Read about the Power and Beauty of Design in the new Pragmatic Marketer

Chances are you’ve downloaded an updated user interface for your phone or bought a super-cool piece of software that promises amazing functionality. There’s just one problem: The interface isn’t intuitive and you can’t figure out how to use it. Adding to your frustration level: You can’t find any directions. And if there are any, they read like a soulless robot wrote them. Lackluster user experiences (UX) like these illustrate why a product’s UX can be a key differentiator in winning the hearts and minds of customers.

Design matters. It involves much more than a product’s look and feel. It encompasses the power of the user experience, the beauty of solving problems for customers in ways they never dreamed possible. And it influences your opinion about a product and the likelihood that you will become a repeat customer.

The summer issue of Pragmatic Marketer delves into the power and beauty of UX design. Our articles explore everything from how UX integrates with the rest of the product team, to how usability tests can reduce your risk of product failure and how in-app guides can improve your product’s UX. There’s also a case study about how UX transformed a financial company’s core product. You’ll find plenty of actionable tips and best practices you can implement immediately to win the hearts and minds of your customers. Read it now!

Pricing in Channels – Channel Partners Are Customers Too

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The August box of the month for Pragmatic Marketing is Channel (training and support).  Pricing through a channel is critical to the success of your product and your company.

There are many types of channels, but for simplicity in this blog, let’s say a channel partner buys your product at a wholesale price and resells it at a retail price.  Of course there can be multiple channel partners.  For example sometimes distributors sell to resellers.  What we will talk about today applies to every channel partner.

As we set our prices, the first price that matters is what to charge the end user.  This end user price must be based on what they are willing to pay.   Manufacturers often don’t get to dictate the end user price, but there are many techniques to influence it and in the end you need to predict what that price will be.  This is not your list price but rather what is often referred to as street price.  The price buyers typically pay.

Once you know your street price, next you have to decide the price to your channel partner.  Sometimes you actually set a price, but most of the time you set a margin for what you expect your reseller to make.  In the end it’s the same thing.

Here’s the important point.  Your resellers get to decide whether to sell your products or your competitors products.  They make that decision based on how easy the products are to sell and how much money they will make.  In other words, you can often influence resellers to sell your products over your competitors by giving them a bigger margin.  Think of your resellers as customers.  They get to decide which to sell just like your customers decide which to buy.  If both aren’t happy, you don’t make the sale.

A seemingly common attitude of executives at manufacturing companies is they think their resellers are making too much money.  I’ve worked with many manufacturing companies whose executives want to squeeze the margin from their resellers.  They forget that resellers have choices.  Some big choices, like whether or not to carry your products, and little choices, like which product to push when a buyer is looking for a solution.

As a general rule, when you give more margin than a competitor to a reseller, that reseller will push your products more and vice versa.  In fact, if you think of your retailer as a customer, each decision they make they are trading off their benefits vs. their costs, just like your end users.

Put yourself in the shoes of your channel partners and see what choice they would make.  They may take less margin if your product has a great brand reputation and is easier to sell.  It may require more margin if you’re trying to break into a market and want your resellers to actively push your products.

Suddenly an old adage comes to mind … You get what you pay for.  If you don’t pay your channel partners well, they won’t work for you.

A Reader Question – Pricing for Altruism vs. Profit.

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An email from a reader:
Hi Mark!
Challenger Health (info@challengerhealth.com) is a very early stage, non-medicinal consumer healthcare products startup; our core customers are physicians (Orthopaedic primarily) and physical therapy professionals. The most effective pricing model is something we have discussed at length, more specifically, if it makes sense strategically to price our products differently depending on whether the customer (doctor, in most cases) intends to resell to his/her patients or provide the products at no cost, wherein the former is charged more than the latter.
Thanks for your time Mark,
Patrick Grams
Thank you for the question Patrick.  Although it’s hard for me to give you a definitive answer, I’m leaning heavily toward YES! you should charge different prices based on how the doctors will use your product.
The most important rule for setting prices is charge what your customers are willing to pay.  It seems very likely to me that those who are making profit are willing to pay more than those who are giving it away.  Doctors who give it away are absorbing the cost themselves.  Those who are reselling it are passing those costs, plus a profit, on to their customers.
As to how to do this, consider setting your list prices at the highest price, the price you will sell to a doctor who is using this to make money.  Then, you can put together “Good Samaritan” pricing levels, for anyone willing to offer your product for free to their clients.  (Feel free to choose a better name.)  That establishes the value at the higher price and justifies the lower price.  Never lead with Good Samaritan pricing though.
You will then need to monitor your customers buying at Good Samaritan prices for compliance.  Hopefully there is a way.  One method might be to monitor the number of units they use per period.  It is likely that people giving it away go through many more than those selling it.
All that under consideration, it seems unlikely that Good Samaritans will buy your product and give it away unless you can demonstrate how it helps them make or save money.  Call me cynical, but people do things when it helps themselves.  If you can’t clearly articulate how this helps the Good Samaritans, you can’t charge much or you won’t sell much to this segment.
Hope that helps.  Feel free to post further clarification or questions in the comments and I’ll do my best to answer them.
Good luck

Money or Time – It’s Pervasive in Pricing

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I recently took up paragliding.  Awesome sport!  Once you’re good at paragliding, it’s pretty easy.  You fly a kite, take a few steps, take off, sit down in your harness and fly.  Awesome!!!  However, while you’re learning, it’s a lot of running, schlepping gear, untangling lines, oh, and a lot of waiting.

While running, schlepping, untangling and waiting, I would often think of a quote from Patricia Fripp, a world class speaker coach, that went something like this:  “When you’re early in your career, you have more time than money.  Later in your career you will have more money than time.”

As a 54 year old sweating, panting, exhausted man who has more money than time (or energy), I kept wondering why my instructor didn’t have an “elite” training package.  I would have paid more to have a program with less schlepping and waiting (the running I had to do and the untangling I had to learn.)  My instructor could have segmented his market.  (Of course I don’t know how big the market is for out of shape old people who want to learn paragliding.)

The more I obsessed on this, the more I realized this concept of money vs. time is pervasive in pricing.  People with little money and lots of time are very price sensitive.  They spend time searching for the best prices, the best values.  They check different distribution channels.  They use coupons if available.  They wait for sales.  They search the Internet for tips on how to buy at the best price.

People with more money than time don’t do any of this.  They decide what they want then buy it.  Of course they want to pay a lower price but they aren’t willing to put in very much time or energy to make this happen.

This same concept holds true during negotiations.  As a general rule of negotiations, the most patient person wins.  People with more time can be more patient.  People with less time (or patience) tend to pay more.

In B2B businesses, when your customers have “use it or lose it” budgets, they are time sensitive, impatient.  They may not want to pay more, but they will.  They should be paying more.

Think about your customers.  It’s very likely some have plenty of time without much money, others likely have plenty of money with little time.  You should think hard about how to charge one group more than the other.

 

Photo by Thomas S

Product Launch 30 Day Plan – Week 2

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In Week 1 of the Product Launch 30 Day Plan the focus was on the most basic product launch information. In Week 2 you will gather more information, assess your organization’s strengths/weaknesses, and organize a cross functional launch team.

After Week 1 you have the following completed:

  • Defined product launch goals
  • Established product launch priority
  • Refined target market segments
  • Chosen product launch strategies to support the launch goals

I suggest you complete the these deliverables before continuing Week 2’s assignment. It’s OK if it takes longer than a week to complete Week 1’s deliverables. It’s better to complete the deliverables from beginning to end before continuing with Week 2 of Product Launch 30 Day Plan.

Understand Your Buyers

Who are the people you need to achieve your product launch goals? These are the people who need to take an action you want. They are people who are within your target market segments. The tool used to represent these people is a Buyer Persona.

The purpose of the Buyer Persona is to provide the launch team a common picture of a buyer. Much has been written about Buyer Personas so I won’t to go into great detail here (it’s also covered in the Pragmatic Marketing Market class). A Buyer Persona is a tool that reflects the most common attributes, behaviors, and concerns of an individual in a market segment. You want Buyer Personas to take an action that drives an outcome you are measuring.

Better knowledge of your buyers leads to a more focused use of resources.

Build a Compelling Message

You can do a fantastic job of understanding your buyers. Resources are squandered and money is wasted when you don’t deliver an attention-grabbing message.

On average you have 8 seconds to get the attention of a potential buyer. Technology companies tend to waste too much time talking about what their product does and not enough time talking about what it does for their buyers. Buyers become confused or misinformed, and move on to something else.

The key to building a compelling message is to grab a buyer’s attention fast and get them to engage. The way to connect what a buyer needs with product capabilities is through Marketecture. Marketecture is a technique taught in the Pragmatic Marketing Foundations class. The Marketecture for a product leads to a Positioning Document. The Positioning Document forms the basis of consistent communication with your buyers.

An example of Marketecture is on the Nest thermostat website. The Nest thermostat has a lot of cool technical features but they are not front and center. Their message focuses on what a Nest thermostat can do for you.

Now is a good time to build your Marketecture and produce a Positioning Document, if this is not yet completed. It’s also a good time to revisit your Positioning Document to reflect the final product.

Identify Launch Readiness Gaps

Product launch readiness goes beyond getting the product ready. Think about promoting, selling, delivering, booking revenue, support, professional services, customer training, and more.

Every organization has strengths and weakness that impact a product launch. Failing to identify and address the weakness could result in a disastrous launch. Different product launches also need different skill sets and resource. New weaknesses (gaps) emerge. You need to fix those  weakness before the product launch is launched.

Conducting Readiness Assessments is the tool to help you identify readiness gaps. Spend time with a representative of each affected functional area. This individual can represent the interests and concerns of their department. Work with that individual to understand what exists and what is missing. The Readiness Assessment tool (and process) is in the Pragmatic Marketing Launch class.

You are ready to organize your Cross Functional Team (CFT) once you identify your readiness gaps . You will understand the skills needed and how to focus your resources to ensure the best launch readiness.

Organize Your Cross Functional Team

It is not realistic to believe you could understand every job and every nuance within your organization. You need people who understand those jobs and important details. These are the people that become members of your cross functional team (CFT) for your product launch.

Assign the work of developing readiness plans for each functional area to members of your CFT. Each readiness plan defines the tasks and deliverables needed to get a functional area ready for launch.

It’s possible new gaps are found after going through the readiness planning process. You will also have a better sense of the level of effort and time required to completed the readiness plans.

There are books written about organizing and managing CFTs. I want to offer a few insights that will help you.

  • CFTs need a leader
  • Meet with a cadence
  • Meet as a team – you’ll miss big things if you meet one on one
  • Document everything – people forget stuff
  • Be patient but clear
  • Drive results, don’t wait for them to happen on their own

The CFT Team Tracker is helpful in tracking the activities of your CFT. It is available in the Pragmatic Marketing Alumni Resource Center. Click on the link and register to get access (note: for alumni only). Use the CFT Team Tracker to track assigned action items, issues, and team decisions.

Reassess Launch Goals

Now would be a good time to reflect on your launch goals. Given the gaps you’ve identified, are the launch goals still in workable? If not, are there more resources/skills/experience needed? Is there enough time to get your organization ready to launch?

If you have any questions about this post, feel free to put them in the comments section. It’s likely your question is relevant to other readers.

 

 

photo credit: Sunflower/calendar I via photopin (license)