Lowering Prices on Concert Tickets, I-Phones & Vista

There is a big difference between lowering your price and lowering the value of what you are selling. And the results can have opposite results.

I work with two local musical organizations that have made price adjustments in the past year or so. The Fort Wayne Philharmonic cut their prices by as much as 50% for some of their concerts.

Why? They were not filling the house. 1/3 of the seats were filled at some events. And so they decided to make it more affordable by lowering the prices on some of the “Cheap Seats”. And it worked.

Granted, there are other contributing factors, such as how many performances they do, the type of concert, including their Pop’s Concert Series, but overall, it looks like it was a good move. They lowered the price, and enhanced the value.

(The other musical organization, The Heartland Chamber Chorale is going to be doing a similar change I believe.)

Getting a mixed review when they lowered their price was Apple, when they dropped the price of the I-Phone after they sold at a substantially higher price, and they tried to make amends by offering rebates to those that paid the big bucks. They lowered the price because the value was less than the initial customers paid for.

Now comes this news about Microsoft and Vista:

SEATTLE (AP) — Microsoft Corp. will cut the price of some versions of Windows Vista, the software maker said late Thursday.

The move came a day after court filings revealed internal dissent over which Windows XP computers would be considered capable of running the new operating system — and a feeling on at least one executive’s part that the company had “botched” the marketing of computers as “Vista Capable.”

Only copies of the year-old operating system that are sold in boxes directly to consumers are affected by the price cuts — not the versions pre-loaded on personal computers. The cuts will range from 20 percent to 48 percent.

The reductions are to coincide with the late March release of Vista Service Pack 1, a collection of security fixes and other improvements.

Microsoft said the new prices will apply to the Home Premium and Ultimate versions of Vista, in both their full editions and the editions that upgrade an older or more basic operating system.

Both versions serve the tiny percentage of users who install an operating system on their own; most people get the latest version of Windows only when they buy a new PC.

Windows Vista’s January 2007 launch was plagued by delays. To keep consumers buying PCs in the holiday season of 2006, Microsoft and PC makers promised free Vista upgrades later to shoppers who bought Windows XP computers.

At the launch, Microsoft was widely criticized for offering too many versions of the operating system — including Home Basic, which didn’t have the snazzy new signature look called “Aero” — and for setting the price too high for the high-end versions.

Brad Brooks, a corporate vice president for Windows marketing at Microsoft, said in an interview that the company has since tested lower prices and found “product was moving much, much faster.”

Brooks said he expects so many customers to buy Vista at the new prices that the price cuts will increase Microsoft’s revenue, not subtract from it.

A federal judge recently said consumers could pursue a class action suit against Microsoft for labeling PCs as “Vista Capable,” even though many were not powerful enough to run all of Vista’s features, including the Aero interface.

Company e-mails produced in court chronicle Microsoft settling on a plan to market a wide range of XP-based PCs as “Vista Capable” after company officials realized in early 2006 that 30 percent or fewer of computers on the market could run the full-fledged version of Vista with Aero.

That realization apparently caused computer makers like Dell Inc. to worry that people would stop buying PCs for almost a year — until Vista launched.

The e-mails also showed Microsoft lowering the bar for “Vista Capable” to protect Intel Corp.’s sales of some widely used chips that weren’t powerful enough for the full Vista experience.

Microsoft employee Anantha Kancherla was particularly blunt in his March 2006 response to a question about whether a certain PC configuration would be considered “Vista Capable.”

“Based on objective criteria that exist today for “capable,” even a piece of junk will qualify,” he wrote. “For the sake of Vista customers, it will be a complete tragedy if we allowed it.”

According to the e-mails, Jim Allchin, the executive in charge of Windows at the time, wasn’t involved in the decision to brand a wide swath of XP computers as “Vista Capable.”

Upon learning the details, Allchin wrote, “We really botched this.”


The 2008 American Consumer Preview part 6

Two months down and I already have 6 postings on this subject. The most recent talk in the news this week is revolving around the word recession. I have written about what to do, how to prepare and linked and referenced articles and stories from others.

But what if it doesn’t happen?

Here’s a new report to look at as we march into month 3 of 2008 (pun intended):

Consumers Speak Out On the U.S. Economy

The NPD Group, Inc., a leading provider of consumer and retail information, announced the results of a recent “Fast Checks” study entitled: Consumers Speak Out On The U.S. Economy. According to the study’s results, most consumers think the U.S. is in a recession or headed for one.

It appears that consumers, across many retail segments, do not intend to change their behavior yet. “Even with all the media attention on the economy, consumers still seem to be focused on their needs and desires,” said Marshal Cohen, chief industry analyst, The NPD Group, Inc, “Consumers are tuned into news about our economy, but they aren’t so quick to change what they are doing, including where they shop.”

More than half of consumers surveyed said they were least likely to change spending habits on affordable purchases like books, movies, cosmetics, fragrances, or an indulgence that can pass for a necessity like footwear. Interestingly, more than one in 10 who plan to spend on home improvement plan on spending more. “Certainly the housing market is another source of concern for consumers. These results would suggest more people are looking to improve their house to spruce it up for themselves or to make it more attractive to a potential buyer.” observed Cohen.

What is the one thing that would most likely tip the balance for consumers and rein in spending? Cohen says it’s job security. “Twenty-six percent of the study’s respondents are concerned about job security. Should a real or perceived threat to U.S. consumers’ jobs come along, that will shift the dynamic and likely have the greatest real effect on our economy.”

What are the implications for retailers? Consumers will clearly be on the look-out for incentives to shop.

“I think the consumer is still going to be there, but retailers are going to have to do more to get them.” Cohen said, “Certainly promotional incentives of all kinds will be key but how you market and communicate will help seal the deal.”

(Source: The NPD Group, 2/28/08)

Another Starbucks comentary

This one is from Laura Ries. Here’s a snip:

“…The closing of Starbucks was national news. Celebrities who normally get out of bed around 2 pm were scrambling for their 4 pm “morning” cup of joe. The few bucks Starbucks lost in sales that afternoon was more than compensated by the massive PR coverage. It sent a message to consumers, investors, and most importantly, employees that Schultz was back and that Starbucks the king of coffee would defend its coffee crown with tenacity….” (READ MORE)

A Harvey Mackay 2-Parter

Before I share with you the latest column from one of my mentors, Harvey Mackay, I want you to take a side trip and read about a personal experience that I had with Harvey and his assistant Kathy. Just click here.

Here’s the latest Wisdom from the Master of Relationships:

Facts inform, but passion moves

I recently came across a terrific description of a salesperson … and it’s from the 1940s. Aside from the sexist language, a sign of the times, I think it’s still right on.

During a convention of Chrysler sales managers in Los Angeles, Harry G. Moock, a company vice president, issued this description of a salesman:

“He has the curiosity of a cat, the tenacity of a bulldog, the friendship of a little child, the diplomacy of a wayward husband, the patience of a self-sacrificing wife, the passion of a Sinatra fan, the assurance of a Harvard man, the good humor of a comedian, the simplicity of a jackass, and the tireless energy of a bill collector.”

What can I say … I’ve always been a Sinatra fan.

Passion is at the top of the list of the skills you need to excel whether you’re in sales or any other profession. A salesperson without passion is just an order taker.

If you’re in sales, you can have a great product, a tremendous territory and a fabulous marketing campaign, but if you don’t have passion, it’s hard to make a sale. When you have passion, you speak with conviction, act with authority and present with zeal. When you are excited and passionate about a product—or anything for that matter—people notice. They want in on the action. They want to know what can be so good.

There is no substitute for passion. If you don’t have an intense, burning desire for what you are doing, there’s no way you’ll be able to work the long, hard hours it takes to become successful.

“Make sure that the career you choose is one you enjoy,” said Kathy Whitworth, who won 88 LPGA tournaments, more than anyone on the men’s or women’s professional circuit. I was lucky enough to be in attendance when she won four of them. “If you don’t enjoy what you are doing, it will be difficult to give the extra time, effort and devotion it takes to be a success. If it is a career that you find fun and enjoyable, then you will do whatever it takes. You will give freely of your time and effort, and you will not feel that you are making sacrifices in order to be a success.”

President Harry Truman once said: “Good work is never done in cold blood; heat is needed to forge anything. Every great achievement is the story of a flaming heart.”

Mark Twain was once asked the reason for his success. He said, “I was born excited.”

My readers have heard me say many times, “When you love what you do, you will never have to work another day in your life.” In fact, the subtitle to one of my books is “Do what you love. Love what you do. Deliver more than you promise.”

Socrates was approached by a man who asked the great teacher to help him learn. The master took the would-be student into the water and suddenly pushed him under and held him there. Surging to the surface, out of breath, the young man gasped, “Why did you do that?”

Socrates answered, “When you want to learn as badly as you wanted to breathe, you will.”

Hopefully you’re happy and passionate about your work every day. If you aren’t, think back to the times when you were and what you can do or need to do to get that feeling back.

J. Paul Getty, the wealthy oil tycoon, actually ranked passion ahead of imagination, business acumen and ambition as necessary ingredients of business success.

Surround yourself with people who are passionate about their jobs. You’ll catch their passion. And remember that you can’t be passionate when you feel like it. You have to be passionate about your job, product or cause all the time. There’s no off switch on a tiger.

Sam Walton, the founder of Wal-mart, had 10 “Rules for Success.” Rule number one was “Commit to your business. Believe in it more than anything else. If you love your work, you’ll be out there every day trying to do the best you can, and pretty soon everybody around will catch the passion from you—like a fever.”

So set an example for your co-workers or teammates to be passionate. There’s nothing more powerful and more contagious than passion.

Mackay’s Moral: The biggest challenge is not to add years to your life—but passion to your years.

Create a Niche and Create Value

From Marketing Profs comes this bit of advice about Niching:

What’s Your Specialty?

Marketers choose to position a product on either a single feature or a combination of features. Which strategy you use can materially impact how consumers perceive the item’s value and performance.

Consider three different brands of toothpaste—one claims to whiten teeth, another claims to freshen breath, while the third purports to whiten teeth, remove plaque and freshen breath. Research at Northwestern University demonstrates that if the prices are the same, customers are more likely to believe the brand that only claims to whiten teeth is superior to the other two in that aspect. Customers also were apt to believe the brand that only claims to freshen breath does so better than the other two.

Consumers subconsciously go through a zero-sum exercise, thinking various features balance out—so if a product does well at one task, it is most likely less capable at another. Without realizing it, consumers discount a brand that claims to do it all.

However, if you raise the price of the product that has multiple features, customers will believe the product to be superior to a less expensive product that includes only one attribute.

The Po!nt: To make your product stand out from the competition, highlight one characteristic or feature—or price your all-in-one product above similar products that only highlight one feature.

Source: “Jack of All Trades or Master of One? Product Differentiation and Compensatory Reasoning in Consumer Choice” by Alexander Chernev. Journal of Consumer Research, 2007. Click here and then click “Chicago GSB” to obtain the full report.

Copyright © 2000-2008 MarketingProfs, LLC All Rights Reserved.

I hope your competition doesn’t read this

I’ve talked about how to handle your marketing during a recession, now here’s words of wisdom from others:

The Upside Of A Recession: ‘The Dumbbells Cut Back… The Smart People Don’t’

By Robert Croston and Patrick Cahill

The market drops 370 points in a single day, corporate earnings disappoint and housing prices continue to sink. We are in uncertain economic times. We may be in a recession right now, or could slip into one next week… or next month.

As optimists, we don’t like forecasting difficult economic times. But, even optimists have to come to grips with the realities of our uncertain marketplace.

With economic anxiety looming, many of our clients are asking: how should I position and market my firm in the year to come? Assuming yours is a healthy company, here are our general recommendations.

The Cumulative Power Of Marketing

The laws of marketing never change, even in a recession. In fact, if played correctly, they can compound in your favor. Marketing, in any economic environment, is about sustained and integrated activity.

Like the principle of compound interest, a little investment, applied consistently, will pay great dividends down the road. There are of course short term benefits – marketing assists in generating immediate sales – but the real power of your marketing program is cumulative. This cumulative effect drives awareness and ultimately preference in your service so, at the elusive time of need, your prospect thinks of you first.

A sustained marketing effort will help ensure that your pipeline is consistently replenished, leads are properly nurtured, and your market presence is maintained.

The advantages to continuing your marketing in uncertain economic times go far beyond simply maintaining the status quo. The reality is many of your competitors are going to pull back their marketing. As a result, your dollar is going to go further than it is now. Your share of voice will grow. This represents a great opportunity for forward looking firms that are committed to growth because there are still lots of buyers out there.

The Reactionary Response

Many service firms automatically cut expenditures, and marketing is often on top of the list. It’s an instinctive response to difficult economic conditions. Almost universally, this response will lead a company to have real trouble in the coming years, recession or no recession.

We can understand why firms think they need to cut back. The sensationalistic media attention given to the economy creates a quiet panic in all of us. We run all sorts of scenarios through our head: clients are going to brace for hard times… they will take longer to make purchases… perhaps they’ll even cut service providers. As you think of sales cycles stretching, client retention diminishing, and project size shrinking, you may find yourself looking to cut costs.

Marketing is one of those initial costs that seem easy to reduce. It’s hard to measure and you aren’t quite sure if it’s needed when it’s time to hunker down. Why not cut it until things are looking up again? It’s easy to justify: “We’ll go full force once the market turns, it won’t hurt a thing.”

The Facts

Study after study demonstrates why this is not wise. Keith Roberts, of PIMS Associates, found firms that increase their marketing spend during a recession actually grow significantly faster than firms that maintain or decrease their marketing spend.1 Additionally, firms that invested more in marketing in a down market realized a 4.3% increase in their ROI. This compared to companies that maintained or cut their level of effort during the two years following a recession.

The study also pointed out that those who increased their marketing efforts during a recession gained market share three times faster in the two years following a recession than businesses that cut their marketing. While service firms don’t play the market share game, this does illustrate the cumulative effect of marketing and the opportunity for advancement in a recession.

While the work PIMS did is compelling, it’s hardly the only material on the subject:

  • McGraw Hill found that business to business companies that maintained or increased their marketing during the 1981-82 recession grew during and after the recession at a far greater rate than those who didn’t maintain or increase marketing spending.2
  • The research firm of Meldrum & Fewsmith studied all post World War II recessions and found that advertising aggressively during recessions not only increases sales but it also increases profits, and at a far greater rate than those firms that cut back.3
  • American Business Media found that maintaining share of mind during an economic downturn directly related to current and future sales and that maintaining share of mind costs much less than rebuilding it after a period of marketing inactivity.4
  • According to Coopers & Lybrand, marketing during a time of economic difficultly solidifies your client case, portrays you as stable, takes business away from less aggressive competitors and positions your firm well for post recession growth.5

We could go on, but we’re sure you get the point – this storyline, and the research behind it, is compelling.

The Silver Lining

As legendry ad man Ed McCabe puts it, “All great enterprises move forward in a recession, and the weaklings move back. The dumbbells cut back…the smart people don’t.”

Be one of the “smart people.” Whether there will be or won’t be a recession, maintaining a healthy marketing program will only build on what you have already developed. And maintaining and growing what you have toiled long and hard over requires careful planning, decisive execution, and plain old guts. Now more than ever the money you spend now on marketing matters. Not because dark times loom, but because there is real opportunity out there right now.

1 Roberts, Kieth. What Strategic Investments Should You Make During A Recession To Gain Competitive Advantage In The Recovery, Journal of Strategy & Leadership, Vol. 31, Issue 4.
2 International Journal of Research in Marketing, Vol. 22, Issue 2.
3 Ibid
4 American Buisness Media, The Value of Advertising During an Economic Downturn.
5 Ibid

Robert Croston is Vice President and Principal Consultant at the Wellesley Hills Group, a consulting and marketing services firm that helps service companies to grow. Robert can be reached at rcroston@whillsgroup.com.

Patrick Cahill is a Senior Associate with the Wellesley Hills Group, a consulting and marketing services firm that helps service companies to grow. Patrick can be reached at pcahill@whillsgroup.com.