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Archives for December 2016

Danger in Discounting

Posted on: 12.24.16 | by Matthew Kenney

Ask any marketing educator or consultant his/her pet peeve and you might find this is it: They dedicate careers to studying science of marketing and their advice to students/clients is ignored. This phenomenon is especially prevalent when it comes to the topic of price discounting.

Marketing practitioners — especially those in retail — often like discounting because they see a cause and effect. Drop the price of widgets from $200 to $100 and watch them fly. When sales volume is slow, discounting gets people into a store or showroom. This is just common sense, so who needs an egghead academic saying it will harm their brands and make marketing more difficult in the long-run? Many marketers don’t want to hear discounting is dangerous because they either don’t believe it or don’t want to believe it.

Well, the egghead academics are correct. Here is what inevitably happens. Companies generally cannot make a sustainable profit deducting 30-70% off a legitimate price. So what do they do? They raise the price and offer a deep discount on that inflated price. They are enticing some customers to buy while making it harder for the company to earn a profit. You don’t have a profit when you give it away via discounting. When companies start marking up only to mark-down it’s a sure sign of impending doom.

There is a place for discounting in the marketing mix, of course. Discounting is an effective way of liquidating excess inventory; introducing a new product; and capturing consumer attention. It can also be used strategically to squeeze competitor price-points and margins. Nobody who teaches the science of marketing will tell you there isn’t a place for discounting. What they’ll tell you is this: Don’t over use this tactic. Doing so may potentially destroy your brand and your company.

Discounting is the marketing equivalent of a 3pm cup-of-coffee. The caffeine boost gets you through the day, but doesn’t address the core issue of why you don’t have enough energy. Where we see too much discounting we often see a culture short on innovation and entrepreneurial thinking. We also see a need for more business education. The more marketers understand about marketing science the less dependent they become on discounting.

For example, study-after-study proves that price is not the biggest factor in the consumer purchase decision process. It’s not even near the top. Perceived value is the biggest factor. The mistake in practice is assuming a lower price increases perceived value. It often does not. If you see a sofa discounted from $899 to $599, for example, do you really think that sofa is worth $899? Is that jacket marked-down from $379 to $165 really worth $379?

If price had this biggest effect on your purchase decision wouldn’t your home and office be filled with the lowest-prices alternatives for everything? Why didn’t you buy the cheapest tires for your car? Why not buy the lowest priced linens for your bed, or the lowest-priced food for your children? Why did you have lunch at Panera and not brown-bag it? It’s because perceived value, not price alone, is what’s driving you.

Marketing is a science, which means actions have predictable results. Discounting is a dimension of marketing science, therefore there are predicable results. If your company is relying too heavily on discounting to generate sales you need to solve the underlying problems. Look at your value proposition, advertising and pricing. If consumers will not buy a product unless it’s discounted, your price is either too high or you haven’t convinced them otherwise. Marking-up prices only to mark them down is a bad strategy. Chickens come home to roost. Take a free tip from one of those eggheads who studies this stuff for a living: You cannot trick the market in the short-term and expect to thrive in the long-term.

(Copyright 2016. All Rights Reserved).

Five Ways to Remember More

Posted on: 12.19.16 | by Matthew Kenney

Did you ever see a textbook filled with highlighted passages? Of, have you ever re-read the same passage several times in an attempt to remember it? When it comes to learning….both these efforts have been proven ineffective. Many people believe highlighting and re-reading works because it seems obvious. Yet, the evidence doesn’t support it.

If these techniques do not work that means the information we want to retain will not be there when we need it. It matters not what we’re attempting to learn. Knowledge is like a savings account: We can only take-out what we put-in.

So, how do we make sure the information sticks in our long-term memory? Over a century of research on this topic suggests there are five proven methods. Due to space restrictions we’ll synthesize the findings below.

In Practice: 5 Types of Practice That Yield Results

One of the best ways to recall knowledge is called Distributed Practice. This is a process where practice is broken into a number of short sessions. Think of it this way: A daily five-minute sales meeting will likely be more effective than a 30-minute weekly meeting.

Retrieval Practice is also effective. This approach utilizes short quizzes or tests. The same premise applies: A number of small quizzes will be far more effective than one big test.

Interleaved Practice is where we blend topics. Thus, 5-minutes learning about a Product A and 5-minutes learning about Product B will work better than 10-minutes learning about Products A & B.

Elaborative Interrogation means that we should be asking ourselves as we learn: What is the purpose of this effort, and how will it be applied?

Self-explanation is a technique whereby we teach ourselves without any assistance. For example, let’s say a supply chain partner doesn’t provide any selling points to assist your efforts (which is common across industries). What do we do? We must figure it out. Business doesn’t always come with a playbook. Sometimes we learn effectively by relying upon our own common sense and talents. The key is to not rely solely on intuition if possible.

Reference:

  • Roediger, H. (2013). Applying Cognitive Psychology to Education. Psychological Science in the Public Interest. 14(1). p. 1-13.

Do Yourself a Favor: Re-Define Failure

Posted on: 12.06.16 | by Matthew Kenney

nolan_ryan_in_atlanta_croppedBaseball fans likely know Nolan Ryan, and many can correctly identify him as the all-time leader in strike-outs (having struck-out 5,714 batters). But how many people know he is also the all-time leader in walks? Those who like baseball stats probably also know he threw a record 7 no-hitters. Yet, Mr. Ryan also had a career winning percentage of only 52%.

Nolan Ryan lost nearly as many games as he won. Do you think he considered himself a loser after he lost a game? It is doubtful. What do you think Elgin Baylor, Patrick Ewing, Charles Barkley, Ted Williams, Barry Sanders, Fran Tarkenton and Jim Kelly (all Hall-of-Fame inductees in their sports) have in common? They never won a professional championship. Yet, they all had lucrative careers. Are these men failures?

As professionals, we should never confuse what we do…with who we are. Nobody likes losing – be it a game or a prospective customer – but a game or sales presentation is only an event. Failing to achieve a goal does not make a person a failure. Professionals should learn from the experience, practice to sharpen their skills, and try again. There are many variables that affect the outcome of a goal. Unfortunately, personalizing set-backs is common in the workplace. We will not win today’s game if we are thinking about yesterday’s loss. So why do we spend time thinking about yesterday’s losses?

In Practice: Redefining Success and Failure

Do you want to be successful 100% of the time in business? It is possible, just redefine success and failure as follows:

  • Success = Giving the best possible effort 100% of the time, and maintaining an uncompromising commitment to professionalism.
  • Failure = Any effort that is less than our absolute best, and less than professional.

We cannot control what goes though a customer’s or colleague’s mind. But we can control what we put into their minds mind. An interaction does not have to result in a sale or new project to be a success. An interaction is a success when another person feels he/she has been treated with respect and dignity.

When marketing, not every prospective customer who receives excellent service will become a client. There are competitive, economic, sociological and psychological forces far beyond any sales professional’s control. But a successful customer service experience is 100% within each professional’s control. If we focus on service-quality success in every customer interaction the result will be increased sales. The key: Don’t define success as a profit. Define success as an exceptional customer service experience. Do this and profits will flow like a river.

(Copyright 2016, Kenney College. All Rights Reserved).

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