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Escaping the Commodity Trap

Pricing is an important part of any product strategy. As such it should include not just the price of a unit of whatever you’re providing but the total cost of acquisition. That is, price includes costs of searching, acquisition, waiting time, and whatever else comes between desire and fulfillment.

The assumption in rationalist economics is that lower prices ceteris paribus (to borrow another fiction from economics) will increase demand. Perhaps – if your product were a pure commodity. If you’re providing, services, software, sugar cookies, or almost anything else; neither low nor high pricing is obviously correct. Pricing implies attributes of your product, which you do not explicitly state.

I had time to ponder this recently while waiting in line at a bagel shop. Bagels are hardly exotic. Their very fbagelamiliarity, like pizza, ice cream, and smart phones, allows for endless debate. Needing a couple of bagels and already being in lower New York City of a Sunday morning, why not stroll an extra half mile to semi-famous Black Seed Bagel shop.

The unassuming space was perhaps 20 feet wide, but easy to find by the queue outside. Behind the counter was a table strewn with bagels and behind that two large ovens. Diners hunched over the few high tables in the dim dining area. Most just stood where they could squeeze in waiting for their numbers to be called, so they could pick up their sandwiches and leave.

Having to wait in line does afford chance for stray conversation. The two twenty-something women in front of us assured us that these bagels were worth the effort. After getting to the head of the line, I asked for “multi-everything bagel,” only to be told they were out of them. I settled for a sesame and a multigrain.

The clientele were not here for a bargain. My survey of a dozen providers around Boston and New York found a median price of one dollar. At Black Seed, they cost $1.50. At the current New York city minimum wage of $8.75/hr one could add $3 to the total tab for waiting time or perhaps $3.00 per bagel. That afternoon, we stopped at the venerable Zabars on the upper West Side. The wait was minimal and the bagels $ .95 each.

Were Black Seed’s “better?” Back home over a late supper of smoked salmon and bagels, we did a taste test. Zabars beat Black Seed and local standard Rosenfeld’s. Black Seed’s multigrain bagel, in the picture, was airy in the sense that it had extra empty space. This “benefit” both reduces calories, provides transparency, and allows you to see what’s in your sandwich.

De gustibus non est disputandum, but the Black Seed experience was distinct. In contrast, the nearly frictionless transaction of buying bagels at countless other places seems immediately forgotten.

Whether Black Seed’s physical product is superior or its cafe’s inviting is, of course, irrelevant. Through social media, a superior online presence, and inspired marketing It has escaped the commodity trap.

As an anonymous bard might have phrased it:

As you wander through life
Whatever be your goal
Keep your eye on the bagel
And not upon the hole

Google Moves the Goalposts – this time for the better

If your organization ranks well on Google, when visitors search on terms relent to what you do, congratulations. But not for too long. Google periodically tweaks its algorithm. Overnight, your high ranking page can be sent back to the Minors.

A sudden demotion in search rankings frustrates and angers some site owners. Sometimes Google’s ranking changes may appear arcane or arbitrary. Its latest change on April 21st makes sense.

In essence it says that if someone searches from a mobile phone, pages in search results, which do not render well on a mobile device, will be penalized with a lower rank.

Not rendering well includes a multitude of issues from a page requiring lateral scrolling to menus spilling off the screen. In the parlance of web design, such pages are said to be unresponsive. Unresponsiveness reduces the effectiveness of a page. Now it also reduces its search rank.

As a start, try viewing the pages on your site from your own iOS or Android phone or tablet. You might be unpleasantly surprised by what you see. Even if the site works OK on your particular device, there may still be problems with some of the scores of gadgets your clients are using.

A convenient way to check is with Google’s “Mobile-friendly” test page.  You just enter the URL of a page you want to test. If the page, such as the one you’re reading now or, say, on a well know site such as intel.com, pass, the test responds with a reassuring
Awesome! This page is mobile-friendly in go-ahead green type. If not, you’ll see a curt Not mobile-friendly in red, a list of errors, and suggestions for designing a more responsive site.

Firms, which ought to know better, such dell.com, had problems on the mobile-friendly test. Firms, with really busy pages, Home Depot comes to mind, nonetheless passed.

Thus Google gives yet another reason for your site to have a responsive, mobile-friendly or even mobile-first design. In southern Africa, where I’m writing this, mobile is the dominant mode of online access. As a recent Pew study reports – mobile is a growing and for some segments the dominant mode of Internet access in the U.S. See graphic below.

 

7% of Americans Rely Heavily on a Smartphone for Online Access

In both B2B and B2C mobile is where your customers are. Have you checked the mobile-friendliness of your site lately?

Say It Ain’t So

CLIO is an organization of advertisers, by advertisers, and for advertisers to give awards to advertisers promoting advertising. This is much more efficient than independent bodies debating whom should be honored, such as the Nobel Prize Committee

Clio awards honor many categories of ads in many media. This year it gave a “general” award to comedian and sometime ad pitchman Jerry Seinfeld.

In his mocumental acceptance speech, Seinfeld praised advertising because he “likes lying.” He goes to summarize the classic criticisms of marketing and advertising – deception, vulgarity, crass materialism, and value distortion. If you’re a marketer,  you know the rest. As marketers, it probably helps, if we say it first. In an ad driven world, where the purest of politicians competes first on fund raising, what’s a little lying?

Beyond Like

Micro-payment mechanisms, such as Bitcoin, have gotten a lot of media attention recently. In practice it is still relatively expensive and cumbersome to receive small sums. Processors typically charge both a percentage of the payment amount and base charge, such as $0.30 per transaction. iTunes, with its huge volume, can make good money on transactions of $.99  or even less – you can’t.

Why might you want small payments? Many content creators, bloggers, givers of advise, sketch artists, want-to-be app developers, not to mention candidates, causes and charities, don’t get enough $10, $25 or even $5 checks. They may get more, or at least something, by asking  less  if there were a convenient way to gather small payments.

If your browse-by visitors think your minimum contribution is too high and so contribute nothing, what can you do? You could still ask for a Facebook Like. A Like is better than nothing, but it doesn’t tell you much or pay for a beer to cry in. Suppose, however, visitors who do not open their wallets, could at least open their spare change purses and give a few cents or a small amount they set themselves. This would not only provide some marginal revenue, while you’re refining your offering or business model, but also valuable feed back on relative preferences and price points.

An intriguing new service promises to make it easier to “show a little loving.” It’s called appropriately douluvit (www.douluv.it). Users of the service can embed “lüv” icons Screen Shot 2014-08-17 at 8.13.42 PM by any item on their site. When visitors click on the icon, they see a range of options specified by the site owner. For example, the campaign could request contributions of say 2¢, 10¢, 25¢, or  whatever the visitor wished, if she found an article helpful.

At this point in the campaign, any responses are non-binding pledges. Once a given visitor has accumulated $10 in pledges, she is required to make an actual payment by credit card. After a site has accrued enough paid donations, douluvit pays them less a 10% commission.

In effect, Douluvit aggregates mini and micro payments such that they can be made efficiently. This free service deserves more than a Facebook Like. It deserves a look.

A Legend in Its Own Mind

Apple (née Apple Computer) has been doing some high priced promotion to celebrate the thirtieth anniversary of its Macintosh computer. Double page ads with pictures of original and contemporary Macs recently ran on successive days in the New York Times, The Wall Street Journal, The Boston Globe and many other vehicles. The commemoration took over Apple’s home page. Apple acolytes can watch an infomercial featuring almost famous-like types, whose lives were made richer, fuller, deeper, and more transcendent when they got a Mac.

The promotion has all the trappings of a major new product launch, but without the new product. Reruns of greatest hits do not equal great marketing. Taking a trip in the Way Back Machine to 1984, was the original trans-luggable Mac such a success that it should be celebrated today?

In 1984, Ronald Regan was in the White House, but computers were not in the houses or offices of most people. Personal computers, even “portables,” were heavy and expensive. They made up for this by doing relatively little. Out of the box they did nothing but show a blinking cursor on dark screen of a CRT monitor. If you wanted apps with that, an extra $500 or so would get you a spreadsheet or a word-processing program. For some hundreds more, you could get a dot-matrix printer to make an ugly printout of an ugly screen. In other words, the bar for a superior product was none too high.

Even compared with this modest baseline, the early Macs were works in progress. Their implementation of graphical computing ideas borrowed from Xerox PARC was slow. Drag the mouse, and wait for the system to catch up. The original Mac was underpowered, overpriced, and not positioned toward a market, which valued its potential enough to pay a premium for it.

Apple had the graphical computing field essentially to itself at least until mid-1990 and the release of Microsoft Windows 3. With the Microsoft two button mouse, Windows became the first viable mass-market graphical computer system. By then the Mac was a more robust product, but could not sell enough in either the home or business markets to avoid losses. The company suffered near death experience in the mid-1990s, when it fired Steve Jobs.

Apple rallied and survived, yet its later dominance was based on its consumer electronics – music players, tablets, and phones – not computers. This is not to say that Apple isn’t doing well in computers. Gartner estimates that Apple achieved a share of 13.7% of US PC shipments, though in a shrinking market.

In its most recent quarter, Apple derived more than five times the revenue from phones as from computers. This shift has been happening for some time such that in 2007, the company formally changed its name from “Apple Computer” to just “Apple.”

What Have You Done For Me Lately?

The contemporary Mac is a good, if rather expensive, computer. I’m writing this post on one. Moreover, Apple’s OS X software is arguably superior in a number of ways, such as less prone to crashes and viruses. Yet this is old news. Over the last, say, half dozen or more years Macs have not improved significantly, though they have gone through a number of cosmetic changes – all in silver, a bit lighter and thinner, and slightly sharper graphics.

Rather than celebrating a thirty year old footnote, Apple might better use its resources to reinforce what they have done for us lately – even if that means actually doing something for us lately.