My Facebook friend, Prof. Christopher Shallow, posted the following tip about successful marketing on his Facebook status:
Solution to price competition is to develop a:
1. Differentiated offer
2. Differentiated delivery
3. Differentiated image
(It is these three that differentiate the successful from the me-too’s!)
His intent, stated later in the thread, was,
…to help small businesses think about how they can solve that well-known problem of thinking that they have to compete on price.
I responded saying,
Differentiation, on its own, is not enough. The proposition needs to also be motivating. The museum of new products is full of differentiated ideas that nobody cared about.
I’ve written about this before in Is Your Brand Positioned for Success.
A lively discussion ensued about pricing and the importance of the customer’s perception of what constitutes value. Toward the end of the thread Chris responded to a comment saying,
…I always stress that all successful marketing begins with the customer NOT the product.
This prompted me to present a brief case study of my own recent experience developing a marketing strategy to reposition Red8 Interactive:
Too true Chris, a successful marketing strategy comes from understanding what customers want and need.
As a practical example, when I took over my current company, Red8 Interactive, (Red8 produces interactive advertising like banners, rich media, landing pages, emails, web sites, etc.) a little over a year ago the selling proposition was based on having a team of developers in Shanghai China: we’re off shore, we’re fast and cheap. But the company was struggling. Nothing about the proposition was differentiated or, frankly, motivating.
One of the first things I did was interview current, past and potential customers. I wanted to discover what value they received or didn’t receive from working with Red8. I learned a lot.
I also looked at sales over the past two years to see who the best customers were. I discovered that 80% of sales came from mid-sized ad agencies, interactive agencies and web design firms.
What I learned from the interviews was that this group didn’t care where the code was written, high quality code was expected, and that price wasn’t the issue. We had to be competitive with the cost of a local freelancer but we didn’t need to be cheaper unless we had nothing else to offer.
These customers wanted a resource that made their difficult jobs easier. One agency producer I interviewed summed it up nicely, “I get pain from the Creative Department, I get pain from the Account Managers, I get pain from Clients, I don’t want pain from my production vendors.”
We focused sales efforts on mid-sized ad and interactive agencies, more than doubled our hourly rates to be competitive with local freelancers, took “China” out of sales and marketing material, increased our emphasis on project management including adding PM and communication tools. We also focused the developers on the platforms common to marketing and advertising production, i.e., we said no to jobs outside our core competency.
Everything we do, every decision we make, is measured against whether or not our target customers will receive value from the decision; whether or not it will make Red8 easier to work with.
Sales have more than doubled, we’re adding 2 – 3 new customers per month while retaining current customers. On 6/1 we launch a second team of developers in St. Luis MO. We plan to have this team at 10-12 developers by the end of the year.
I vented a little because I see way too many examples where the marketing strategy is designed to sell products rather than selling a solution to the customers’ problems.
A successful marketing strategy starts with the customer not the product.