What You Sell and What They Buy

http://www.codefromaway.net/2012/03/what-you-sell-and-what-they-buy.html

by narcissus • 14 years ago

56 16 14 years ago

davemel373• 14 years ago

Two Points....

Lazy Man's Version. 1. "People Buy the Hole, Not the Drill!"-Marketing Axiom 2. delink product from price and link price to value. 3. Always compare apples to oranges when selling. the worst thing that could happen (from a marketing and pricing perspective) is your product or service becomes a commodity in your customers eyes.

The story goes that when Robert Kiyosaki first developed his Cash Flow 101 board game to teach kids about money, he ran some focus groups asking how much people would pay... the common response was between $20-$40, which is pretty normal for a board game. He supposively ran into Dan Kennedy who explained to him that instead of comparing this game to other board games, he should focus on the value it creates and the financial education it delivers and charge like $200 for it. He did this and still sold hundreds of thousands of copies. (it's available on amazon for $99). Drawing the comparison of apples to apples or in this case board game to board game was holding him back in his mind, but if the value was communicated properly, the game actually saves you thousands of dollars of education in a money course, or worse, a lifetime of money mistakes. ALWAYS COMPARE APPLES TO ORANGES. you never want to draw a side by side comparison, because then price becomes relevant. If you succesfully delink product from price, and realize that price is actually by definition a numeric representation of value, you can actually charge what a product is really worth. This is also why a "Unique" selling proposition is so important, you don't want to be viewed as a commodity to your customers, it will only hurt your bottom line.

Smart marketers live by the axiom, "You Buy the Hole, Not The Drill!" (Although, this concept of selling benefits, not features is only one layer, and there are deeper emotional layers if you want to peel the onion. The better you understand what drives your customers decisions, the more effectively you can communicate the value you are really providing to them. Keep in mind though that you need to tie the benefits into features, to explain how you will deliver that benefit. A good exercise for this is a two column spreadsheet where you outline all the features of the product in one column, all the benefits in another column, and start drawing lines matching them up to each other. Yes, good copywriters and marketers actually do work, they dont just suddenly get inspired :)

There is a great book on pricing strategies by Dan Kennedy and Jason Marrs worth reading if you want to learn how to set your prices properly.

molsongolden• 14 years ago

Great thought-provoking comment.

edit: why was this downvoted? I wasn't sure what to say but wanted to let the commenter know that I appreciated his contribution. Should I have just upvoted?

davemel373• 14 years ago

Thanks :)

Confusion• 14 years ago

Wait a few hours for the score to settle, before asking about a downvote.

pingswept• 14 years ago

The book mentioned appears to be: http://www.amazon.com/B-S-Price-Strategy-Prisoners-Prosperit...

davemel373• 14 years ago

That's the One.

Makes you think, if these guys can fill an entire book with great content about pricing strategies, we should probably put a little more effort in our price strategy than pulling a number out our heads based on our own preconceived notions of what our customers would pay based on the competitors pricing, etc...

After all, if price is a numeric representation of value exchanged, if your prices aren't at the top of the market, you are probably not serving your end-users as well as possible with the best value possible.

More importantly, the more you charge and the wider your margins, the more room you have to create and deliver a superior product and customer experience.

If Dan Kennedy is to be believed, only about 20% of consumers shop by price. There are two reasons they do so... 1. They can't afford to spend more and have NO CHOICE. 2. They are too lazy to think about what they are buying and actually research the product, and determine what product serves their needs best.

Question: Do Your Really Want These Customers Anyway?

Bottom Line: If you are price competitive, it might just be because you are too lazy to put real effort into creating, communicating and delivering value, or have a lack of confidence in your offering.

End Result: you end up attracting the wrong type of customer that doesn't appreciate you or the value you provide, or just doesn't have the money to pay you. (from experience, these customers are the biggest headache and rarely worth the time and effort)

ianterrell• 14 years ago

The founder of Patagonia, Yvon Chouinard, writes about a related topic on the supply side in his book, "Let My People Go Surfing." The way he phrases it is, "What is the company's real product?" and he defines product as that which the company makes its decisions around.

Some of it is a little simplistic, but the points that have stayed with me are 1) the product of a large publicly traded company is its stock price, and 2) the product of a small scrappy start up is the start up itself.

tzaman• 14 years ago

Ah yes, this goes hand in hand with my mantra: a product (be it IT or physical) is only worth as much as people are willing to pay for it.

bambax• 14 years ago

McDonald's is actually in the information business. It sells information about its food.

What people buy when they buy a Big Mac are two things:

1. the actual Big Mac

2. insurance that a Big Mac always tastes like a Big Mac

This second thing cannot be bought from a local restaurant not part of a chain. You can't be sure what a random burger will taste like, and you can't esp. be sure it's not going to be awful.

That's why more people go to McDonald's than to other restaurants that they don't know: they hate uncertainty and would rather eat something that is consistently average than take a chance every time.

This is also known as the "Lemon Effect": http://blog.medusis.com/are-you-a-lemon (shameless plug).

powertower2• 14 years ago

> they hate uncertainty and would rather eat something that is consistently average than take a chance every time.

I think it's more like they have been programmed (marketed to from a young age) to spend $5-12 on a relatively low quality product as long as they get it fast and get it from McD's (on every corner). They simply don't know any better, and don't care to find out more.

I can buy a complete organic meal and cook it myself for half the price, with 2-3x more nutritional benefit, with 1/10 the health risk. But that requires time, effort, knowledge, self-improvement, etc.

endersshadow• 14 years ago

Oh for the love of all that is good and holy, can we put this marketing-is-brainwashing thing to rest? People don't go to McDonald's because they saw a clown singing a jingle on a television. They go because they like the food at that price. They may be more aware of that option than other options due to marketing, but people aren't automatons that just do like television tells them to.

That being said, I challenge your assertion. I can buy a double cheeseburger (call it 1/4lb of meat) from McDonald's for $1. This takes me about 5 minutes. Buying organic beef, cheese, and rolls, and then prepping, seasoning, and grilling that burger will take you, give or take, 20 minutes and probably cost you on the order of $2-5 per burger (depending where you live), minus the time needed to get those ingredients. You value time, effort, and knowledge at zero, which is below their actual value.

My point is that your argument is fallacious. Learn from what McDonald's puts out and understand why, despite plenty of marketing, Burger King has fallen off a cliff and Wendy's has come charging ahead. McDonald's has a lot of value in terms of a case study, but you dismiss it with that old-programmer-standby, "It's just marketing." I'm sick of seeing that attitude--it quickly dismisses good and interesting business strategies that we can learn from.

Porter_423• 14 years ago

McDonald's business is not about fast food,rather it provides information about food.Actually business is depend not only by the product but also much more depend on its Advertisement.That's why McDonald's business is so popular in America.

funkah• 14 years ago

In the past I have also heard that McD's business is not fast food (nor real estate) but food arbitrage. I suspect this says more about the person doing the analysis at the time than it does about McD's business. They sell hamburgers.

dfragnito• 14 years ago

Software IS a Service (SIAS)!!

lrobb• 14 years ago

Do you really need to write up a whole framework of code to justify the price you put on a site? Not at all! They're not paying you to write code: they're paying you to get them a result.

This. I'm reminded of the post by Rob about his startup acquisition... The interviewers were asking him why he didn't rewrite a site written in classic ASP to node.js/mongo... Completely missing the point that the code behind the button made absolutely no difference in the sale or functionality of the product.

What You Sell and What They Buy

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