Extraprise Sustainable Marketing Webinar, Thursday July 16th at 2 PM Eastern Time

To continue the dialogue regarding Sustaible Marketing, and make it more of an interactive discussion than our blog series and whitepaper, we'll be conducting a webinar on the topic July 16th at 2 PM Eastern. Please join in, we'd love to get some feedback as we develop this topic. Register here, and we'll look forward to discussing the topic with you. We'll also be posting the webinar on our website next week.

Sustainable Marketing - Part 4: Price vs. Value

This is the fourth part of a series on Sustainable Marketing. In this installment we continue the comparison of Traditional Marketing (Price) versus Sustainable Marketing (Value). Click here to link to the beginning (Part 1) of the series.

It is difficult to have an intelligent conversation about price and value without quoting Oscar Wilde. A cynic, he wrote, “knows the price of everything and the value of nothing.” In our context, value is often understood by those who make and use products. Price is better understood by those who are involved a transaction: sales, finance, contracts, purchasing, and too often, marketing.

Price is what a customer pays. Value is what they perceive or receive in return. Value-based pricing defines selling prices based on the perceived value to the customer, rather than on traditional measures like cost, competitive pricing, or the historical price.

A key insight in this approach is that pricing may be customized for each customer segment based on the value delivered. Many metrics determine value, such as time, features, discount level, and many other firmographic and demographic factors.

Like most sustainable aspects of marketing, value-based pricing requires a significant level of analysis and customer understanding. It is imperative to know how customers measure value, through evaluation of customer interactions, feedback in surveys, focus groups, and other marketing instruments.

The van Westendorp Price Sensitivity Meter (PSM) is a well-known segmentation process for understanding customer price preferences. The basic assumption is that all customers are capable of envisioning broad pricing schemes and can define their preferences based on a quantifiable measure of value to them. Customers or prospects are asked four price-related questions:

• At what price would you consider the product to be so inexpensive that you would have doubts about its quality? (too inexpensive)
• At what price would you still feel the product was inexpensive yet have no doubts as to its quality? (inexpensive)
• At what price would you begin to feel this product is expensive but still worth buying? (expensive)
• At what price would you feel that the product is so expensive that regardless of its quality it is not worth buying? (too expensive)

Graphing the resulting values from each question helps the marketer identify the range of acceptable prices. In most such exercises, the optimal price band falls between the point of marginal cheapness (the intersection of inexpensive and too inexpensive) and the point of marginal expensiveness (the intersection of expensive and too expensive).

An allied approach, Conjoint Analysis, requires participants to make a set of predefined trade-offs in features, packaging, and price. Attendees are typically asked to rank a series of options or choose their preferences from a list of alternatives. Initial segmentation is important; participants must be grouped according to their identified demographics, objectives, and anticipated values. Analyzing these judgments can reveal the relative importance of the underlying components of value. Other approaches like Gabor Granger and Brand Price Trade Off offer useful additions to these basic themes.

Research in value-optimized pricing supports the assumption that this approach leads to increased revenue and margins. Assuming that costs are fixed, customers who perceive greater value will pay more for the same product and be more profitable. Customers who perceive less value may be targets for increased marketing spend to change their perception. At the other end, customers who perceive the lowest value may not be appropriate targets for the next marketing initiative. They may be incented to move to lower cost sales and support channels like the Internet.

Click here to continue to Part 5 of the Sustainable Marketing Series.

Sustainable Marketing - Part 3: Products versus Customers

This is the third part of a series on Sustainable Marketing. In this installment we beging the comparison of Traditional Marketing (Product-centric) versus Sustainable Marketing (Customer-centric). Click here to link to the beginning (Part 1) of the series .

There has been much discussion over the last decade about the necessity of moving from a product-centric to a customer-centric approach to business. In the mid-90’s, technology caught up with the concept. Companies like Siebel Systems were launched to capture and share customer interaction data across marketing, sales, call centers, customer support, and a variety of channels.

With the rapid rise of the World Wide Web, customer centricity became an imperative. Marketers quickly lost control of their distribution strategies. Customers had instant access to competitive information like features, packaging, pricing, and discounts. For the first time, they gained the ability to manage their relationships with companies. Customers determined when, where, how, and through which channel they would interact with companies and, as a result, marketers scrambled to define a set of preferred interaction models for each customer segment based on its value to the company.

Despite this flurry of activity, most marketing organizations remain product centric. Companies still organize around product lines and marketing budgets too often follow the corporate organization chart. Developing a customer-centric focus is a journey not a destination. In fact, we typically see companies going through three distinct phases to make this transition, as the following chart illustrates: (note: you may click on the chart to link to a larger version)

From My Pictures

Click here to continue to Part 4 of the Series.

Sustainable Marketing - Part 2: Sustainable Versus Traditional Marketing

This is the second part of the series on Sustainable Marketing. In this installment we compare traditional versus sustainable marketing. Click here to link to the beginning (Part 1) of the series.

What is, and what isn’t sustainable about marketing? The following ten criteria summarize the differences between the traditional and sustainable approaches:

Traditional.......Sustainable Products............................Customers Price...................................Value People................................Process Campaigns.........................Access Leads..................................Sales Analysis.............................Insight Data................................Information Budget...............................Baseline Sometime..........................Real time Manage.............................Measure

The key distinctions captured in these criteria are the rapid movement to measuring realtime information to create immediate insights, and selling value-based solutions to customers. These are certainly not new insights. However, the two key clauses (converting real-time information into insights and moving from selling products to markets to selling solutions to customers) do not often appear together. Pursuing them as part of a single initiative with the other concepts outlined above, is a significant step towards sustainability.

Click here for Part 3 of the Series

Sustainable Marketing - Part 1: Introduction

Sustainability has crept into the corporate parlance quietly over the last decade. And it's mutated from something that seemed a bit like a PR attempt to appease the activitist tree huggers; into something strategic, real, and core. Of course, by usage "Sustainability" has come to apply primarily to environmental issues, but in the broadest sense, it is the "capacity to endure," and implicitly the term recognizes that resources are limited and must be utilized judiciously or literally imperil survival.

So as we see the corporation promoting sustainability as part of its social responsibility obligation (whether it be for PR purposes or a true belief in the underlying value); we are seeing more and more messaging around the term. And, in general, it is the marketing department that is responsible for creating this Sustainability messaging. In order for Marketing to avoid being deemed hypocritical, and in order for it maintain its own "capacity to endure," Extraprise espouses an objective we call "Sustainable Marketing," over the next few weeks, Extraprise EVP Bill Blundon will build a case for "Sustainable Marketing" over Traditional Marketing.

In these current turbulent times where marketing budgets are being sheared; customer expectations and demands are increasing; marketing technology is becoming more complex; social media is burgeoning while traditional media seems to be going the way of the dodo bird; and the C-level suite is looking at marketing with ever increaseing scrutiny; Bill lays out in report format an approach that will indeed foster marketing's "capacity to endure."

INTRODUCTION

Many discussions about business are politicized and, as a result, easily become polarized. Somewhere between “Workers of the World Unite” and the “The Business of America is Business” common ground can sometimes be found. One such area involves reducing the volatility of the business cycle, or failing that, limiting its impact. Whether it is John Maynard Keynes or Joseph Alois Schumpeter, economists may differ fundamentally on means but they often overlap on ends: Growth is good; sustainable growth is better.

Anyone who has been a marketer for just a decade has lived through the inflation of an Internet bubble, the bursting of same, a post-9/11 crash, a gradual recovery, a major global advance, and an international economic meltdown. Marketing strategies, budgets, tactics, and measurements changed in response to these events, but at an even more rapid rate.

Investments in marketing are often cyclical depending on the season, the economic climate, competitive forces, and new product launches. During periods of economic stress, marketing investments are viewed as (in that terrifying phrase) “discretionary spending.” Marketing organizations are expected to make cuts and they often make them reflexively – “cut ten percent across the board!” More sophisticated organizations borrow from finance and IT and take a portfolio management approach to their cost-cutting. They consider the impact of specific disinvestments in terms of business objectives, revenue, margin, market share, and other imperatives.

Still, too many marketers lurch from peak to valley without a long-range plan.

As the definition of marketing has evolved over the years and begun to value left brain over right brain thinking, analytical skills are more highly prized. Too often, however, these skills are applied only to tactical issues like customer segmentation, list selection, and media placement. Those who take an analytical approach to marketing strategy are a rare breed.

Amid currency fluctuations and bailouts, one concept has remained highly valued: It’s the customer, stupid! Increasingly, the product-focused Four P’s of Marketing (product, price, promote, place) are evolving to the more customer-focused SIVA (solution, information, value, access). This new trend, or ancient verity, depending on your point of view, is part of a more general approach to creating a sustainable notion of marketing.

This report considers some of the changes required to focus marketing not just on today, this quarter, and this fiscal year. To find its way out of the boom/bust cycle of investments, marketing must find a more sustainable way of operations.

Click here for Part 2 of the Series