SQUARING THE CIRCLE: Consumer Choice and Consumer Segments

square peg

I have been reading about market segmentation and choice. Howard Moskowitz’s research into tomato sauce as retold by Malcom Gladwell on the TED talks led to a big increase in sales by Prego.The company added new varieties to its lineup of sauces – chunky, garlicky, mushroom, and saw a big jump in sales.(http://www.ted.com/talks/malcolm_gladwell_on_spaghetti_sauce?language=en  Moskowitz’s conclusion was that consumers are not one great monolithic entity with one taste in tomato sauce. Therefore, the company needed to offer more varieties and in so doing dug deep into the market.

But merely offering lots of choice leads to lower sales. In Terry O’Reilly’s CBC Radio programme, Under the Influence, (http://www.cbc.ca/radio/undertheinfluence/limited-edition-brands-1.3021076) Terry recounted a test marketing of jam. When consumers were offered dozens of varieties and even inducements, like coupons, sales were still less than where consumers were offered limited choice. It seems that our human brain cannot cope with too much choice. Too much choice causes us to walk away shaking our heads.

How can we square the circle of too much choice simultaneously increasing sales and killing sales?

The companies that have been successful in adding choice already have a market presence. Reebok introduced its soft leather dance shoe in 1982, but gradually offered tennis shoes, basketball and then children’s shoes. There was a time lag as Reebok built its brand and consumer awareness of the benefits of supple leather footwear. Introduced all at once to the market, it could have been hard to sell a monolithic idea to a splintered group of people with altogether different needs and tastes. We are not all the same and so we all do not need the same product.

So how is it done? First create a presence in the market for 1 product or service that is the best or suits your target market the best. Dominate your market. Like the pub in the sitcom, Cheers, Everyone Knows Your Name. This is brand creation. Offer limited choice in that product or service. If you are offering more than 3 or 4 choices, trim. Only when you have some significant market share (you are measuring your market penetration, right?) can you start slowly adding other related versions to the original idea. Even after marketing leather shoes to dancers, Reebok is still best known for…  running shoes.

One Studied Tactic to Negotiate a Better Price

deal1One Studied Tactic to Negotiate a Better Price: How you frame your initial offer affects how high a buyer is willing to go.

Whether you’re negotiating the price of a big client order or selling your company, is it better to offer a single initial figure or a range? According to a recent study, the latter is the better option.

Researchers from Columbia Business School ran a series of five negotiation-simulation experiments involving Amazon’s Mechanical Turk workers and business school students. Participants were asked to not only guess what their partner’s reservation price (the lowest price they would accept), but were also asked questions designed to show how they perceived their partner—the study’s authors were curious as to whether certain negotiation tactics might lead to a likability cost, even if they resulted in a few more dollars for the partner.

In the paper, which was published in the Journal of Personality and Social Psychology, the researchers said that those who asked for a range were more likely to get their reservation price than negotiators who gave a single offer. There was also little evidence that a range offer would cause the negotiator to be seen in worse light.

In other words, open with a price of $7,000 for your car, and you’ll get counter-offered $6,500. But open the bidding with a range of $7,000 to $7,500, and the bidding starts at $7,000.

So the next time you’re posed with the salary expectation question, looking to sell your business, or trying to get a profitable price for your product, remember to always give people a range—you’ll reap the benefits in the end.

reprinted from Profit Report – Kristene Quan and David Fielding || April 15, 2015

Gartner Survey on Pricing Strategies Used by Retailers

snakes and laddersPrice is a critical competitive issue for retailers.  (That is, of course, an understatement). A recent survey by a Gartner Company subsidiary and point of sale research firm, Software Advice, examined how retail technology adoption, especially pricing strategy,can help a retailer stay afloat in today’s make-or-break market. The report confirmed that retailers face a number of important decisions when determining how to price their goods and services. Setting prices correctly, after all, can attract customers, drive sales, burnish a retailer’s reputation, and, affect the retailer’s very existence. Incorrectly-set prices, on the other hand, can have a profoundly negative impact on sales and customer loyalty. To help make more informed decisions, retailers must rely on the use of various pricing strategies and competitive price monitoring and analysis.  See the full report at www.softwareadvice.com/retail/industryview/pricing-strategies-report-2015.

The Most Effective Pricing Strategies, Defined

Eight different pricing strategies rated as most effective by the retailers were Discount; Bundle; Below competition; MSRP; Odd pricing; Price lining; Dynamic; and High-low.

The survey found that a majority of respondents (51 percent) use software to manage product pricing; 39 percent of them using a stand-alone pricing application. Discount, below competition and bundle were the most effective pricing strategies for the department, specialty, grocery and e-commerce sectors, but discounting took the lion’s share of pricing strategy in every category.

Most Effective Pricing Strategies:

Most interesting to us were the comments from the retailers on various strategies they use to increase sales and diminish inventory:

*One retailer said his company used bundling, discount, price lining and odd pricing in for its online store. “We use different strategies because our customers are not just one solid segment of people in the market,” he explained. Millennials, baby boomers, bargain hunters and office managers are all groups targeted. “We use the different pricing strategies and then run them through a market analysis weekly,” he said.

An example he gave: If the product is ink for a particular printer, the target market would consist of customers who purchased that printer in the past, which might include college students, accounting offices or small businesses. Depending on which customers purchased the printer, different pricing strategies are used to attract them.

“Bundling, he said, conveys a sense of value through the savings the customer receives on each item by buying in bulk.” (For example, selling water bottles for $19.75 each, dropping the price to $18.76 per bottle when three or more are purchased.

The retailer noted that while the discount strategy attracts aggressive bargain hunters to his business, it’s not the most effective strategy on a per customer basis, but it’s still significant enough to his overall business to warrant its continued use.

*The CEO and founder of a group of fashion retail stores said his stores use different pricing strategies to meet different goals. One such strategy, with the goal of selling more units, is incremental discounts that increase with the number of items purchased (for example, getting 20 percent off the second item purchased and 30 percent off the third). The company also uses specific promotions to drive sales of items for which the store has large amounts in stock.

Because this retailer has high-end stores with name products, the concept of odd pricing, which implies bargain pricing—is not the perception he wants to create of his merchandise.

*Everyday low prices, another common grocery price strategy used by stores like Walmart and Target (and which undid Ron Johnson at JC Penney) was included in the survey but is not among the strategies rated most effective by respondents because not everyone has the buying and pricing power of the giants.

*A Canadian retailer reported that he uses MSRP in his online shop which sells vaporizers and related accessories. The MSRP, he said, allows him to maintain good relationships with manufacturers, but can be hard to maintain when the same products he sells show up at Amazon or eBay at lower prices. To avoid price wars, maintain good terms with manufacturers and maintain its own margins, he developed a line of house brand accessories to pair with the core products sold at MSRP.

Bottom Line:

When it comes to pricing technology, the most sophisticated, forward-looking global retail intelligence leaders offer SaaS-based intelligence and analytics solutions that transform the way retailers price, select merchandise, and manage products in order to maximize sales and optimize margins.

For example, the Upstream Commerce Suite of Solutions empowers retailers to base all shopper-centric decisions on real-time market data. The Company’s highly configurable, flexible, and user-friendly platform enables retailers to effectively manage their pricing strategy through accurately tracking and comparing product pricing, availability and promotions using price intelligence; pricing dynamically; optimizing product selection; monitoring MAP; making relationships with suppliers better informed, and price predictively for optimal sales and profit.

with thanks to Naomi K. Shapiro



What every business person wants to know: How to Tell if Your Marketing is Working

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If you’re not getting results after 4 months, it’s time to ask some serious questions—including whether the problem falls with you

Because marketing is not something with which many B2B companies—especially manufacturers and technical firms—are overly familiar, many leaders of these businesses have a lot of questions about how it all works. The first question most CEOs ask when they launch a marketing effort is, naturally, “How long does it take to get results?” But a close second is this: “How do we know if we’re marketing the right way?”

(This question is sometimes phrased more bluntly: ‘How will I know if it’s time to fire my marketer?”)

As I’ve outlined before, marketing does take time to show results, so impatience can seriously threaten to success. But at the same time, you shouldn’t have to wait six months to know whether your efforts are making any progress.

And as I’ve also written before, the first 100 days are the most crucial for setting your marketing efforts on the right path. That’s when your marketing team should be creating a strategy, defining your target market and value proposition and creating collateral to help the sales team to sell with confidence. A new website could fall in there too, depending on complexity of the job. If your marketer can accomplish all these tasks in the first four months of working with you, it’s safe to deduce that your firm on the right track.

But it’s important to note that if a marketer hasn’t accomplished those things, it doesn’t necessarily mean they’re failing—especially if your company has never done any real marketing before. As long as you see that progress is being made on coming to decisions and building the marketing foundation (that is, your messaging, website and collateral), you can probably stay the course.

But if after four months you have seen no tangible results at all from your marketer—no signs of a new strategy, no road map to new collateral, no talk of a new online presence—consider it a red flag. An inability to get anything accomplished in the early days is a harbinger for more of the same in the future. Either your marketer is incompetent (what many leaders tend to think), or your company is unable to make decisions. I’ve seen both. And while many CEOs like to think that their companies are perfect, if you’ve had a string of marketers who haven’t been able to achieve results, you need to consider the possibility that the problem lies with you.

With thanks to Profit Magazine; Lisa Shepherd || November 14, 2014

Lisa Shepherd is author of Market Smart: How to Gain Customers and Increase Profits with B2B Marketing and president of The Mezzanine Group, a business-to-business strategy and marketing company based in Toronto. She was the youngest female CEO of a company on PROFIT’s ranking of Canada’s Fastest-Growing Companies in 2007 and 2008 and is a frequent public speaker on B2B marketing strategy and execution.

What I learned in China #2

snakes and ladders

As per my previous article on my visit to China, we have much to learn about and from their people. It is potentially the largest market on earth with 1.3 billion people in one country but much will depend upon the growth of a large and wealthy middle class. Wealth is not evenly distributed in China. Its economy is still only 20% the size of the United States. Our newspapers report a slowdown in China’s economy but it is just decelerating and not growing as fast. Wages and prices are rising fast in China and the smart ones are looking for better business models. The people I met are concerned about the slowdown and perhaps an opportunity for Canada has presented itself.

But first, we as Canadians must know how we can fit in.  I discovered that they have an interesting viewpoint on Canada. The Chinese people I met know little about our huge country. Many were astonished when I told them our entire population was smaller than some of their cities. I took a map of BC with me and they all pored over it, expressing surprise that the population was so small, so thinly distributed and empty in the North Country.

And they like Canadians. They think Canada is boring, lazy but safe; a stable supplier and a people to be trusted. Above all, we are not Americans.

Much of what we have, the Chinese would like to have for themselves. Food safety is an issue in China. Our food quality is highly is regarded. One visitor to Kelowna told me that there is bakery in Hong Kong that proudly announces that all their goods are baked with Canadian flour.

But what the Chinese people do not understand yet is that we can be a conduit to the US and Europe for their goods. The two largest markets today are Europe and the US. Canada has good trading relations and a free trade arrangement with both. We understand the business climate in both our trading partners. We speak the language and share a culture. The Chinese do not.

Can we use this knowledge to build businesses in Canada? We can become the conduit to both markets, working our magic as a multicultural country, encouraging immigrants and wanting to rely less upon America. We have systems in place that work and guarantee the quality of the end product whether it is animals or crops, intellectual property or machined goods. Our federal government is working to improve our trade relations and Mr. Harper’s last trip was to establish a  framework for Canada to become one of the few places on the planet (London and Singapore are among them) where Chinese yuan can be converted without using US dollars as the standard.

We are at the starting square in a game of snakes and ladders. Put on your thinking caps and start learning about China. The path can be a slippery slope or just a missed opportunity. The better way is up. The next few years are going to be truly interesting for those who embrace the opportunity.


china 1I will never be an expert on China. It is just too big, too complex and too old with layers of history and meaning that would take several lifetimes to unravel. As I said to my hosts, China, driven by it huge population builds big – Big airports, Big train terminals. Big road systems. Big apartment blocks. And yet you drink tea from cups the size of thimbles.

Because of the gigantic size of their market, many companies can specialise. I drove down 15 miles of road entirely devoted to furniture stores. We crossed over to the shoe district and then to the leather district. We visited a factory producing water based ink on his 10 acre site and a factory devoted only to embossing paper. On my last day, I found myself in a square mile of narrow alleyways devoted to wedding dresses and tuxedos in a quest for that right little number for my wife. In driving around, however, I was most shocked by the sight of a small shop of perhaps 500 sq. feet that sold only electric drills. In our micro market, where everyone has to be everything, all the time, it was refreshing to see a different and profitable business approach.

It reminded me of research on the US I did years ago where I found an obscure town in Nevada, I think, that produced most of the rubber pipe used in the US. The United States has a gigantic market and efficient distribution system (read road, rail and air) whereby it is possible to dominate a market and yet not be at the centre of it. Think of what we could do better with NAFTA which is in explicably underexploited by us.

How could we emulate the success of China? We have cheap power, high labour costs and some cheap raw materials. We are shipping raw goods to China. The successful Chinese manufacturers in turn buy German and Japanese equipment to operate lights out facilities and then ship back to us.  Is there a model there? Do we need ore entrepreneurs and highly skilled labour?

But China has entered a sluggish period and that is forcing a change that will have long term benefits. The old style entrepreneurs sold on price alone. Many have not found a way to break that mould. But a few have gone to the quality end of the spectrum. This is especially valuable in meeting the demands from BC over the next 10 years for the rapid development of the energy and minerals sector. I visited 2 vocational schools there that churn out 3000 CNC machine operators a year, that train 300 baristas a year – for the skyrocketing coffee culture in China. And the emphasis was on a quality product, customer service and cleanliness that would put to shame huge swathes of business in British Columbia.

China has lessons and opportunities for us. We need just to listen and pay attention – then act.

How Small Business Handle Their Money

Canada’s SMEs prefer to manage their finances in-house, according to our survey of 727 companies

Canadian business owners have a do-it-yourself approach to financial management, according to the latest instalment of the American Express Small Business Monitor.

Fully 92% of the 727 owners surveyed (each of whom employs fewer than 100 people) believed they could speak adequately to their businesses’ finances. While 71% said they handle their own bookkeeping, 95% deal with budgeting and forecasting in-house, and 79% handle their own payroll work.

Managing finances internally is not necessarily a drain on employees’ time, with 50% of respondents saying they spend less than five hours a week on it and only 9% taking more than 15 hours weekly.

The one area that remains tricky for many Canadian firms is taxation—only 55% of the businesses polled do their own taxes in-house. At the same time, taxes were ranked the most challenging aspect of business finance by nearly one-fifth of respondents, with the same number rating cash-flow management as most difficult.

Technology is key to respondents’ financial management: 33% use software that makes the process simple; 11% turn to websites to learn the basics.

Small businesses are remaining positive, despite the slow economic recovery. Sixty-three percent are “hopeful” about their firms’ financial future, and 52% said they saw a slight or significant improvement during the last quarter. However, companies are continuing to take a cautious approach, with 66% willing to take only moderate risks, versus just 6% prepared to attempt significant risks.

Here are other key findings of the AMEX Monitor, co-produced by PROFIT and Canadian Business.

with thanks to Canadian Business and Profit




Do you have a minute? There’s something I’ve got to get off my chest. Can we keep it just between you and me? Yes? OK – here it is.

Buyers are liars.

There. I’ve said it. Buyers are liars. Maybe it’s the purchasing tactics that an organization uses to drive a bargain. Maybe it’s simply what an individual does to look good to the boss. Whatever the reason, purchasing at many businesses can push the boundaries of truth well past the level of absurdity.

You know you believe me. After all, how often have you heard one, more, or all of these lines?

“You guys are the highest priced player in the market.”  Right. As if that one isn’t completely transparent. You’ve probably already got a pretty good idea what your competitors charge. If you’re the highest priced player, odds are it’s because you’re a premium product, or you’ve chosen that approach as part of your overall sales strategy. Remarkably, we’ve heard this line even when two companies control 80%-90% of the market, with little if any price differentiation.

“Switching costs nothing.”  Your customer wants you to think you need them far more than they need you. But you buy products and services, too. You know full well that switching vendors always carries some level of cost, risk and pain. That’s the real reason behind the threat. It’s much easier to bluster than it is to actually make a change.

“You are 10% too high to get this deal.”  It’s the purchasing equivalent of the auto salesman saying, “Tell me what you can afford, and I’ll see what I can do.” Give in, and you’ll never regain control over the sales process. Purchasers will go to absurd lengths to make this lie stick – right down to fake quotes from competitors, or even fake POs to competitors “accidentally” being sent to you instead.

“You are selling a commodity. It’s exactly the same as everybody else’s.”  Outside of products traded on an electronic commodities exchange, every vendor should be bringing some degree of value add to the process. It might be the range of guarantee, freight and delivery expertise, brand recognition, technical know-how, or customer service. That’s what attracted the purchaser to you in the first place. It’s amazing how often someone thinks you’re special, only to insist you’re not, once there’s actual money on the table.

So, what’s an honest, hard working company to do, in the face of such perfidy? Over the last century, tens—if not hundreds—of books have been written about effective negotiation tactics. In the best-selling book Getting to YesRoger Fisher and William L. Ury offer five key propositions for a principled negotiation:

  • Separate the people from the problem
  • Focus on interests, not positions
  • Invent options for mutual gain
  • Insist on using objective criteria
  • Know your BATNA (Best Alternative To Negotiated Agreement)

In addition to the tried and tested techniques offered by Fisher and Ury, and the always critical building of two-way trusted relationships with your buyers, we must step into buyer negotiations armed with the right information. In our experience, the following five techniques are quite effective at cutting through the baloney.

  1. Acknowledge the truth: buyers, do, indeed, lie from time to time. Even if they’re good people. Even if they’re your friends. It’s part of the process. It’s nothing personal.
  2. Use your information: With the right database tools and analytics systems, you can regain the initiative. When a customer claims that they should get a discount because “we always pay on time,” you’ll know immediately if that claim is true, or if they’re actually habitually 15 days past due.
  3. Call their bluff. A modest investment in Web-scraping and other tools can help your staff uncover publicly available information on competitive offerings and pricing. There’s not much room for argument when you’re clearly the better-informed party.
  4. Drive the conversation in the right direction. When a customer throws out something that sounds outrageous, ask the questions that force them to produce quality answers. It will rapidly become clear if they’re telling the truth.
  5. Always offer them value. Provide a valuable, differentiated offering with excellent service to back it up, and maniacally focus on maintaining or growing the gap between you and your competitors. With a sharp focus on staying ahead, It will be much easier to turn around buyer negotiations.

With thanks to the Kini Group fro publishing this helpful . T



We should lament the passing of the Yellow Pages. Two decades ago, they were the only show in town and every small business had advertising in them. Every home had a copy. Every manager’s desk was within reach of a copy. Once a year, you spent 60 minutes deciding on the budget and the look of the advertising for the next entire year. Then you forgot about it and let the Yellow pages do the work.

It is less simple now. There are SO.. many avenues of advertising to your customer base. My marketing colleagues tell me you need to make contact 7 times, using as many types of contact as possible. And there are many possible points of contact; from LinkedIn, Facebook and instagram, to email blasts, newsletters, flyers, radio and TV.

But in the choice lies the problem for many small businesses. The choice requires that small business owners now find the time each week to devote to advertising and marketing. And we all know what happens when you get busy, right?

When a small business is finding it slow, the marketing taps get turned on – FULL. When they get busy the taps are quickly shut off. And the result is that sales rocket and then collapse –  rocket and collapse. And the impact of this cataclysmic cycle is that profits suffer. At the bottom of the cycle, we drop prices to get work in the door. At the top of the cycle, we never increase prices to recoup lost profit.

But what would happen if the marketing taps were ON, full time? Well, sales would increase. And at the top of the cycle the order books would be full. And when the workload becomes overwhelming and the orders are coming in thick and fast, what to do? We could hire more people, buy more resources. Or you could simply increase prices and make a lot more money.

So the question is: is it profitable to hire a permanent, if part time, marketing person to keep your company always in the face of your potential customers. Is there any choice?

Want to know more about how small businesses can cope with the social media octopus? Check out “5 Reasons Social Media is Easier For Small Business”  from Frithjof Petscheleit  http://tweet4ok.com/5-reasons-social-media-easier-small-business/.



At the Core: Lessons in Pricing from Apple.


Apple has taught many entrepreneurs the importance of design, how to create buzz when introducing new products to the marketplace, how to pioneer new technology and the importance of superior quality.

But Apple also has wily pricing experts who have used pricing strategies to create extra profits.

The most recent example is the Apple response to Samsung’s huge presence in the India market. Apple’s products are too pricey for the average Indian, where many people still survive on $2 per day. Smart phones make sense in countries where electricity supplies and telecoms infrastructure is weak and prone to frequent blackouts. Phones add value to people’s lives by bringing them close to the markets. This has already happened in some poor fishing communities that dot the coastline. When heading back with the catch of the day, they can check the spot prices at various ports within reach and choose the best paying one. Clearly smart phones are an economic accelerator. So, how to get more smart phones into Indian hands?

Apple has used a price skimming strategy for the consumer market. Early adopters pay greatly for the newest and brightest toys. But Apple also knows that competitors can enter the market easily and quickly after Apple has pioneered the technology. So constant innovation is a hallmark of Apple products.

But that means the earliest smart phones are soon obsolete. Apple could NOT “dump” the old phones on the American or early adopter market, for fear of cannibalising its own consumer segment. So Apple took the older phones to India, effectively buying market share with a great if outdated product that has already generated all the profits Apple expected.

But not all of us have the luxury of dumping our old products on a foreign market. How can Apple’s leadership in this pricing gambit be put to use in a Canadian small business?

If your pricing model demands a profit margin on each and every inventory item you sell, you will not be able to sell the end of season or dust covered items for a dollar. You will lose money.

But Apple has a simple idea. Not all inventory moves equally. If you sell seasonal or fashion products, some product will be left over after the majority has sold. If your pricing model allowed for this hangover – check your records in prior years -, then you could sell the leftovers for $1 and make a profit.  See my prior articles on how the big box stores price this way or take a look at my book , Pricing Strategies for Small Business. If you sell strategically, you can gain new clientele. By contacting your customer list and advising of a tremendous sale, you move inventory that would otherwise gather dust and gain loyal customers at the same time.

Contact Andrew Gregson for your next convention, conference or workshop.