Mills on Marketing

Are we really persuaded when retailers price something at $19.95, rather than $20?

Yes we are!

University of Florida marketing professors Chris Janisewky and Dan Uly investigated the way the human brain thinks about value and shapes bidding.

Their research is reported in Scientific American Mind (April/May 2008). When people judge an opening price they create mental measuring sticks. If they see a $20 Kettle they wonder why it is worth $19 or $18. That is rounded numbers.

But why the starting point is $19.95 our mental measuring sticks change. When we think about what it is worth, we start thinking about nickels and dimes instead of dollars, so a fair price for a toaster might be envisioned as $19.75 or $19.50.

The psychologists also looked at five years of real estate sales in Alachua County, Florida comparing list prices and actual sales prices of homes. They discovered that sellers who listed their homes more precisely at say $495,000 as opposed to $500,000 - consistently got closer to their asking price.

In other words, buyers are less likely to negotiate a price when they encounter a precise opening price.

So, the lesson is, if you are in a buyers’ market you should start with an exact list price.

Popularity: 12% [?]

Liz Bigham SUP/Director of marketing for Brand Marketing for Jack Morton Worldwide tells us just 9% of the 91 million viewers who watched the 2006 Superbowl ads could remember the ads a week later.

Combine that figure with the massive increase in consumers who distrust advertising (the number or complaints about deceptive advertising doubled between 1997 and 2001) and you have a serious disconnect.

If consumers can’t remember what you’ve said and don’t trust the medium you’re using to talk to them its time to change. Its time to reallocate your brand dollars to experiential activities that will generate advocacy for your brand.

Popularity: 12% [?]

One of the things that I admire about Disney World is the way it transforms its low paid workforce into a cast of brand evangelists.

Walt Disney understood that the words we use frame the way we think and often behavior. Disney created his own language to support the Disney mission of delivering happiness through entertainment.

In Disney Speak:

• Rides or shows are always called ATTRACTIONS
• Employees are always CAST MEMBERS
• Customers are always called GUESTS
• Jobs are always called ROLES

On the surface, language can seem superficial or trite. But words create images that reinforce assumptions. Take the word GUEST. A disgruntled customer evoked a different image to an unhappy guest. Guests always deserve special treatment, while customers often evoke images of indifference.

If you want to create a service culture where staff stay in role or on-brand, start by changing the vocabulary you use to label staff, roles and customers. The right words really can mobilize your culture.

Popularity: 22% [?]

Hot fashion retailer Zara has one plaudits for the way it taps into fashion trends and converts them into hot clothes that are affordable - amazingly fast.

A Zara design can go from concept to store within 30 days. Zara employs over 200 staff in its Spanish design and development team. The team churns out an amazing 1000 styles a month.

The mantra in Zara is react rather than predict. Zara’s designers don’t attempt to predict or share the market like most of their competitors. Zara reacts to what they in the night clubs, on the streets and on the catwalks and tests them in their shops. What sells is replaced quickly. The sale dogs are cut.

Its a magic formula. Customers love it. They get the latest fashions, fast and cheap.

Zara’s short lead times means it continues to deliver more fashionable clothes. Thats why customers return to the store - on average an amazing 17 times a year (most competitors average 3). The lower quantities mean the fashion items are often in short supply. Low surplus stock means Zara doesn’t have to regularly purge its stock with massive end of season sales - so margins remain high.

The huge range of styles gives the customer more choice and improves the odds of Zara getting it right. Because Zara customers know Zara is always updating its stock, Zara spends very little on advertising. Zara’s hot fashion creates massive word-of-mouth among it’s target customer base.

When Ortago Gaona, the founder of Inditex, the owners of Zara, is asked what Zara does, he replies “Zara provides freshly baked clothes.” For the staff this translates into: react rather than predict.

The Zara formula also suggests that before long we will find that a lot more fashion brands will have to own and run their own retail outlets. Zara’s “fast fashion” is built on getting daily feedback from its own stores and using it’s sales associates and store managers as “trendspotters.”

Popularity: 37% [?]

Traditionally brands have used advertising to excite demand. The problem is, it is very difficult to communicate your cutting edge features and end-user benefits in a magazine ad or even a 30 second t.v. spot.

More and more brands - especially those who have supreme confidence in their products superiority are allowing customers to try before they buy.

Take Bose, the world leaders in speaker technology. Bose now offers to send its new wave music system to customers and let them try it out for 30 days at no cost. If they truly don’t like the product they can return it to Bose at no cost. Bose now runs Try and Buy retail kiosks in airports - where flyers can trial Bose’s noise canceling headphones.

Tryvertising obviously has its costs, but as brand experts Keith Lincoln and Lars Thomassen point out in their book, How to Succeed at Retail (Kogan Page, 2007):

“Marketers operating a tryvertising mindset will find completely new ‘conversation channels’, if not the most unexpected partners and alliances.”

Popularity: 15% [?]

I have worked with Toyota and Lexus for over 20 years.

Undoubtedly, I’m biased. My wife and I both drive a Lexus. Plus, I’ve been part of numerous Toyota and Lexus product launches, branding and sales plays.

Over the years, I’ve thought deeply about what separates Toyota from its competitors.

Building cars that are relentlessly reliable and offer exceptional value explains much of Toyota’s success. But you can only do that consistently if you have a culture or mindset, that welcomes customer feedback - especially when it’s a negative.

No other company I have ever worked for embraces and faces problems or challenges like Toyota.

When Toyota discovered the average age of a Toyota buyer is about forty-five, compared with about thirty-seven for Honda and thirty-two for Mitsubishi, they set about building a brand that would win the hearts of the next generation of consumers by launching a new brand called Scion in the U.S.A.

The median age for Scion buyers is thirty-five. More importantly, 76% of Scion buyers have never bought a Toyota before.

Compare this to GM who spent years trying to rescusitate Oldsmobile with slogans such as “This is not your father’s automobile” and “A New Generation of Olds.” The campaigns didn’t work. So in 2000, GM killed off Oldsmobile.

Popularity: 93% [?]

Back in 1999, Joseph Pine and James Gilmore wrote a paradigm-busting book called The Experience Economy: Work is Theatre and Every Business a Stage.

Pine and Gilmore argued that the future of marketing would belong to companies who moved from pushing goods and services to delivering “sensational” value-adding experiences.

Since then, a barrage of books have appeared on customer experiences. But the best book I’ve found is Experience the Message, How Experiential Marketing is Changing the Branded World.

Max Lenderman is creative director of GMR Marketing, one of America’s top event marketing companies. Lenderman has written a must read book. My copy is marked heavily with annotations.

Pine and Gilmore remain the heavy-weight thinkers in this field. I call their book The Experience Economy, the “old testament.” Lenderman’s book deserves the title “new testament.”

Popularity: 17% [?]

The new economy has transformed customer desires.

David Lewis and Darren Bridges, authors of The Soul of the New Customer - What We Buy and Why in the New Economy describe how the world has moved from “scarcity to abundance - from abundance to authenticity.”

So how do your customers see you or your brand? Do they see you as real or fake?

If you aren’t really what you pretend to be, you had better start addressing the issues that cause your customers to doubt your authenticity.

Popularity: 10% [?]

To succeed in life you have to be able to sell your case. In today’s media savvy world most of us understand this.

Persuasion in all its forms has become a multi billion dollar industry. A 1995 research paper by Donald McColoskey and Arjo Klamer published in the American Economic Review calculated one quarter of the gross domestic product of the USA is linked to persuasion.

So, why is it that ad agencies, PR companies and businesses continue to spew out so much double speak and bull?

Perhaps they have something to hide? That is certainly what the public thinks. Is it any wonder that surveys testing the publics’ believability, of the truth in advertising messages, continue to fall?

Persuasion starts with believability. And believability starts with words that are jargon free, clear, and full of meaning.

Popularity: 10% [?]

In the June 2007 HBR, Gail McGovern and Youngme Moon ask why companies bind customers with contracts, bleed them with fees and battle them with fine print?

Their answer is simple.

Confused customers make bad decisions and lock themselves into dumb deals.

The banking, health care and mobile phone industries are full of examples where customers lock themselves into long-term deals that make them angry and frustrated.

Beware!

Competitors who come up with customer friendly alternatives are making a killing.

Virgin Mobile USA has enticed millions of angry mobile phone customers away from incumbent carriers.

ING Direct, has quickly become the fourth largest bank by offering accounts without fees, without tiered interest rates and no minimums.

Popularity: 10% [?]