Best Practice for Small Business. Marketing ideas for small business.

Following on from our post last week - “The Ultimate In Customer-Driven Pricing” - we point your attention to an excellent post by Seth Godin on how pricing can change people’s perceptions of certain things. For example, Seth talks about the fact that people may not be aware of certain products and services that they are receiving until they start paying for them (even if it is just a nickle). Have a read….

For a nickel
The current Fast Company reports that when Ikea started charging a nickel for shopping bags, consumption went down by 50% (95% in the UK).

Clearly, it’s not the nickel.

The way you charge for something changes the way people perceive it. If the dinner special includes dessert, people get dessert because it’s ‘free’. Of course, it’s not free. You paid extra for the special, remember?

A la carte pricing focuses your consumer. It forces them to make a choice in a spot where they didn’t use to make a choice. It can highlight features that might have gone unnoticed (underbody salt removal treatment at the car wash, for example).

If you want people to notice a bit of consumption, charge for it. Even a penny.
If you want people to take something they had been leaving behind, give it away with purchase. Otherwise, they’re wasting.

Here’s one practical application. If you make something with low marginal cost like a CD, consider offering a second one (same title) for a nickel or a dollar. Why? Because if a customer buys a second as a gift, they’ve just helped you spread the word…

from b2bsee * The Market Research Blog

Rock band Radiohead have just announced that their new album will be released as a digital download with the fans being able to decide how much they pay for it. The band currently have no record label and as such, have no overheads in releasing the album – therefore every penny paid by the buyer goes straight to the band.

So far the NME website reports that people having been paying an average of £5 per album, meaning that the consumer is paying much less than they would normally pay in a traditional release. In addition to this, the fans know that all the money is going straight to the recording artist as opposed to the majority of it going to the record label big-wigs.

Have Radiohead kick-started a new trend? Can this kind of pricing be applied to other industries other than the music industry? Leave a comment below and let us know what you think.

An article on the Church of the Customer blog looks at this story in more detail – see below. For more information on pricing take a loook at our white paper - “The Problem With Price”.

A few years ago, we wrote an essay for Seth’s “Big Moo” http://www.amazon.com/Big-Moo-Trying-Perfect-Remarkable/dp/1591841038 on what the world might be like if technology and globalization overwhelmingly drove a significant number of prices to their ultimate price point: free.
Our scenario: what if “suggested retail price” disappeared, along with your ability to set prices?
Or, what if you allowed the marketplace to name its own price without negotiation?

The British band Radiohead is trying scenario two with its new album. On this website, you add the album to your cart; when you check out, you type in how much you’ll pay. That’s it. No argument, no negotiation.

You pay a buck to handle the credit card fee (alas, intermediaries always get paid), but it’s a cool experiment in economics for a band known for risk-taking.
For producers of digital content, I argue this isn’t much of an economic risk at all. The replication cost of digital files is basically zero. Radiohead has spent years cultivating a cult following, so the band has already reaped a handsome return based on the worldwide attention they’ve accumulated with this product-release strategy.

Of more benefit to them now is building a database of buyers, bypassing the information black hole of so many retail channels. That’s the value exchange.
And in a few months, Radiohead will partner with a label, which will manufacture a CD of the album. If the album is great (always a non-quantitative variable when it comes to art), it will have already created demand for the totem version of the album.

If scarcity isn’t your primary method for generating demand, then getting your product or service into as many hands, mouths and minds possible is. The ideas, products or services that spread the most usually win.

Today and more so tomorrow, that means letting go of the control you’re accustomed to.

from b2bsee * The Market Research Blog

Why Do Western companies get it wrong?

Before moving on to discuss how companies should implement change in terms of their marketing and selling approaches, it is worth considering why Western companies often target the Chinese market in an inappropriate way. There are a number of reasons for Western companies’ apparent lack of understanding of how to market; many of these are self-evident and all of them stem from a lack of experience in the market.

Life cycle
Some of the ‘mistakes’ made by Western companies in terms of their marketing and sales approaches and messages can be explained by the fact that many of their Chinese activities are relatively new. Companies are providing solutions to needs which have only just emerged, and mutual understanding between buyers and suppliers is still developing.

There has been a strong tendency for Western companies to undervalue the importance of marketing in China, seeing it as something that takes place not at the beginning of the product life cycle, but once channel access and market penetration have been achieved. This is extremely surprising, given the sophistication of marketing techniques in the West, and may result from a lack of knowledge of the target market, as well as a lack of confidence that marketing techniques will be successful.

Focus on product, channels and price, rather than promotion
If Chinese companies tend to regard promotion as the only aspect of marketing, there is an opposing tendency for Western companies in China not to pay promotion enough attention. Western companies entering the market have frequently conducted some kind of channel (place) research, as well as an examination of the likely prices the market will bear. They have usually given a good level of consideration as to which products will appeal, albeit with insufficient thought to how these will need refining. However, analysis of the market assessment research being conducted by market research agencies in China will tell you that the 4th ‘P’, promotion, has often been completely ignored. Company resources have been thrown into understanding the size and nature of the market opportunity, with much less emphasis placed on how that opportunity should be communicated directly with the target market.

‘We know best’
A valid criticism made by Chinese businesses of their Western counterparts is that they sometimes appear hard-wired in thinking that everything they do is automatically superior to the local competition. Essentially, Western companies forget that marketing is about the profitable satisfaction of needs, and that if a need is different in China to the West, then the value proposition must also be different. Westerners tend to try to ‘re-educate’ Chinese buyers, rather than simply providing a value proposition that meets the market’s existing needs.

“Marketing is a ‘Western’ discipline – it’s less important in China”
Some Western companies, many of them guided by Western market entry consultants, tend to overstate the importance of relationship building in China, in that they see it as a substitute to marketing effort, rather than a complement. Good salespeople are sometimes left stranded alone in a small representative office, with no marketing capability to complement or assist them.

Communication problems
It cannot be denied that there remains a significant language barrier between Chinese and Western companies, albeit one that is closing as huge numbers of Chinese businesspeople learn English and increasing numbers of Westerners learn Chinese. Once companies need to interact at an operational rather than strategic level, mutual linguistic understanding can often be lacking.

Tips For Successful Selling In China

So, based on our own experience of selling in China, and in particular the experience of our clients and survey respondents, are there any ‘golden rules’ that can be used by foreign companies looking to market and sell in Chinese business-to-business markets? The answer is, of course, that there are differences by industry, geography and a host of other factors. We would argue that it is perfectly achievable for a Western company to succeed in the Chinese market, so long as it remembers the basics of marketing, and is prepared to adapt these to the local environment:

Remember the marketing basics – Product, price, place and promotion are all important. All should be researched before and after market entry, in order to ensure that the value proposition meets and continues to meet the target market needs.

Patience – Patience is required when applying the marketing basics to the local market. In particular, the sales process is longer and more complex than in Western markets, and local buyers will take time to be convinced that a Western company has the ‘local’ credentials to meet their needs.

Listen – Only by listening will you be able to understand and therefore meet the local market needs. Chinese companies do not want to buy a product or service that has come straight off a shelf in the West.

Relationships – Focus, but do not over-focus on relationships. Any salesperson must be prepared to be ‘friends’ with a potential supplier. However, this is as well as, not instead of, the 4 P’s of the marketing mix.

Be confident in your quality – Western companies start from a strong position, in that they are usually assumed to have excellent quality. Focus on the value you add, and be prepared to explain why you can add value in China specifically.

Be methodological, but flexible – One of the qualities that defines Western businesses is their methodological approach to doing business. It is clear that when this turns into a dogma about how business should be done, Chinese companies quickly lose interest in your offering. However, do not be afraid to highlight the methodological nature of your offering, as this is something that is valued by Chinese businesspeople and seen to be lacking in some Chinese businesses.

Be prepared for plenty of negotiation – The Chinese approach to completing deals relies heavily on many rounds of negotiation, and this is something that any potential supplier must be aware of. It is almost inconceivable that your first proposal (particularly your first price) will be accepted. Companies wishing to do business in China should consider the price they are willing to accept for their offering, but never open negotiations at this level.

Avoid exaggeration – Focusing on the credentials you have, rather than exaggerating to make up for perceived deficiencies, is to be recommended. Chinese companies want above all to trust their suppliers.

Matthew Harrison is a Director of B2B International and B2B International China, and currently based at our office in Beijing. If you would like to share your views on this paper or hear more about our research, consultancy and training services in China, please call the Beijing office on +86 (0)10 6515 6642. Alternatively comments and queries can be emailed to beijing@b2binternational.com.

from b2bsee * B2B Blog

This blog is the first place you will be able to read our latest white paper written by Matthew Harrison, Director of B2B International China.

Marketing and Selling to Chinese Businesses
By Matthew Harrison, Director of B2B International China

About This Paper

This paper is based on 100 in-depth interviews with business owners and senior purchasers throughout Beijing and Shanghai. Companies of all sizes were interviewed, from those turning over US$1.5m through to multinational companies. Companies were divided into quotas to ensure a cross-section of different types of manufacturing and service companies.

About B2B International China

B2B International’s Asian office provides marketing research, marketing strategy consultancy and marketing training courses to Western and Asian companies alike. The company specialises in obtaining information direct from Asian markets and converting this data into intelligence and advice. The team is based principally in Beijing but specialises in obtaining and analysing information across the whole Asia Pacific region.

We provide a range of services designed to:
• Help Western companies with a presence in Asia expand and strengthen that presence
• Help Western companies without a presence in Asia establish a presence there
• Assist Asian companies establish a presence in Western markets
• Provide training and consultations on marketing techniques and strategies to Western and Asian companies alike

Introduction

The question of how to market and sell to companies based in China is one that is debated endlessly by foreign companies seeking to profit from the huge potential of the country. Views expressed by businesspeople claiming to know the secret of success in China vary wildly, from those (generally newcomers) who say that marketing and selling in China is ‘just like home’ through to those (usually those with at least a couple of years’ experience in China) who exaggerate the unique nature of Chinese business and Chinese people to such an extent that selling in China sounds like an impossibility. The reality is that these two positions are both equally crass and incorrect – there is no reason why a Western company with a flexible, patient and ‘listening’ approach to marketing and sales should not succeed in the Chinese market.

This paper is based on a survey of Chinese business opinion in the two key cities of Beijing and Shanghai. Our aim is to dispel some of the myths propagated about Chinese business, and explore the reasons behind both successful and unsuccessful marketing and sales approaches in China. We do not seek to provide definitive ‘one size fits all’ answers to companies looking to establish or increase their presence in China; rather to put forward some general guidelines for companies from outside China to bear in mind.

Chinese Attitudes Towards Marketing and Sales

It is worth mentioning straight away that the principle of ‘marketing’ in business-to-business markets is less widely recognised in China than in more mature markets. Commonly, marketing is viewed as a service department for the sales department, its role sometimes seen as little more than taking care of the company logo and brochures. In short, marketing is defined by many in Chinese businesses as consisting of only the ‘promotion’ element of the 4 Ps. ‘Product’ is the job of engineers, ‘price’ the job of salesforces and ‘place’ the job of senior management. At worst, marketing departments are derided as ‘Spending departments’, their apparently superficial output seen as a poor substitute for the relationships that are so important in a Chinese business environment.

Figure 1 – The 4 Ps Of Marketing

In contrast to some Western markets, the salesperson and more broadly the principle of selling are widely respected in China. Two issues perhaps lie at the core of this fact – firstly the entrepreneurial spirit of the Chinese people, and secondly the importance placed on relationships in business decision making. A good salesman must almost by definition be adept at forging not only relationships, but also friendships with potential customers. This makes a good salesman respected almost by definition, and also implies a long sales process, with all of the on-the-ground presence, learning and patience that this involves.

Part 2 will be published on Wednesday 20th June.

from b2bsee * B2B Blog

With the launch of Apple’s much mooted iPhone on the horizon, many leading phone manufacturers are rallying together to try and proactively take a lead… or is it just a reactive damage limitation exercise? Can the might of the iPhone brand and all the hype surrounding it take on an entire industry? Only time will tell.

The article below, from the Financial Times has all the details.

Mobile phone groups take on iPhone
By Maija Palmer in London
Published: June 13 2007 22:02 | Last updated: June 13 2007 22:02

The mobile phone industry will on Thursday launch a challenge to Apple’s iPhone, by unveiling a low-cost, flat-rate music service that can be accessed on most handsets in Europe and Asia.

The MusicStation service has backing from the handset manufacturers Nokia, Sony Ericsson, Motorola and Samsung and 30 mobile phone operators and all four music majors – Universal Music Group, Sony BMG, EMI Music and Warner Music International – as well as several independent labels.

Music companies are hoping that MusicStation will help kick-start mass-market consumption of music over mobile phones.

The service launches just ahead of Apple’s iPhone debut in the US on June 29. The iPhone will give users easy access to Apple’s iTunes online music store, building on the success of the company’s popular iPod portable music player.

“We were keen to jump through the finish line first,” said Rob Lewis, chief executive of Omnifone, the privately-owned UK start-up company behind the MusicStation service. “All European and Asian consumers will have access to MusicStation well before iPhone’s arrival in those regions.”

Telenor, the Scandinavian operator, will be the first to launch the service in Sweden, but it is expected to be rolled out throughout Europe, Asia and Africa over the next few months.

Manufacturers will begin producing handsets that have been pre-loaded with software to access MusicStation. Many of these devices will be mid-priced, in contrast to the iPhone, which will have a price tag of about $499. It is estimated that 100m MusicStation-enabled handsets will be sold over the next 12 months, dwarfing the 10m iPhone handsets Apple aims to ship in the next year.

The industry estimates that mobile music consumers on average download just six songs a year, at a typical price of £1 (€1.48) a song.

Music groups stand to increase their earnings significantly by taking a share of the weekly €2.99 flat fee that MusicStation charges consumers for unlimited access to a catalogue of more than 1m songs. The fee includes all downloading charges.

Users will be able to listen to the songs and store them on the phone, but not burn them on to CD or distribute them over the internet.

from b2bsee * B2B Blog