Trig Point Marketing and e-Commerce Consultancy
10 Mill Road
Westtbourne, Nr. Chichester
Sussex, UK, PO10 8TH
Email: dave@trig-point.co.uk
Phone: +44 (0)1243 374559
Mobile: +44 (0)7834 32 40 31
Trig Point Marketing and E-Commerce Consultancy
Welcome to Trig Point Marketing Consultancy, providing Marketing Support and Consultancy across the South East of England including Sussex, Hampshire and London our specialism being Marketing Strategy for SMEs. You can now follow us on Twitter, where Marketing Strategist Dave Cousin will be giving his latest thoughts on Marketing and keeping you up to date with all new news and developments on this site.
SEO is about more than Google, image by Ezearn
1. Research local themed keywords
For your small business SEO you really should use keywords that contain the name of your local town, county or larger area you cover. You are instantly competing against less people meaning you have a better chance of appearing on results; also click through rates from searches where people have used a location are higher: many who don’t use a location realise their mistake and search again remember without clicking any results. .
2. Create interesting content
Not all content has to be sales copy, especially when using keywords that don’t indicate a clear buying intention information can be better to keep people on the site, educate them and get them to trust you as a business not desperately trying to sell but who know what you are talking about, remember small business SEO is about much more than just getting your results to appear on Google.
3. Use landing pages for your primary keywords
Landing pages are great because once your small business SEO efforts have got people on to your site you can boost your chances of them staying and going elsewhere on your site. A landing page about exactly what people have just searched for will be much more likely to stop them clicking back to Google: especially important as Google now track how much time people spend on your site and rank you lower if you don’t have sticky pages.
4. Make sure you have unique titles and descriptions for each page
On those landing pages make sure each one has a unique description and title in the HTML: which Google and other search engines use for showing in results and deciding what keywords to rank you for and where. Your SEO may get you to position 1 for a keyword but if no one clicks on it your small business SEO will be useless. Customers read a description briefly before clicking normally and they spot keywords they have searched for so include them.
5. Include keywords for your specialisations and each product
Remember that a lot of people won’t be searching for a company type but for a specific product, service or even the problem they need a solution to so look for keywords for all of these and research groups of keywords for every service and product you have. If for example you are a locksmith, SEO options include looking for keywords relating to key cutting, lock repair, emergency locksmiths and how to fix a stuck lock to name but a few.
6. Look for long tail keywords with low competition
Don’t choose the most obvious keywords: everyone will choose and compete on these for their SEO be they small or large businesses. Let big companies dominate the high traffic keywords if they want and spend a lot doing it; focus on long tail keywords, unless you have a good enough page rank to compete for top positions on other keywords. You can get to top positions for dozens of low competition keywords for as little effort as a few very competitive words, remember your small business’ SEO may also suit more niche terms.
7. Look at competition in detail when choosing keywords
When deciding whether a keyword is worth using you need to consider how easily and how quickly you can get to the first page, and ideally the first four or five positions, to get a reasonable amount of traffic. When you look at keywords you can look at different measurements of competition, most are based on how many sites overall use keywords. What you need to know though is how many people are actively optimising their site for that keyword and what pageranks they have relative to you: to make the most of your small business SEO pick your battles wisely.
8. Build relevant links
Google use not just keywords on your pages but on the pages linking to them to decide the content of your pages, make sure then that you get links from relevant pages ideally containing your keywords; on a directory add them to your description but ideal is a link from an article though about what your page is about.
9. Make sure the markup of your pages is up to scratch
Use the W3C validator to check for issues and get them fixed by your web designer, some are more serious than others but Google like tidy sites. Also look out for issues such as missing alt tags and any scripts that run on your pages making content or menus unreadable to a search engine spider. For SEO remember that keywords and content have to be visible for Google to rank you and links visible for pagerank to spread.
10. Build links that will pass pagerank
Some links pass no value and are ignored by Google and other search engines, these are called no follow links. Some websites avoid passing value by using the no follow tag that tells search engines basically ‘I don’t endorse this link’. Many websites do this automatically, if a site has mainly no follow external links then if you try to get a link too chances are you will also be given a link that has no SEO value.
With do follow links you still need to make sure you are getting links from pages with some pagerank; make sure your link will be on a specific page with pagerank as the pagerank of the homepage may be high but the page your link will be on may be low. Lastly remember that the number of other external links will affect the value of a link to your site so try to get links on pages with few other links where possible.
Sussex pubs, just one type of small Sussex business to benefit from SEO , photo by Chris Gunns
If you are a small business based in or around Sussex you have to watch your budget carefully at the moment, many will have a local focus and therefore think locally with their advertising: local advertising after all is often cheaper.
So perhaps you will advertise your business in the Yellow Pages or a local newspaper? Unfortunately though fewer people are using such publications for their information search to find a solution to their problems or find specific business types. Yellow Pages realise this and that is why they will give you a free website with a listing, they are aware that the paper version of the Yellow Pages is heading for extinction.
B2B businesses especially will find their clients are looking online, and often using recommendations through Social Media sites such as Linkedin to choose who to do business with. Many think of the internet as international but you can think locally with your online marketing, for any business in Sussex SEO is a great option to focus on getting not just local consumers and businesses on to your site but also local prospects.
With SEO you are putting your website as a search result in search in front of those people who are searching for certain words and terms; by choosing what words and phrases you want to appear for you can make sure you are appearing to people who have with their search shown an interest or even a clear buying intention.
This means for a Sussex business SEO is low risk: you can check how many people are searching for keywords in advance and see how many sites and which sites will be competing with you to get to the top of Google’s and other search engines’ results.
For some keywords you will find that there is a lot of competition and you can then work on other areas of SEO to get above other websites for that word or you can choose other keywords that have less competition.
The great think for a business with a local focus, including many Sussex businesses: SEO can help you appear for people searching for businesses in a certain location. By using phrases such as Sussex SEO, instead of just SEO for example we compete against only other local businesses and we get much more relevant traffic.
It is important to consider how often when you search you put in a local area as well as a business type or even the specific product or service: most people do this and so you can actually get better results by using this tactic for your Sussex business’ SEO.
The other important thing to remember with your SEO campaign when considering different options is that you can do it on a small scale with a few keywords at first and then if it works for you expand it, a lot of the work involved such as creating regular fresh content for your website you can do yourself, perhaps in any downtime. Also importantly for your Sussex business, SEO, unlike most other types of marketing, once done keeps bringing traffic so you keep reaping the benefits without having to spend any more.
TV watching patterns and use of other Media have changed how TV Ads are used, image by Paul Townsend
No one of the following questions should automatically mean you do or don’t go ahead and use TV Advertising but they may give you some idea whether it is right for your business.
Are you selling B2B, B2C or both
If you are selling to B2B then generally TV advertising won’t work, even if people who work in the right positions in businesses do watch TV they may not want to think about work, you may have more luck with start-up services of course and those to the self employed. If you sell B2C this doesn’t of course automatically mean you should use TV advertising as the following questions will show. As for selling to both B2B and B2C you will probably have a different marketing mix for each but a TV ad aimed at one or the other may confuse the message to others.
How large an area do you cover?
You need to be able to cover at least an ITV region really to make TV advertising make sense, or at least a few cities within that area. Having said this more independent stores and businesses used to advertise on TV than do now, if you have something that will attract people from across a region such as a tourist attraction then TV advertising may be worth considering.
Do you have the capacity to sell enough to cover the costs?
TV advertising if done well has the potential to bring in a lot of demand but first make sure you can meet that demand or at least meet enough of the demand to cover the costs of TV advertising and make a profit.
Is your message or are your Brand Values easy to explain in 20-30 seconds?
It may be that people already know who you are and what you do in which case a TV ad can just remind them that you are still about. Otherwise though you need to make sure that you have something that can be effectively explained within the length of the ad or else TV advertising is not for you; Direct Mail, Direct Sales or Online are all options you should look at. At the same time of course Video can still be valuable but perhaps a 5 minute mini documentary on your website or even sent out by mail on DVD would be more effective.
Are you selling the same product, service or USP to most of your customers?
TV means showing one ad at a time and you therefore need to make sure that it firstly will get the right message to most of your potential customers and that for those potential customers who would ideally be sent a slightly different message the TV at least does not alienate them. With Direct Mail, some online and various other Marketing you have the opportunity to send different messages to different segments.
Do you have access to people in house or at any agency with the right competencies to create and support the campaign?
Don’t assume that your creative department are up to making a TV Ad there is a lot of skill required and as episodes of the apprentice shows it is much harder than it looks. Unless you have experienced people in house you will need to use an agency, this gets expensive and may make little sense for a short term ad or ad only to show on niche digital channels.
Could you distribute a video ad another way, e.g. online?
Having a video ad doesn’t mean it has to be put on TV, if it is put on TV then it may only need to be shown briefly if it is good enough to go viral. Of course if you are advertising an end of January sale with 20 seconds of products and prices then you aren’t going to be able to do this online and certainly not within the amount of time you have.
Is your awareness level currently high or low and going up or down?
If you have low awareness then TV can give it a big boost, gaining awareness of your brand values and exactly why a customer should use you is more difficult through TV and so you are perhaps best to use online marketing if you have good awareness of your brand but poor awareness of what you do and stand for. Also if you currently aren’t using TV and your awareness is already going up then TV may add little extra; if your awareness is on the way down then TV may help but you still need to find a way to continue communicating with customers and those who might become customers: TV is an expensive and usually fairly ineffective way to do this especially once you have contact information for your customers.
Can you integrate a TV ad into other communications and lead to interaction with customers?
With online marketing it is often easy to get a customer communicating and interacting with you often through social media or your own website and this includes from video ads. TV ads can do the same thing but with a more passive audience you often need more incentive for them to do this and do it straight away before they forget what they were going to do and why.
Do most of your target market watch TV? Do more of your target market use the net or use the net for longer each day?
TV is a great medium for reaching people who spend a lot of time watching TV, this seems obvious but some brands seem to use TV to reach audiences who spend far more time online and are far more likely to interact with brands they see online: teenagers are the obvious ones but also people who use the internet in their jobs; pensioners and housewife’s on the other hand may be best communicated with through TV.
Will TV advertising boost distribution?
Many Supermarkets and stores still expect products, especially new products, to use TV advertising and won’t list your products without it; you may therefore get more than just awareness through TV advertising.
Does as seen on TV mean anything to your customers?
Do you need to add credibility to your brand?
New brands and brands that have had bad press may need to add credibility. Online businesses, with little offline presence especially, struggle to build up trust or brand values that would normally be associated with established offline businesses. TV does add credibility in the eyes of some consumers and for some ‘As seen on TV’ does mean something, this is likely to be the case most of all with less price sensitive customers and B2C customers though.
Is there a digital TV channel or a few channels that targets your specific audience?
Leger holidays sponsor programming on the History channel for their Battlefield tour offering: TV advertising though mainly used for FMCGs and products and services with mass appeal can actually target groups very well if there is a channel that fits or even a program that you can sponsor, for example Ancestry websites sponsoring genealogy programs. With digital channels and program sponsorship you may be able to get great deals for programs that have low viewing figures but which are 90% the right people you are targeting.
Can E-commerce businesses simply add extra destination countries as an option and get extra sales.
You might think that selling online has the huge advantage that you can suddenly sell to anyone who goes online as easily as you can to the people on the same street as you: it isn’t that simple though. Even selling within one country can have a few complications such as extra postage costs to highlands and islands in the UK, or equivalents in other countries.
There is a lot more to think about when selling to different countries other than postage of course but postage costs are a big issue if postage makes your items very expensive or if you need to arrange separate couriers for each country, there are of course some couriers who cover most destinations.
As a marketing consultant the main thing I want to write about is the difference in your overall offering when selling to other countries. The very products you sell online may not be very popular in other countries, many Fast Moving Consumer Goods have different packaging and different formulas in different countries to meet local tastes but you are unlikely to be able to do this.
Of course selling something that isn’t available in another country or is valuable because of where it’s from can be a good marketing strategy. Products made and sold from the UK will in some, but not all, countries command a premium. Products that are quirky because they are different may well also be profitable niche products in some countries as imported US candy and Japansese gadgets are in the UK: but they still aren’t mainstream.
Your website itself may well need to be different as well, not even considering language and the hours you have customer service open. You will find that in some countries the conventions of website design are different and some countries’ e-commerce sites tend to have a lot of information and few pictures while others are much more visual.
In some countries the amount of customer service expected will also be different; in certain places a large percentage of people will phone up customer services even before selling relatively small and cheap items, if you can’t provide customer service at the end of a phone then you may well lose out. It is important to remember that in some cultures people tend to be more risk averse, providing a very clear and generous returns policy will be essential to make sales in some areas. The popularity of price comparison sites, the popularity of different search engines and more will all affect your offering to each country you target as well.
Other considerations not strictly related to to your marketing include that you may find that in your agreements with suppliers you can’t sell to certain territories. You may need to offer certain terms in your returns policies and allow for local distance selling regulations, if you think those in the UK are complicated many are far worse and less fair to sellers.
There may be other laws you need to consider including declarations on packages and of course what you can and can’t legally sell. Sometimes you can send items but can’t guarantee they will get through to customers; Somewhere like Saudi Arabia all sorts of products are banned and rules on packaging are very strict: a Yoga DVD with a typical cover would probably not get through Saudi customs for example.
Richard Branson has been whipping up some PR by talking about how businesses should work to create jobs rather than focusing purely on profit. That is a nice idea if you can afford it and I am sure he is mainly aiming at big multinationals: however it is important to remember that a business’ marketing objectives aren’t always profit.
Many SME owners setup a business to be a lifestyle business; I find they often tend to have too little consideration for profit and have no flexibility if things go wrong. As long as you do consider making a profit first but worry less about how much of a profit though you can potentially build a nice business that you don’t have to work too hard at.
Turnover is sometimes more the objective than profit, often this is the case when you are building a business to sell and customers and volume of custom are what is going to be valuable to a buyer more than profit.
Increasing volume in order to employ more people or have a bigger more valuable business though is another slightly different objective that is common in medium sized businesses and shouldn’t be ignored.
Different marketing objectives first and foremost need a different approach to price and in turn a different approach to a business’ entire value chain.
Repositioning an offering as a mass market low cost option may make a business less profit but increase volume. Moving the other way may give businesses a premium brand that they feel proud of and allows them to follow philanthropic objectives such as giving a percentage of sales to charity or ensuring that they buy from ethical providers.
It is important for marketers to make sure they are clear on the marketing objectives of a business before doing work for them; it may also be necessary to help a client become clear what thier objectives are and make sure marketing objectives aren’t so disparate that it is impossible to achieve both at the same time.
Dave Cousin’s Marketing Philosophy
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Dave Cousin’s Marketing Philosophy
Article
A new business starts from an idea to offer a product or service to a group whom one believes demands this product at a price where the business can make a profit, this is marketing at its most basic but also its most important, if you can’t show that people want what you are offering then stop right there.
Marketing is far more than just promotion, as some people suppose, Marketing is about forming a full offering which people demand and from which you can derive profit, this profit should ideally be more than you can make with another offering although other factors such as running a business that those running it will enjoy, however this is secondary to making an offering from which you can at least break even.
Having mentioned that if you cannot show that people want what you are offering then do more research or try something else, far too many people start from the wrong point, either ‘this is a business I would enjoy running I will worry about marketing later’, or ‘this is a business I can afford to setup I will worry about marketing later’.
The offering you choose is made up of the marketing mix and until you have this right you can’t move ahead you may find after research that there is no way to make a suitable offering so ideally you need to know this before investing in setting up a business. Good Marketing Planning and decent Market Research can significantly minimise risk.
To start you should have an idea of what you are going to offer and you will need a unique selling point, it could be a whole variety of things giving you a competitive advantage such as that you have a new manufacturing technique allowing you to offer a better product or a cheaper product, it could be that you have an idea for a unique advertising campaign or it may be that you will be the only business offering a particular service in a particular location but there must be something. From here you will have an idea of who your target market might be, though this may need further research.
The marketing mix should generally come from analysing a target market and trying to offer them a product they want at a price they want to pay at an outlet they are happy to use promoted in a way that will ensure they make a purchase, or in some cases another most wanted response. This is the same for B2B and B2C and for services though with a few extra considerations.
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Ten questions to consider before setting up an e-commerce store:
Article
There is a lot to consider when setting up an e-commerce business or taking an existing business online but these are some of the initial areas to consider once you have a basic idea of what you are selling. You may be unable to answer all of these questions but we hope the extra information will help you as well as some of our other articles.
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Do you have a competitive advantage or unique selling point? This could be something like an exclusive product, a product not sold online, products available to you cheaper than your competitors? You need to have some reason why people will buy from you and there are a number of ways you can do this; it can even be a mixture of advantages not available elsewhere such as being the only site to offer a particular product to offer next day delivery and to offer gift wrapping. It could also be something very simple such as having a quicker and easier site to use than your competitors
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Is there demand for the products you are going to offer, or more importantly sufficient demand at the price you can offer to break even? New products can be particularly difficult as can your own products to predict without carrying out research. A lack of competition can be good but can also indicate a lack of demand. Another potential pitfall is to research and find that there is demand for a product but not check what people are willing to pay and find your unable to make sales at a profitable price.
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How will you promote yourself? Will you depend purely on online promotion? Bricks and Mortar stores with an online store as well will have an advantage against purely online stores because of the reassurance this will give customers but offline promotion can help purely online stores seem more reputable. Also offline promotion will help you reach a slightly different audience. Your decision should depend partly on your target market and of course your budget, online promotion can be very good value if you use it effectively and much of it is purely effort driven.
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Will you hold stock or depend on Direct Despatch where suppliers will send products directly to your customers? (at a cost). Most suppliers don’t offer Direct Despatch and issues of Direct Despatch include the charges which can be expensive, you have to rely on suppliers keeping you up to date on low stock and product discontinuation, you may be unable to send out products on next day delivery, you will need to rely on your suppliers to send products out quickly and be easy to contact. However there are of course many costs in holding stock especially if you only have an e-commerce site,the main costs being space and having money tied up in stock there will inevitably be an opportunity cost to this and a risk that your stock may not sell or will lose value.
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Will you offer a high level of customer service for at least 9 to 5 Monday to Friday or try to get away with shorter hours or relying on e-mail? Having a customer service number gives security to shoppers online and you may lose sales where customer have questions they want answered quickly.
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Will you sell to your country only or sell continent or world wide? Of course many e-commerce stores start aiming at one country and then expand often starting with big markets such as the United States or countries with the same language. In the UK many e-commerce stores will also send to Ireland where the proximity means that postage costs don’t make products uncompetitively expensive.
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Will you use an off the shelf website or have one designed to your needs? The most obvious difference is the price, bespoke websites can be very expensive but some level of bespoke design can be bought for less than you might think from designers who reuse some of their code but can add to it. A bespoke site can give you some uniqueness and be designed to suit your target market, for example if you are aiming at a group who are likely to be less experienced web users you may want a very simple website. Off the shelf sites do often have the advantage of free upgrades to the software and generally follow accepted web design concepts meaning the site will work in a way that customers are used to from other sites, for most customers this is a good thing of course and usability should be top of your priorities in almost any case.
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Which payment provider will you you use? Paypal is simple, a well recognised and trusted brand but also fairly expensive plus transfers to your bank account are slow and you are likely to have to keep a reserve in your Paypal account. Your Bank is unlikely to provide you with web payment services unless you have some history of trade with them. Worldpay is another option as is Google Checkouts which is similar to Paypal.
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Who are your competitors? Some of your competitors may be very obvious, people with the same or similar products. However these competitors may not be as important as you think if they are aiming at a different market, for example you may be aiming products at the gift market where a competitor may be aiming at the homewares market, they are a competitor but then so is a site selling different products but also aimed at the gift market especially if they are at the same price, using similar promotion or suitable products for the same end user.
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Are your products suitable for sale online? This breaks down into three main questions, firstly will it be practical to post them? They may be fragile, heavy or large making postage very expensive, though from experience some products surprise you, consider the potential postage cost as a percentage of the retail price, products that are cheap but expensive to post are the biggest problem. Secondly consider whether they are products where there is likely to be a large number of returns such as clothes, especially shoes, you may have to refund costs including postage costs and you may end up with excess stock especially after Christmas when items have been returned. Thirdly how easy is it to view the product online; some impressive products may not appear as impressive online and some products may have more of the value in tactile rather than visual qualities. Using multiple pictures, videos and interactive 3D images can help here. Descriptions can help but often if the main images doesn’t impress: people will not consider the product any further.
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Also make sure you are aware of the Distance Selling Regulations in the UK or the equivalent for your country or area and understand what they require of you. Your duty to accept returns for example may effect your potential costs.
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Pricing Strategies from the multinationals that can be used in your business and any business
1, Price Skimming using a Premium product: Hardback Books.
Price skimming is a strategy used by many producers and retailers, as is charging a premium for a premium version of a product and the two are often used together. This is the case with book publishing and a way to avoid under-charging those who will pay more.
To the consumer electronics industry they are known as ‘early adopters’, those who want a product as soon as it comes out and are not very Price Sensitive, meaning they are less affected in their buying decisions by price. They exist for publishing as well and probably do for your products, in publishing there will be those people who want a book as soon as it comes out and often this will be the hard back version., for example many Harry Potter fans will buy the book when it comes out without considering the price.
Which may be 15.99 for the Hardback with the soft back coming out later at between half and two thirds of the price.
The fact that they are buying a premium version of a book, the hard back rather than the later released and cheaper soft back, has two main advantages. Firstly it helps the buyer justify the extra price for buying the product early whereas if they could get exactly the same thing six months later at a lower price they might not be able to justify it. Secondly charging a high price for a product at launch and then drastically dropping it can make a consumer feel they have been coned and affect their feelings towards a brand the extra perceived value of the Hard Back means they consider it worth more than the cheaper paperback, although the extra costs to the publisher will be a few pence.
With the skimming strategies used elsewhere, for example with electronics prices for the same or very similar products can drop drastically for example early flat screen TVs could cost amounts in 5 figures whereas now you can pay less than £500 for a comparable or better product. This stops many being early adopters who wait for the same TV to come down in price. Offering a slightly different product, even if it is just a cheap to manufacturer hard cover, a limited edition colour variant or a free goody bag, can avoid this problem.
If you are launching a new product think about using price skimming where those who are not price sensitive pay more for being early adopters, this obviously works best for products with some uniqueness to them, for example if you have a product such as a piece of software which can save time for those using files on different computers, some professionals may see the value instantly and be early adopters who will not be concerned by a high price, others may expect the price to come down or expect competitors to offer similar software cheaper in the near future, by making the initial product a premium version with extra features and showing a normal version to come soon this may negate this problem.
This strategy can work for services as well, for example if a Tanning shop has a new spray tan booth and it is the first of its type in town many customers will want to be among the first to try it for prestige reasons as well as out of interest. With the tanning lab you could offer an extra to make it seem more attractive at a high price such as a free robe for every user during the first month.
Please let me know your thoughts on this article. Next time:
Offering great value prices without damaging your brand with lessons from Pizza Express.
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Pricing Strategies from the multinationals that can be used in your business and any business
Article 4 Penetration Pricing: Not for everyone the inherant risks and what to consider
This Series of articles has been aimed at showing how small businesses can use some of the same pricing strategies as the big multinationals, in all cases the strategies may not work for everyone but this is particularly the case with this Pricing strategy: Penetration Pricing.
Penetration pricing though certainly is used by those who can afford it and if you are competing against much bigger companies it may be as well that you are aware of this tactic and can keep an eye out for its use.
Penetration pricing is an offensive strategy and I don’t mean that it offends people, though it might, but that it is about attacking a market and carving out a share usually at the expense of competitors sometimes even to specifically remove competitors, at which point it becomes predatory pricing which the office for Fair Trading may have something to say about.
As a new company or with a new product or service in a new market Penetration pricing may be right for you, you see it all the time, often as an introductory offer and this shows Penetration pricing in its simplest form, a company launches a product and sets the price to say 99p to make it cheaper than its competitors though its normal retail price may be say £1.99 and this is usually shown, partly to show that it is a more expensive product and to show people that they are getting a good deal, this is often enough to make people switch from their usual brand at least to trial the product which they may also have seen advertised backing up its credentials. The hope is that people will prefer the product and continue to buy it when it goes back to a normal price therefore taking market share away from people’s previous preferred brand. So the first thing to consider if following this method of using a short-term introductory price is whether your product is good enough that people will switch to it long term otherwise it can become an expensive failure if people buy your product while you’re making a loss on it and then don’t continue to buy it once the price goes back up.
However there is another advantage that shouldn’t be ignored, getting distribution, shops particularly big supermarkets will expect some kind of special offer before they will give you shelf space and may expect regular offers to keep your products on the shelves, they will also expect you to absorb most of the costs so they still get a good margin though you may be making a loss; again if you have done your research and know that people will continue buying your goods then the supermarket will probably continue stocking it if having your products on the shelves is bringing in a better profit than a competitor’s, it is most obvious with supermarkets who have tremendous power but the same goes for a local cornershop looking to make as much profit as they can from their limited space.
Getting into penetration pricing can turn into a price war with competitors so know who your competitors are and know how deep their pockets go, of course if you are only looking to grab a small part of a big market you may be ignored but if you are competing directly with a competitor consider what will happen if they can keep their prices lower for longer, this is most likely to happen in a oligopoly or duopoly, for example lets say that in a small town there is one fish and chip shop with a monopoly they can therefore charge prices that give them a good margin and are making great profits (known in economics as supernormal profits), a local businessman becomes aware of this and opens a second fish and chip shop and charges 50% of his competitor’s prices to encourage people to try his fish and chip shop if his product is just as good then in theory everyone will come to the new shop though there may be some less price sensitive customers who find the first shop more convenient or are loyal to the owner, either way though the first shop’s owner has to drop his prices to the same or lower than the other shop even if this means making a loss and soon you have a price war where each shop owner is desperate to put the other out of business before they are put out of business themselves so if you really want to start a price war make sure you can finish it, of course if you can then the supernormal profits of a monopoly may await you as may a review by the OFT if your big enough to be noticed. In some cases a price war can end in a draw, with the Supermarket bread-wars of 1999 Bread sold as a loss leader got to as cheap as 7p per loaf as supermarkets battled to get customers through the doors but eventually this came to an end and prices slowly began to rise again.
In the US Wal-Mart aimed to get people into their store by selling a gallon jar of Pickles for $2.97 but it was the pickle manufacturer Vlasic who suffered as Wal-Mart pushed their margin down further and further. Having become reliant on Wal-Mart they had no choice but to carry on supplying and came out the other end with a devalued brand and later, with other contributing factors, ended in Bankruptcy proceedings; so be aware that penetration pricing may get you the distribution you crave and a deal with a major retailer but are they going to be happy when you double the price and force them to slash their margin or put up the retail price.
At this point you may be wondering why I am even telling you about Penetration Pricing seing as I seem to have such a low opinion of it I do hope to protect you but you may be well suited to using penetration pricing, as I mentioned if you are entering a market where you only need a small share then it may work for you and not lead to a backlash from competitors as long as they don’t see you as a major threat. Short Term Penetration pricing which is marketed as such is also less likely to rile competitors as it is only a short term problem for them and it may be the quality of your product they are more concerned about.
Free samples are in a way a type of penetration pricing and unlike with changing the price of a product it is alot easier to control the quantity of free samples, people won’t expect you to have an endless supply, though using a limited time offer for a product or service at a lower price can also help control your exposure to loss. Free samples are easy to try and withdraw whenever you like as long as you don’t make a commitment to a certain number of free samples, though this is a good call to action, if its not working for you and people are just getting what they can for free then stop it. Free samples work great for services as well often when there is little opportunity cost, e.g. free consultations at a time of year when business is slow and you have lots of time to spare.
Penetration pricing isn’t purely for new market entrants, established companies may bring out new brands or variants and use penetration pricing on them, for example a washing Detergent maker may have a product which has a new formula and penetration pricing may be used to encourage people to try the new version more often than not this, a reason why a product or service is worth giving a try when you haven’t before or have moved away from it before plus a low price can be a winning combination you may even be able to get some PR off the back of it so think about how your products or services can be easily improved, be it better materials, quicker delivery or turnaround times or the fact that you or your staff have just been on a course and can now offer a better service.
Penetration pricing is about quickly getting a foothold in a market, so what if it is a brand new market with no competitors? if you have unique products or services then you may be able to set your prices high if the benefit is obvious, try reading more about price skimming in my other articles, however it may be that you still need to get people to try a product, Calgon tablets help to avoid limescale build up in your Washing Machine and Dylon’s Colour Catchers stop your colours running in the wash but both used introductory prices to get people to try the product and give them the chance to see that they worked but with a lower risk. With unique products you must also remember you are still competing for a customer’s limited cash against other unrelated products particularly if it is a luxury it may be that you are offering a new fun but non-essential gadget then you may be competing against other gadgets aimed at similar demographics or even against things like a night out which people could spend their disposable income on. Think about limited time offers and other calls to action to encourage people to make the most of your cheap price and try and make your offer seem like good value.
When choosing a Price for market penetration you will not want to set it any lower than necessary but remember that you need to make it worth while for a customer to switch to you because if your product or service turns out to be worse they can loose out you need to lower their exposure to risk sufficiently, test marketing can help you set a price in some cases and there are many reasons to test a product or service on a small market before a full launch. It may be that you don’t actually have to make a loss on your products or services when setting a penetration price at least not on the cost of goods but if you do it is best to consider them as Promotional costs and consider if the money would be better spent on advertising, or another area of Marketing spend.
Fishman.C(2003) http://www.fastcompany.com/magazine/77/walmart.html
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Pricing Strategies from the multinationals that can be used in your business and any business
Article 3 Using Multiple Brands at different Price Points: with examples from Sony, Ford and Tesco
This article is mainly concerned with using different brands or sub-brands at different Price Points in order to capture different sectors of a market.
Within a company there are often various brands: some of which may be related and some of which may have little relation such as at Procter and Gamble who have diverse brands including Pringles, Duracell and Gillette, there may also be sub brands such as with Nivea which includes Nivea for Men and Nivea Lip Care ranges.
Separating brands out within a company’s range has advantages but there are also advantages to having a number of brands associated or using the company’s name as a brand covering all the different brands it has.
Which option to use depends a lot on the similarity of the products, the different brands that Procter and Gamble have don’t necessarily benefit from the same brand values. Many of the brand values associated with Pampers nappies may have no value or become negative when associated with Pringles crisps. A company such as Heinz on the other hand which just produces food has brand values associated with the Heinz brand which add positively to the whole range.
One area of a brand can be the associations with quality and value that it has and therefore the brand can affect the perceived value and quality of a product upon launching a new product; for example a range of Heinz sauces, can by using the Heinz brand instantly communicate to the customers that the sauces will have the same high quality as the rest of the brand and they can therefore command a higher price. This strategy works very well assuming that this new product is as good as the rest of Heinz’s products however if the quality was lower than customers expected this could damage the entire Heinz range of products as people would start to loose the assumption that all Heinz products were good quality.
In some cases a company may want to have some products which are lower quality on offer and different companies approach this in different ways in terms of how they brand their product.
Our first example is from Sony, the Sony brand is known for being very high quality and all products branded as Sony are kept at a high quality to maintain this brand value, they therefore can continue to ask premium prices for Sony products. However the premium end of the market for electronics is only a certain size and is competitive; the middle and cheaper end of the market is valuable so when Sony took over Aiwa which was already more of a volume producer they kept it aimed at a different point in the market, the products weren’t as good quality and weren’t usually as advanced and featured, they tended to be of a good quality still though, and were aimed towards the middle of the market in terms of price points and quality. In the 2000s Sony’s own brand started to be less defined in order to be more competitive across more sectors of the electronics market and Aiwa suffered from poor sales it is likely that a more overt association with Sony would have boosted sales of Aiwa products but Sony avoided this worrying that it would damage the Sony brand and also perhaps cannibalise sales.
Ford Motor Company uses a similar strategy and owns several car brands; in the United States Ford has three separate brands: Mercury, Ford and Lincoln.
Mercury was setup in 1939 when Ford had already bought Lincoln which had become its luxury brand with Ford in the middle and Mercury originally as an entry level brand, their separate marketing aimed them at different market sectors. Since the 30s and 40s each brand has developed to some extent separately keeping separate brand identities with Mercury becoming a ‘near luxury’ brand with Ford aiming more at a lower priced area of the market.
Supermarkets such as Tesco take a different approach to having brands at different price points and use their main brand across all own brand product but also have sub-brands with different associations in terms of the price and quality customers expect from these brands.
Tesco have three main sub-brands aimed at different price points they are the Tesco Value range at the cheaper end of the market, the Tesco Finest range at the high end of the market and then standard Tesco products which have no specific brand name but simple carry the Tesco brand name. All three are established and regular Tesco customers know what to expect from each range, often there will be products with three variants one in each range. Tesco carefully manage all brands to avoid damage to the main Tesco brand where one major brand value is ‘Value for money’ therefore products in all ranges must be good value as well as meeting a minimum level of quality even within the Tesco Value range, where the product will be fit for purpose and aimed to meet the expectations of the purchaser who will be conditioned by the price they have paid.
Supermarkets such as Tesco with their value and finest ranges and Sainsburys with their basics and Taste the Difference ranges mean that customers are now used to having options from the same business but at different price points, this means that if within your business you market a ‘Simple Quality’ or ‘Cut above the rest’ range customers will know what to expect therefore the customer can easily select the product they want based on what they need and can afford, a customer coming to your shop and looking for, lets say in this example, high quality velvet curtains upon seeing basic cotton curtains marked up as ‘our value range’ will understand that that is at a separate price point rather than assuming than the shop they have walked into offers poor quality items at low price, likewise the customer looking for basic cotton curtains won’t walk into a shop and assume it is aimed at people looking to spend more than them if they understand that the expensive velvet curtains are part of a more expensive range.
Having different ranges then works well if your primary brand value is Value for money but if your brand is all about low cost or is all about very high quality and high costs but you want to move into another section of the market then having separate brands may work for you though you may not benefit from the same economies of scale and some costs such as promotion can double. If you have a shop or other retail establishment it may be necessary to have two premises for two different brands.
In Eastbourne, Sussex, where Trig-Point Marketing is based, there are two restaurants next door to each other: both Italian restaurants, one aims at the lower to middle of the market in terms of price the other is more up market however both have the same owners and a shared kitchen. The clientele are different however expecting different quality food at different prices, there is therefore in this case little cross over or cannibalisation of sales between the two and the two brands can share costs still, therefore this strategy works well for them. Having two separate brands would also be likely to work well for manufacturers who can produce similar products in the same factory but aim them at different points in the market using different brands at different prices.
In the case where there is little saving in having two brands under one company the case for using this strategy is diminished but can still be a good strategy if you are an expert in a field and would like to help yourself to more of the total market without damaging what you already have.
This article was written by Dave Cousin of Trig Point Marketing Consultancy-helping you take a step back and look at where your marketing strategy is taking you.
Next time: Pricing low and charging for the extras: with examples from Easyjet.
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Dave can either spend a day with you at your company giving you specific advice to suit your business or we will be holding a seminar in the near future where Dave will aim to give you the information you need to go back to your organisation and roll out a culture of everyday promotion by all.