. All of you are transplants (like myself). How has assimilation to “Portland lifestyle” been? Anything notable or odd you find in your new home city?

I really love Portland. I moved here in June of this year, sight unseen, from London. And I love London, but for totally different reasons. Portland is a great place to start a business right now – I find the communities in the city are very design-centric or development infrastructure-centric, and startups are booming.  On a personal note, I’ve spent a lot of time outside of Portland since we’ve moved here. I’ve gone hiking and backpacking around Mt. Hood and the Columbia Gorge, as well as to the Pacific coast.  I am in awe of the of the temperate rainforests here. I absolutely love all the green.  Even inside of Portland, it’s so incredibly green, and that is a very important aspect to have in my life. Portland also has a great foodie scene and we’ve made lots of great friends so far.

You can check out more of what they’re up to and sign up for Orchestrate’s private beta here: http://orchestrate.io

Follow the team on twitter @orchestrateIO

And, if you really like what they’re up to, they’re hiring!

Creating Business Strategy Around Product Strategy

In many of the start-ups I’ve seen and been working with while mentoring, the companies have been focusing on building and developing their product, and then sorting out their product strategy. Since, for many of these start-ups, this is their first foray into business and product ownership, they tend to focus on getting the product built (which is not an unreasonable investment of time), and neglecting the overarching business objectives and operations planning to get there.

Supporting business

It’s important to build a tight business structure to support your product.

The difference between a business strategy and a product strategy is that a business strategy lays out your business operations objectives, customer acquisition plan and metrics for measurement; whereas product strategy outlines what will get built and how the product will be positioned to achieve the business objectives.

Thinking about how to create a business around a product can be challenging, but if the product is well defined enough, you can reverse engineer the process. This is exactly how I’m approaching it with the companies I’m mentoring; the start-ups have the defined product and an idea of the needs it will fill, and from there, we work out the additional pieces and begin to look at the overarching business strategy model.
A business strategy should:
1. Identify who the customers are and what they need
2. Define the product(s)
3. Include a sales, marketing, and communications plan
4. Forecast financial/revenue targets over time
5. Determine the equipment, staff and operations costs required to meet the growth projections

From here, we can overlay the product pricing model to see when revenue will turn into profit. Regardless of whether or not a company is going for funding (though most seem to be), it’s important to review all the pieces together, as it also allows for identifying areas where there might be gaps or too broad of an approach.

Running a business is more than simply selling a product. It takes identifying and understanding of all the supporting pieces needed to get your product out the door.

What other items would you add to a business strategy?