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Monday, January 18, 2010

What Garfield Can Teach Us About Price Discounting

Discounting can be bad for your small business. Even Garfield seems to get this. But why don’t small businesses? First let me explain the Garfield reference. My young son was watching an episode of Garfield the other day while I was riding the exercise bike diligently trying to work off the Holiday pounds. Although I was reading a great book on marketing I couldn’t help but notice what the episode was about- Pizza and marketing (sort of). You see, Garfield’s owner Jon decided that he would forego ordering from Garfield’s favorite pizza restaurant because he had a coupon to a new pizza place. But the thought of cheaper pizza did not thrill Garfield, in fact, he was totally unenthused at the idea. Why? Because Garfield had tasted this budget pizza and it was awful! It had the texture of rubber and it tasted like cardboard.

The pizza was cheap because it had been made by a machine that automated the whole process and could turn out 10 pizzas per minute. It was a very efficient process that made the cost of the pizza dirt cheap. The problem was the quality- it was terrible- thus the reason for the discount. The owner of this cheap pizza producing restaurant had to give out coupons- and he even offered Jon further discounts- to get customers to buy. I understand this owner’s reason for discounting his product. It was inferior and he had to do something to be competitive. What I don’t understand is why some small businesses do it.

For the most part, discounts signal inferior quality. Why do small, independent restaurant owners who produce superior quality meals and experiences feel compelled to discount their products? Why do retail stores with owners and employees who know their customers by name and that carry specialty products not easily found anywhere else in the local market resort to cutting their prices when times get a little tough?

Don’t misunderstand me. I’m not talking about the occasional discount to introduce a new product or business to the market (especially a new market) or a coupon given to drive traffic to your store or restaurant during typical slow times. I’m not even talking about discounting as a last resort. What I am talking about is the constant discounting and couponing that goes on as if the establishment were a mini Wal-Mart. And businesses that start discounting soon after a drop in sales or a recession without trying other approaches first. Unless you compete in a budget/discount type of industry, these kinds of discounting practices are detrimental to your business in the long term- and perhaps the short term as well. For more information on the problems with discounting see my article “The Pitfalls of Discounting” in my latest newsletter.

There are times and places for discounts for some small businesses, not all, but some. And there are right ways and wrong ways of doing this. Be smart when you discount or offer a coupon. Have a specific business goal and competitive reason for doing it. Don’t just do it because your competition is doing it or they have “everyday low prices” that are lower than yours. In fact, don’t compete on price unless you know you can win the battle and the war. And don’t discount at the first sign of a business slowdown. Price is not the only reason customers shop elsewhere. Even in bad times there are customers out there who will appreciate your superior offering and pay the higher price. Concentrate on finding these customers before you even think about discounting. That is most likely your ideal customer any way.

So learn this valuable lesson from Garfield: Discounting often associates your product or brand with lower quality. Be ready to counter that perception or use it to your advantage if you are going to employ this pricing tactic. If you are going to offer discounts or some other kind of price concession, introduce them wisely and for a limited time. Be specific with yourself and your customers why you are doing it and stress that this will not be a long-term deal. For more information on how to properly use discounting, see my top 7 tips in this short article “How to Discount Price Without Jeopardizing Long Term Profits and Brand Image” It is available in my latest newsletter, which you can sign up for here.

Be strategic with your use of discounts to avoid negative consequences. Or better yet, just don't use them at all.

To your success!

Wednesday, January 6, 2010

Brief Thoughts about Social Media for Small Businesses

Social media can be an excellent marketing platform for small businesses, especially when it is used as part of a comprehensive marketing strategy. I like to think of social media as another marketing tool that I can use to expand my reach and more deeply engage with customers. It is a terrific platform for broadcasting promotional offers and directing traffic to your website. But most people are unaware that it is also a great research tool, a way to find out what your customers and prospects want and monitor what is being said about your business. There are a number of ways social media can be used to either enhance or replace traditional methods or ways of doing business-such as using it for customer service, research, advertising to a more targeted audience, generating leads, building trust or getting digital coupons to your prospects to drive almost immediate business. It takes time and a good strategy sprinkled in with some patience but for those disciplined to learn it and use it their efforts will pay off. See my article 5 Most Effective Ways Small Businesses Can Use Social Media and sign up for my newsletter at for more information and advice about social media and tips and tools to manage it all.

10 Benefits of Social Media

This article is from my December 2009 newsletter.

As many of you know I use social media- a lot. Not only do I use it for myself to maintain personal connections with friends, family, clients, colleagues and old acquaintances, I also use it to promote my business and my clients. The benefits of social media for both my personal life and business are obvious to me. But I’m finding out as I talk with some in the small business community that they are not aware of social media’s many benefits or sold on its effectiveness. So I’ve decided to do a little research and write some articles presenting the benefits of social media. Those who read my first two newsletter editions are aware that I’ve written on the subject before and already given some very good reasons to use social media. I refer you back to those articles to refresh your memories or to read them for the first time if you are a new subscriber. What I hope to accomplish in this article and in future articles is to make a compelling case for every business- large and small- to use social media. Because I truly believe that every size and every type of business can benefit from connecting with and knowing its customers better. This article will be a general overview of the benefits of social media. In future articles I hope to give specific examples or case studies of companies and organizations who have successfully utilized social media in their business or non-profit work.

The first major benefit of social media is that it brings awareness. It is a low cost way to get your name or the name of your organization onto the web and into the minds of customers, patrons, and prospects. Anyone can establish an account on Facebook, Twitter, Linkedin, Merchant Circle, Plaxo and dozens of other sites free of charge. The only cost involved is the cost of your time.

Identify Customer and Prospect Wants and Needs
Once you have established a presence in social media your business can connect with and stay in touch with customers to identify wants, needs, and problems- and communicate your solutions. Ask questions to find out what customers are looking for. Create forums on your Facebook fan page for fans to speak their minds about likes and dislikes. Since space is limited on social media sites (especially Twitter) when you need more detailed information, create surveys and questionnaires with a free tool such as Zoomerang or Survey Monkey and simply post the link on social media sites asking people to take the survey. Used in conjunction with survey tools, social media is a great place to monitor trends and get feedback from customers and potential customers. Bonus tip- if you want to get a bigger picture of the marketplace by knowing what your competitions’ customers want, monitor your competitor’s sites. Follow them on Twitter and join their Fan pages. Sign up for their emails. This is a good way to pick up on trends and get ideas for new product or service offerings. It’s also a great way to discover how you compare to your competition so you can know how to further differentiate yourself from them.

Listen In
The third major benefit is that you can monitor what your customers and others are saying about your brand. Sites like Yelp let customers post reviews of businesses. You can use Yelp and similar sites to find out what is being said about your company or brand and respond through social media. In fact, some companies are using Twitter as a customer support platform because of its ease of use and real time updates. Likewise, you can monitor what your customers and others are saying about your competition’s brand. These types of conversations used to go on out of listening range of business owners and managers. Rarely did they know what a customer said about them- good or bad. However now, with so many taking their thoughts, complaints and comments online, we have the privilege of being able to “listen” in on these conversations and respond accordingly.

Increase Online Exposure
A fourth major benefit of social media is increasing your online exposure. The Google and Bing search engines pick up Facebook and Twitter posts and updates and include them in search results. If your website in referenced in your Facebook or Twitter profile (and it should) people who visit your profiles can see and click your website link and be taken directly to your business’ website, increasing your traffic directly. Indirectly, these searches put extra eyes on your business name, your name, and/or your brand name thereby increasing your exposure. Additionally links from social media sites back to your organization’s website often increase your website’s page ranking by being associated with a well known and trusted website such as Facebook, Twitter, Linkedin, and Merchant Circle. Kind of like the instant boost in credibility or coolness nerdy high school kids get when a member of the cool crowd accepts him into his group.

Generate Targeted Traffic
A related benefit is that businesses and other organizations can generate traffic to their website, blog, or events- by posting relevant information and links to your website, blog, etc. right in their social media posts. Twitter is a terrific tool for this and I use this when appropriate. Not every post can contain a link to your stuff or a plug for it or you won’t have fans and followers for very long. But after you have earned the right to promote yourself this is an excellent way to let people know about your business or cause.

Generate and Nurture Qualified Leads
Through search features and third party sites like Twellohood, Localtweeps, iphone apps, and even TweetGrader, you can generate and nurture leads. Just use the tools to find people by location, title or interest to follow them and connect with them on Twitter. Check their Twitter profiles to see what other social media sites they belong to and look for ways to connect with them there as well. Here is a link to a great article on Mashable about finding local fellow tweeters

Make Announcements
Social media networks are a good place to toot (or tweet) your own horn. You can announce new products, services, enhancements, awards/recognition, etc. on social sites to spread the word more quickly. Just be sure to mix in helpful advice and conversation and not to toot your own horn too frequently.

Partner Up
Find new business partners, vendors, suppliers and business opportunities and stay in touch with current business partners, vendors, and suppliers. I’ve met a few business associates through both Linkedin and Twitter and did so within only a few months of using each service. I was not looking for this, it just happened naturally. If that is your goal, however, there are strategies to follow to make your search more productive and efficient. Check out Jennifer Davies’ article on joint ventures and partnerships later in this newsletter.

Educate Yourself
Learn- people post all sorts of information on social networks that are helpful to small businesses such as marketing advice, management advice, customer service advice, and personnel advice. You just have to know how to find it. One excellent way is to use Twitter’s search feature and search for words or phrases using the # (hashtag) symbol. Use in conjunction with hashtag directories to understand what abbreviations mean and find useful hashtags. Twitter recently unveiled a service that lets you organize and follow lists tweets that are relevant or interesting to you. You can create the list using your own criteria. The great thing about these lists is that you don’t have to follow people in order to follow the topic, all the tweets are grouped together, and you can keep these private if you like.

Build Trust and Credibility
And the one that I think is most crucial to small businesses- especially if you sell a product with a long sales cycle that takes multiple touches with your customers, is that social media helps you build trust and credibility. Customers want to buy from people they know, like, and trust. Social media is a wonderful tool to get to know customers as individuals, become personable to them and get them to like you.
Using social media is a convenient, and even fun, way to develop and cultivate relationships with your customers and demonstrate your credibility and trustworthiness.

Used the right way social media holds many benefits that will help your business find customers new and old, better understand their needs/wants and purchase drivers, and develop long lasting relationships that result in satisfied and loyal customers- and a healthy bottom line for you.

Copyright 1st Position Marketing 2009


1st Position Marketing is now blogging with Blogger! This blog will be dedicated to all things marketing and branding with a focus on smart marketing for small businesses. I will talk about practical, effective marketing strategies and solutions that will help your business meet business goals and objectives such as getting more sales, new customers, and higher profits- without breaking the bank. I will post at least weekly and more often when I'm in a writing mood, or if I just need to get something off my chest! My first post will be here soon. Your comments and feedback are welcome. Enjoy!