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How to sell something that is almost free

water-in-the-desert

An amazing article from the Guardian Liquid assets: how the business of bottled water went mad covers almost every aspect of marketing.

When selling something as ubiquitous as water, differentiation from your competitors is key.  How do you differentiate?  One way is through the right marketing mix.  The marketing mix is comprised of:  Product, Promotion, Price, and Placement.  Also known as the 4 P’s of Marketing.

Product:  Of course it’s not just water.  There is value added features, such as electrolytes, flavors, caffeine, anti-oxidising manganese, etc. that companies are emphasizing to differentiate their product from the competition.

There was Life, Volvic, Ugly, Sibberi (birch or maple), Plenish, What A Melon watermelon water, Vita Coco, Coco Pro, Coco Zumi, Chi 100% Pure Coconut Water, Rebel Kitchen Coconut Water and coconut water straight from the nut (“you have to make the hole yourself”, explained a shop assistant). Also: an electrolyte-enhanced water pledging to hydrate you with 40% less fluid than ordinary water (Overly Fitness), a birch water offering “a natural source of anti-oxidising manganese” (Tapped) and an alternative birch water promising to “eliminate cellulite” (Buddha). There was also a “water bar” – a tap in the corner of the shop – that, according to the large sign hanging from the ceiling, offered, for free, the “cleanest drinking water on the planet”, thanks to a four-stage process conducted by a “reverse osmosis deionising water filter”.

You can read more about the concept of “product” from a marketing standpoint in my post about the failed McPizza.

Price:  Another way to differentiate yourself from the crowd is by pricing your product/service at a rate that is considerably higher than your competition.  How about a $100,000 bottle of water?

This self-proclaimed “champagne of waters” quickly won FoodBev Media’s Beverage Innovation award for the “World’s Best Still or Sparkling Water”. A case of 24 500ml bottles is $72, while a bottle from the “Luxury Collection, Diamond Edition” will cost you $100,000. It has a white gold cap set with more than 850 white and black diamonds and holds the profoundly questionable honour of being the world’s most expensive bottle of water. If you buy it, Riese will present the bottle to you in person at a private water tasting anywhere in the world.

Promotion:  Promotion goes beyond just advertising.  What do you communicate?  Once you’ve exhausted the typical “it’s delicious!” “it’s cool!” “it’s a great value!” You can go into educating the market about the process, the people, the ingredients, etc. that goes into your product/service.  It might be the same things as your competitors, but if you say you “add double the standard amount of X” while your competitors just say “they’re delicious!” then your market might assume your competitor does not add double the amount of X.

Fiji water, for example, contains 210mg TDS, including 18mg sodium, 13mg magnesium and 18mg calcium. (Fiji appears to have pulled off some fairly heavy-duty trademarking, including “Untouched by man™” and “Earth’s finest water™”.) Compare those numbers to San Pellegrino, which contains quadruple the TDS, at 925mg, including 33.6mg sodium, 53.8mg magnesium and 178mg calcium. Fiji, with far fewer solids, tastes smoother, while the San Pellegrino is bolder, saltier and naturally fizzy.

Melted iceberg essentially has no taste, having the lowest TDS (9mg) of any water on earth. It is like the ur-water, the water that pre-dates all other waters. “This is your starting point,” said Leonard, gravely. “Your baseline.”

Surprising right?  Now tell me you’re not at least a little curious as to how the various waters taste.  If the marketers did their jobs right, you might at least be open to trying the product once.

Your can read more about promotion in my posts about Coachella, and Quiksilver.

Placement:  Placement mainly deals with distribution.  Which is, where does your customer purchase your product/service.  You’re not going to sell a $10 bottle of water at a gas station.  You have to sell your product/service at where your market is.  They are upper-middle class, baby boomers living in Massachusetts?  Distributing through Whole Foods or Wegmans is a start, if you can meet their supply chain management requirements.

The dress code of the clientele in Planet Organic, Notting Hill is gym chic. On a hot day in mid-August, the men wore mid-thigh shorts, pectoral-enhancing vests, neon Nikes; the women were in black leggings and intricate ensembles of sports bras and cross-strapped Lycra. They had all either just worked out, were about to work out, or wanted to look as if working out was a constant possibility.

They examined the shelves. As well as the usual selection of kale crackers and paleo egg protein boosters, there were promises of wizardry, such as a packet of Alchemy Organic Super Blend Energy Elixir (£40 for 300g of powder). But never mind the food. Life, in 2016, is liquid. Opposite a display of untouched pastries and assorted bread products (who, in Planet Organic in Notting Hill, still eats bread?), were the waters.

The marketing of bottled water is pretty amazing amazing.  Some is ridiculous snake-oil shilling.  Some may have benefits, depending on the needs of the individual, that regular water cannot meet.  Nonetheless, it is a $5 billion dollar industry in the US that is projected to grow 5-6% over the next five years.

How a little movie called Cowboys and Aliens got made

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Step 1:  Change the goal post of the definition of “hype”

Step 2:  Create hype

Let’s say you have a product that you want to build hype around.  How do you go about it?  If you’re Scott Rosenberg and Ervin Rustemagic (of Men In Black fame, which started as a comic book) then you go about it an atypical way.  Rosenberg and Rustemagic purchased the rights to a western comic book called Tex.  Tex was a good comic but at the time, Westerns weren’t a popular movie genre.

So they spruced up the comic to a Sci-Fi Western!

Then it languished in development purgatory.  For years.  So Rosenberg came up with the novel of idea of making the script into a “graphic novel”.  If he couldn’t get the script onto the big screen, he’d get in paperback!  This is because lots of popular comics and graphic novels are turned into movies (i.e. Spiderman, Captain America, etc.)

This is where step 1 comes into play.  Rosenberg had to make the script the #1 graphic novel in the country.  Rosenberg intentionally choose graphic novel instead of comic as the format because to be the #1 comic in the country, he’d have to sell almost half a million copies.  For graphic novels, it’s a more manageable low tens of thousands.

cowboy-and-aliens-cover

So Rosenberg got a bunch of the 144 page graphic novel printed up.  Normally graphic novels are priced $10-$15, but because he need to move a lot of copies he priced them at $4.99.

In addition to selling through normal comic distribution (which Rosenberg negotiated a few rules to make happen), he contacted a number of prominent comic book stores throughout the US and had them “purchase” the graphic novels for essentially nothing.  The comic book stores had to “purchase” them or else it wouldn’t be counted as a sale.  Rosenberg then gave the stores a check to purchase tens of thousands of dollars of the graphic novel.  Overnight, thousand and thousands of copies of the graphic novel were “sold”.  The comic book stores would sell them for 50 cents or just give them away from free.  Unsold ones were tossed into the dumpster.

This is where step 2 occurs.  Rosenberg wrote a press release claiming the high number of sales and that it outsold Frank Miller (of Sin City fame).  Also, Entertainment Weekly reported the sales chart of one store (which received the deeply discounted copies) which happened to list Cowboys and Aliens as the best selling graphic novel of the month.

A few years later, Cowboys and Aliens hit theaters.

Of course, he didn’t actually sell the copies that were actually given away.  This is arguably fraud.  However, it does show their creativity in convincing the studio heads / decision-makers in getting a stalled project moving.

When faced with a hurdle, a lot of creativity (as long as it is not fraudulent) can take you a long way.  Another great marketing story is in my article about Shep Gordon.

Adjusting to market demand

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This is what allowed Zara founder, Amancio Ortega to become the richest man in the world (for at least a couple days).

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Fast fashion:  Customers wanted the latest fashion, yesterday.  Zara’s competitors were taking too long bringing the latest designs to market.  Other retailers try to decide what to make, then produce it.  A push-model of product development.  For example, GAP and H&M will take 5 months to make, design, and distribute new products.  Zara listens to what their customers are asking and buying.  A pull-model of product development that takes Zara 3 weeks.

Of course it’s not as easy as just asking what each customer wants.  Lots of times, people don’t know what they want until it’s shown them.  Henry Ford once said if he asked what his customers want, they would’ve responded with, “a faster horse.”  Also, changing from a push-model to a pull-model requires overhauling a company’s supply-chain.  Raw materials purchases buy 6 months out or more.  Trying to get a refund on 100 gallons of dye is not as easy as it sounds.

Although Zara is not considered inexpensive, lower-market competitor Forever 21 has taken it to the next level.

Cheap:  In addition to fully embracing fast fashion, Forever 21 offers their products at very low prices.  This has allowed Forever 21 to have revenues of $4.4 billion in 2015.

 

Take away

So how do you incorporate market feedback in your business?  Generally, smaller companies have an easier time making adjustments because it is a more agile company with more one-on-one contact with vendors and customers.  In business school I asked billionaire Leonard Lavin, founder of Alberto-Culver (maker of Alberto VO5 hair products) about his education background.  He said he had an MBWA.  Master By Walking Around.  This meant, he walked around his business and talked to his employees, his customers, his vendors.  He conducted market and industry research everyday.  If you don’t take the time to talk to your customers, it might be detrimental to your company’s success further on down the road.

The Lean Startup

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Last week a client asked me about the Lean Startup.  As a small independent baker, the did not  Learn Startup methodology didn’t really meet his needs.  Actually for many small businesses, they’re already utilizing some of the Lean Startup’s principles:  split testing (e.g. which new cupcake idea is selling better), pivoting (e.g. advertise better selling new cupcake), build-measure-learn (e.g. ask customers what they like about each cupcake, why, etc. then adjust the recipe if needed).

The Learn Startup is more applicable to large/new & complex products and/or services.  When you have hundreds of ideas, tweaks, iterations, it can very easy to get caught-up in the labyrinth of product/service development.  Essentially, it comes down to starting with a minimum viable product (MVP), have users play around with it, gather data on (i.e. with actionable metrics, interviews, use studies, etc.), decide on which steps to go next.  This measured, calculated, and insightful process prevents over-developed products/services that do not necessarily have a market/meed a need.

As mentioned, the Learn Startup method might not be useful for all entrepreneurs but if you are in the processes of developing a large/complex product or even a brand new/novel product, it might be worth your time to check out this book and install some informational gathering and pivoting processes to make sure that it closely meets a market need.

How to Beat Amazon

vs amazon

With Sport Chalet closing and even Walmart showing losses, Amazon is the clear competitor to beat.

So far no one has a clear winning strategy:  click and mortar, brick and mortar, online, no one is safe when it comes to retail.  However, there are some that are surviving and thriving by offering something online purchasing cannot match, a visceral shopping experience.

Retailers have to make their stores into a destination.  Funky decoration, unique customer experience, seminars/lectures, a sense of community, etc.  This is really where the personality of the business (the “brand”) is shown.

One example is The Last Bookstore, a bookstore in Los Angeles.   The photos below show a stark difference from Barnes & Nobles.  These aren’t Bookstore temporary holiday decorations but long-term attractions that draw crowds.

This piece invokes a sense of fantasy and imagination that some fictional works brings to readers.

Like other bookstores, there are stationery/craft goods for sale.  The wheel doesn’t have to be reinvented…just tweaked to a unique way.

This “nonperforming” space, in the traditional retail paradigm, would be scrapped in conventional stores.  The book tunnel is a big draw for shoppers.

The current version of The Last Bookstore is actually its 3rd stage.  First opened in 2005 in a loft, it quickly expanded into the former Citizens National Bank’s 22,0000 sq. ft. downtown space (an insane space for any retailer let alone an independent one).

Experiential shopping obviously has a bunch of challenges; you may need a unique space, maintenance of store fixtures, uniquely trained staff, only local reach (for the time being which I will get into at the bottom of the article), possible higher insurance, and other differentiating factors which all can result in tighter margins.  However, having a challenging strategy is better than having none at all.

Implementation

  • The Last Bookstore:  They are known as the largest independent bookstore in Los Angeles.  They have a crazy interior.  They also sell used books for $1.  This price point is important because buying a used book online will not be cheaper after shipping is factored in.  Also, books offer a fundamentally different tactile experience from eBooks.  So customers walk in to check it out.  They wander the vast selection, and take pictures of the funky decor.  They  wander through the store they touch items, a psychological factor in sales.
    • Now they’re are not just a consumer.  Now they’re a consumer at a super hip, independent, small business.  They feel good about themselves.  They tweet to their friends about it.  Repeat.
  • Clothing Retailers:  Using my client Maitri Yoga as an example, a yoga clothing retailer; don’t sell too many existing/famous brands.  About 40-60 (name/unknown) mix.  You’re not going to be able to compete on price and there are also covenants on discount pricing for name brands.  People already know the sizing for these brands so they will use your store as a showroom (like Best Buy used to be before offering price matching).  Sizing and other factors are not uniform throughout clothing, so the product needs to be felt and tried on.  Therefore you have to offer goods that aren’t known and aren’t sold on Amazon.  They come in for a Prana top but see a new unknown brand.  Now you’re the hip store that sells up and coming brands that aren’t offered on Amazon.  In order to do this, you and your purchaser/procurement officer has to know market trends, know which brands have good quality, nice design, etc.

The work doesn’t stop there.  The store has to be laid out in a manner that draws in the customer.  New items in the front.  Focal decor near the front and in the center/back.  You’re going to have to go to estate sales, yard sales, furniture store liquidation sales, etc. to purchase furniture, decorations, accent pieces that fit the company’s brand.

Additionally, you have to build community engagement.  If you’re a Williams Sonoma, you have to offer cooking events.  If you’re a Nike, you have run Clubs to build engagement. Potential customers will come in for the event but may purchase something that caught their eye.  The costs for holding public relations activities such as events can grow beyond the return on investment so keep an eye on public awareness expenses.

The good news for small business owners is that the unique, boutique atmosphere each independent retailer has cannot easily be matched by larger companies.

Every industry is different so I would have to consult with you on an individual basis; then look at industry & market trends, the culture of the brand, the company’s financials (look at its performing items and overhead), etc.  This is all under my strategy consulting services.

 

What is Strategy Consulting?

Strategy

One of the services I offer is strategy consulting.  However, the name is quite vague so what is strategy consulting?  It is a lot of things.  It varies by the needs of the client.  Some clients need help developing an overall strategy for the business.

Say they have a product but not much else.  So they need everything from naming of their product, research on where to sell their product, team building, etc.  Naming might require a psychographic analysis of branding.

If they are a little farther along, it can be an audit of what they’re already doing, or analysis of where to go next.  A business might be looking at weighing the pros and cons of expanding to a new market, introducing a new product, do a product overhaul, etc.  Product overhaul might require a net present value calculation of multiple alternatives.

Every situation is unique so let’s talk and figure out what you need.

Coachella and Advertising

Sunset

Of course almost every company needs to advertise.  But where?  Targeted advertising is most effective.  So just put a sign at where your market hangs out (what’s “market”?  check out my article on some commonly mistaken business terms)?  You can put up a sign but it comes off as inauthentic and lazy.  You have to deliver the brand message/concept in a way that will be received.

H&M is sponsoring Coachella for its seventh year.  Premier music festivals can make over $1 million by selling stage-naming rights to corporate sponsors.  However, other businesses are getting on the ground-level and making for a more interactive experience.  One way is experiential marketing / promotional events:  Levi Jeans’ Pool Party at Coachella.  Yeah, you know it’s commercial but it still creates a positive association with the brand.  Yes, the same positive association used on all animals to create habits.  Habits = sales, if ingrained deeply enough.

Where do you find where your market hangs out?  Google industry trade shows, magazine, clubs, etc.  Selling knitting needles?  Find influential people on Pinterest and send them a sample.  Opening a bakery?  Go get a booth at the local farmer’s market and get to know those in the neighborhood.  In Supermensch: The Legend of Shep Gordon, Shep sold out Alice Cooper’s show in London by having a billboard truck advertising Cooper’s show breakdown in Piccadilly Circus (one of London’s busiest roadways) during rush hour traffic.  So for hours people helplessly saw in person and on the news, Cooper’s ad while stuck in traffic for pennies on the dollar!!!  There are only as many ways to promote your business as the imagination allows.

So don’t just spend a ton of money and blow it into the wind.  Do a ton of research and then inject that into a targeted promotion as part of an overall marketing campaign strategy.

How to be more efficient

efficiency

First, get motivated:  As the saying goes, “if there’s a will there’s a way.”  Motivation is key for anything.  If you want anything bad enough you’ll do what you have to do to get it. Every other efficiency tip is a “way” but the will must be there to do anything.  Believe in yourself and get excited about your vision. Some great resources on Reddit’s  Motivation and LifeProTips pages.

Next, schedule time well:  The most successful people in the world have the same 24 hours as everyone else.  Although there are thousands of time saving tips, here’s one that I found to be very helpful:  schedule calls.  How often do you call someone or receive calls while they/you are in the middle of something?  It takes a typical office worker an average of 25 minutes to return to the original task after an interruption.  When you know a call is coming, you can have whatever materials, questions, etc. prepared beforehand.  This brings me to my next point…

Then, declutter:  An organized desk, computer desktop, etc. allows you to quickly find what you’re looking for.  It also helps you concentrate because there are fewer things out there to grab your attention.  If you don’t need it, file it or throw it away.  If you’re not sure, scan it and save it in the cloud.  Now you have it everywhere and nowhere (very zen, huh).  Ultimately, you’ll need a clean space to work.  Now that you’re prepared to work, this brings me to my last point…

Lastly, work focused:  Now that you’re working, you have to maximize your work-time.  One thing that works very well for me is listening to music.  Not just any music, for me I like non-lyrical, medium-fast tempo, instrumental music.  Spotify has great playlists that I follow.  Hours of crunching numbers on excel and reading industry reports for my clients goes by faster when I’m listening to focus music.

Here are some more efficiency increasing tips in my article.

 

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