Insight < Back Pricing for Product Success Even though such scientific models are available, most merchants continue to rely only on an intuitive sense of what the consumer would be willing to pay. Pricing is a critical factor in the success of a product. The right pricing strategy can drive sales, maximize profitability, and help you achieve your business goals. While you may be focused on maximizing your market share and profit margins, several factors come into play when you decide what should be the right price for your upcoming product. Since a business’s prime objective is to make money, your minimum reservation price as a business might be the cost of producing the product including manufacturing, labor, materials, and overheads. Cost cost-based pricing approach has been the most common method of pricing products, however, product success requires us to factor in market dynamics too. It is important to remember that price by itself is also a product differentiator and there are pitfalls of under-pricing or over-pricing. Pricing should essentially meet your other components of the product marketing mix. When you decide to launch a product for your target customer, you consider the demand curve of the product and arrive at a price range to create the minimum support for your planned production or sales target. This price would usually consider the customer, the competition, the company, and other market aspects such as seasons and price wars. Based on the price elasticity of demand, you would ideally fine-tune your pricing to meet your sales target. This in the luxury segment could mean increasing prices to increase demand. If the product category exists, the customer already has a reference point. Pricing your product using competitive benchmarking correctly communicates your product and brand value. If your product is an innovation and has no competition in the market, you would be targeting early adopters to create a future market for your product. This could be very tricky. On one side you may be tempted to floor the price to create demand, even if it means negative contribution margins and on the other side, you would be concerned about the reference point and perceived value you end up communicating to your target customer. It is important to gauge the customers' willingness to pay and adjust the pricing using promotion strategies. One must never forget that maximizing volume does not mean maximum profits and the customer does not have to own the product to know the value it brings with it. Estimating the demand curve is one of the most difficult aspect of the problem. Market data is the most straight forward way of creating the demand curve. We could use the data available from the sale of similar products. We could also run experiments to estimate the demand curve. With online channels available, the experiments can quickly generate response. Intermittent promotions and discounts, different prices for the same product based on the day of the week or store location can help us quickly build the demand curve. We can also use expert and customer surveys. A customer buys your product only when it considers its perceived value to be greater than the price. When you bring the competition into the picture, the customer would buy the product that offers him the highest consumer surplus calculated as the difference between the perceived value and the price. The perceived value of the product includes the brand value too. Statistical techniques such as conjoint analysis are deployed to create pricing models that consider the value of product features and the competing brands to arrive at the price the customer’s reservation price. Such statistical techniques are powerful tools for understanding customer value perception. They also help us tweak the product features to match customers’ value perception. Differential or discriminatory pricing based on the customer’s convenience, need or loyalty is another way of maximizing sales. Starbucks may have three different sizes of coffee but it practically serves the same amount of coffee in each of those cups. Similarly 7/11 charges premium for the same milk that is sold cheaper by Walmart. Airlines run loyalty programs and offer discounts to promote repeat usage. Pricing should promote product sales and maximize profitability. Under-pricing harms your product profitability in the short run and brand value in the long run. Over-pricing simply kills the demand. It is important that you take the scietific approach and spend the required time and resources to price for the success of your product. Previous Next

Insight < Back The Age of Viral Marketing New-age marketers are not content with just memorable content. They work on creating contagious content that quickly spreads and reaches a large audience through word-of-mouth, social sharing, and online platforms. They bank on social influence for a quick turnaround. No matter how good a product or service is, customers are unlikely to spend any money on it unless they can recall it at the time of the purchase. The goal of any product campaign is to capture the user's attention and increase the likelihood of trial or adoption by making it easy to recall the product at the time of purchase. So why do some products register in our memory, while others do not? What are the ingredients of memorable content? Less is more for our brain which is always overloaded with information. Simplicity reduces cognitive load and increases the likelihood of attention and memory retention. Avoiding jargon and keeping the content simple and concise increases the probability of success of a campaign. Curiosity drives us to explore, learn, and seek new experiences and knowledge. Content that creates curiosity drives customers to seek more information to satisfy their interest. Heightened attention makes it easy to encode the product into the memory. Surprises evoke strong emotions, such as excitement, fear, or joy. Our minds actively work to reconcile surprises with our preconceived notions, leading to deeper cognitive processing. The distinctiveness of a surprise in a campaign makes it more likely to be stored in our memory. Concrete and vivid details have a powerful impact on capturing attention and engaging with the target audience. They create a strong mental image that evokes emotions or curiosity. Sparkling diamonds, ice in the bathtub, blood on the wall, sizzling flames, and lush green oasis are some phrases that pique curiosity and create a mental picture that makes it easy to register the message in the brain. Statistics with a reference point for comparison provides context and make the information more relatable and meaningful. Our brain is more likely to register the vastness of a known reference point than that of a number. The fact that an air conditioner consumes 5 times the electricity required for all our other household goods is far more impactful than the fact that an air conditioner consumes 60 kWh per month. Establishing credibility with references makes it easy to capture the user's attention. Our mind registers matters of emotional significance and personal relevance. Stories that evoke emotions are highly effective in engaging customers and increasing memory retention. Emotional experiences stimulate the release of neurotransmitters like dopamine and adrenaline, which enhance the consolidation of memories in the brain. Identify the core emotions you want to evoke in your customers, such as joy, nostalgia, empathy, or inspiration. Leverage emotional storytelling by crafting a simple and concise narrative. Incorporate characters or situations that customers can relate to. Use sensory language and vivid descriptions and throw surprises where possible to make the story come alive. Create a sense of tension or conflict to build curiosity. Be authentic in your storytelling, and aim to connect with customers emotionally to create memorable and impactful experiences. New-age marketers are not content with just memorable content. They work on creating contagious content that quickly spreads and reaches a large audience through word-of-mouth, social sharing, and online platforms. They bank on social influence for a quick turnaround. When we see others engaging in a particular behaviour or conforming to a certain belief, we tend to interpret it as evidence that the behaviour or belief is correct or desirable. We use social proof as a cognitive shortcut to make judgments or decisions. We just fit in even when we feel differently due to the fear of social rejection. Social proof and fear of social rejection are two examples of how the psychology of social influence works. Social influence helps popularise the product or service. Popularity creates a bandwagon effect, which quickly expands product visibility and sales. Social influence becomes more prominent in situations of ambiguity or crisis. When faced with uncertainty or unfamiliar circumstances, individuals often turn to others for guidance. So how do we create contagious content to build word of mouth and how can we use that word of mouth to get our products and services to catch on? People spend their social currency to share things that make them look smart and special. When you tell someone a secret, it is the privilege of being privy to the secret that makes the other person share it with others. Find that inner remarkability that makes it compelling for people to share your product or service. When something is top of the mind, it is likely that it is also at the top of the tongue. You just need a trigger. Gin is the trigger that reminds us of tonic. Identify the trigger that positions the product at the top of the mind of your potential customers and they will start talking about it. The more we care, the more likely we are to share. That is how emotions work. People share positive emotions but avoid sharing negative ones. People share when they get anxious or angry but not when they are sad. Inspire people and create the excitement required for sharing. Built to show, is built to grow. People will talk about the products or services they are proud to show off. People share when it makes them look good. Humans deepen bonds by sharing things that help others. Show the practical value of how your product or service can help save money or life or how it can help build someone's future. Stories are the currency of conversation. No one likes salesmen selling products in their social circles but they happily share emotionally connecting stories with the product embedded in it. Craft narratives that elicit strong positive emotions such as joy, surprise, awe, inspiration, or humor. Provide emotional, practical, and metaphorical reasons for people to spend their social currency and share your product online. Include a trigger that makes it easy to connect your product to what is trending. Look at the ways in which you can tie in pride of ownership or the practical value of the product in your story. Do not sell a product, sell emotions that engage people and make them feel better when they share your product. Previous Next

Insight < Back ESG is the Future The environmental, social, and governance factors impacted by a company do not directly impact the company's profits and loss statements. Instead, the impact that the company has on the environment and society triggers a reaction from governments, customers, employees, or members of civil society. Traditionally, Management and finance gurus taught us that the purpose of a company is to maximise returns on the investment, resulting in a culture where managers focused exclusively on improving revenue, profits and efficiency even when it meant damage to the environment, displacement of the societies and exploitation of the employees. The information Economy has changed the landscape. The end customers have risen today to reward the companies that maximize the collective gain and punish those that do business at the cost of environment and society. Lawsuits have been filed against companies whose actions have caused damages. Some of them have ended up paying billions of dollars in settlements. Shareholders are becoming aware of the changing landscape and want their managers to take adequate ESG actions. Despite best intentions, a manager may not take the required action because of the unavailability of the data about the return on the investment or factors outside his control. Increasing greenhouse emissions causing rise in global atmospheric temperatures are melting glaciers and causing rise in the sea level with the threat to terrestrial life and man made structures. Heat has resulted in changing patterns of wildfires, killing people, destroying properties and disrupting economies. It has also resulted in decrease of the overall efficiency of the workers on the ground. Changing climate patterns have also led to typhoons that result in destruction of infrastructure and loss of life. With end customer becoming aware of the future consequences of global warming, it is willing to avoid the usage of hydrocarbons and move to renewable energy, even if it entails paying more for it. Governments are planning to introduce carbon taxes that will eventually make it costlier to use hydrocarbons. Particle emission from power plants, factories and locomotives cause respiratory diseases and lung cancer. Nitrogen emission reduces agriculture yields and causes childhood stunting. Plastic and other contaminants in oceans recycle for human consumption. With goverments regulating air and water pollution, there is increasing risk of lawsuits and penalties againts the polluters. Social issues such as pay inequality, working conditions of the employees, constitution of the workforce, child labour, inappropriate or inadequately tested products, pollution or an incidence of bribery can severely compromise the reputation of a company. End customers favour companies and brands with better social record and avoid those whose actions harm their societies. It is a proven fact that proud employees are more productive and better brand managers than those that hide. We all know that better community relations lead to better business environment that better manages inevitable conflicts. If you do good, you will be conceived good in the communities where you work and sell. Your customer knows more than what you communicate about your brand. Bad news spreads faster. Given the changing landscape, Governance is of absolute importance. Company policies should clearly define ESG responsibilities inline with existing and expected regulations. Managers should maximize overall value for all the stakeholders. Maintaining an ESG risk register can help. It is important to encourage employees and managers to identify and highlight ESG risks. A firm's actions related to environment and society impact its long term financial performance. With little data available, it is almost impossible to calculate return on investment. The value lies in a more complex system of stakeholder relations. It may be a good practice for a company to reinvest a percentage of its profits to improve its ESG reputation. There are strategic choices to be made but ESG is the future. Previous Next