In my post What Drives Your Pricing? I stated that businesses are much better off using a strategy-driven pricing model. To explain that better, let us first look at the relationship between supply, demand and price. When the demand for a product goes up and the supply goes down (or stays the same), chances are the price will go up as well. The price point at which the supply and demand curves intersect is called equilibrium pricing. The goal should then be to identify the equilibrium pricing and develop ways to go beyond that.
Businesses can generally control supply, but demand is dependent on a lot of external factors. Here we will focus on how to understand and leverage those external factors and generate demand for your product that will fetch premium pricing.
Studies show that customers buy products because they want to get a job done. While the traditional marketing approach of categorizing customers by age, gender, ethnicity, income, etc., are still relevant, other factors are becoming increasingly important. Businesses trying to launch new products should know about these factors. Today’s tech savvy customer has various ways and resources of getting information, and he will know a lot more about his choices in the market long before before making a purchase. She may also want to identify the products she purchases with her own personality and values (organic, fair trade). Today’s customers (regardless of age, gender, ethnicity) have a different kind of relationship with businesses than they used to, and have little time or use for loyalty if businesses don’t listen to them or ‘speak to’ their needs (push selling is out, pull buying is in). To compete in this market, here are at least four things businesses can do to launch a product successfully and retain customers.
1. Provide a Solution to an Unmet Need
- Creating top demand requires that the product solve a customer’s problem better, faster or cheaper (or all three) than any other product currently in the market. Customers will constantly analyze, compare and judge your product against your competitors’, and it’s her decision based on her assessment that will determine your product’s sustainability in the market. Product features, for example, are irrelevant if they don’t solve a customer’s specific problem.
- Determining an unmet need in the market to create a new product, however, is difficult and often tricky. Many products had failed in the market simply because their timing was not right or the peripheral infrastructure needed to sustain the product, was not there. For example, while personal computers (PCs) have been in existence for some time, early PC users were scientists, engineers and programmers who had to write their own programs, sometimes lacking an operating system, to do anything useful with those machines. Not until the 1990s did the modern PC come into widespread use when users began to have access to application software, digital media, the Internet and a wide range of other resources. Timing is critical!
2. Provide Access Through Multiple Points
- Leverage social media appropriately, but be consistent. Having a person in the organization whose only job is to create, maintain and actively promote on social media is money well spent
- Create a web portal for your customers with mobile applications so customers can access your products and information at a time and place of their choosing.
- Broaden your network with partnerships – get on Angie’s list, sell through Amazon
- Communicate new product plans often and appropriately with ‘Coming Soon’ campaigns.
3. Give Customers a Sense of Value and Belonging
- Emphasize environmental stewardship. It could be as simple as taking a leadership role in recycling efforts (go paperless) to more involved initiatives such as on-site wastewater treatment for non-potable water re-use and generation of process heat in a processing plant.
- Have a presence in the community. Volunteer work, food and clothing drives and awarding scholarships to students in local schools will get you a lot of support from the community. These do not cost a lot of money, and small businesses can easily do them.
- Publicize fair trade if you have a supply chain that practices it – look at the success of Trader Joe’s and Starbucks
4. Educate and Inform
- Retailers are the face of your business to customers. Visit them often, solicit and act on their feedback. Educate them, inform them and treat them as your business partner, your equal, and they will become advocates for your products
- Create a ‘community of users’ by sharing information, soliciting and acting on feedback. Great ideas for innovative products often come from external sources.
- Every business has a story to tell. Share those stories in different forums with your customers and create brand ambassadors.
- Conduct free training, classes and ‘demo days’.
These are actions that any business, regardless of its size, can and should take. As I mentioned in the beginning of the article, pricing and profit are inter-related and demand is a primary factor influencing pricing and profit. The steps described above will not guarantee success, but will go a long way to position your business to succeed.