Marketing, Sales and Pricing Strategies for the New Economy: Explained in Detail-Part 1

Marketing, Sales and Pricing Strategies for the New Economy: Explained in Detail-Part 1

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Imagine that you want to make a deposit into your bank account. Right now you can either do it electronically through your smart phone or an ATM, or you can do it in person with the help of a teller. In the near future, however, you may have to pay for the privilege of using the teller. That hasn’t become standard practice, yet, but, it could happen soon.

Now imagine a world where your customers ask you to open your books to them, review each line item with them, and take out any costs not directly related to you doing business with them. Then, they will tell you how much they’re willing to pay for your product or service. R. Sam Bowers recently spoke to my CEO and Senior Executive Peer Advisory Groups and he challenged my members to prepare for this reality. For some of my members, particularly those in construction and printing, this is a reality now.

The question is not if these changes will affect your business, but when. Technology and 24/7 connectivity have decimated certain industries. Just ask (former) travel agents. On the other hand, Hotels.com and Priceline.com took advantage of technology and started new businesses. A key to your success is being prepared to respond to the impact of new technologies and the buyer’s access to pertinent knowledge.

I am sharing his message with you to help you think differently about your own business. The following is a summary of his key points, which I am covering in several blogs.

The CEO’s Role

As CEO, it is your job is to focus on the future of your business while letting  your executives run it. Here are some vital questions that you need to answer:

  • How will you re-design your business to thrive in a world where things are no longer sold to customers, but bought by informed and educated ones?
  • How quickly is technology changing in your business or industry?
  • What information can your prospects access that affects what, and how, they buy?

In the past, companies traditionally sold their goods and services through personal relationships developed by sales representatives. The Internet has quickly and dramatically upended this system and eliminated the need for many of these personal relationships. While sometimes disruptive and unsettling, the good news is that, with the internet, the entire world is now your market!

New Economy Vs. Old Economy

Commoditization occurs when buyers have more than one equal choice. With the power of the internet, buyers can usually find at least two choices for any transaction they want. Once buyers believe that service and quality of their choices are equal, then they will next look for the best price. In this way, virtually any product or service can become a commodity.

Let’s look at an example of a traditionally non-commoditized service. Imagine that you need to reserve a hotel room for an upcoming trip. Based on previous experience you prefer either the Ritz Carlton or The Four Seasons. You visit each hotel’s website and check room availability at your destination. You find that both hotels have the same type of room available in the same general location. Based on the information available, either choice will equally meet your needs. How do you decide? Most likely, you’ll select the one with the lower price. Even for these premium brands, therefore, price becomes the differentiator.

If you can go online and make this type of transaction on your own, do you really need, or even want, to talk to a salesperson? How do you feel about paying extra to do so? Herein lies the key to the new economy: customers are no longer willing to pay for anything that they don’t want or need.

Here are some of the key differences between the old way of doing business and the quickly emerging new way:

Old Way

New Way

  • Things were sold.
  • Things are bought.
  • Personal relationships where customers wanted, and needed, face-to-face contact.
  • Electronic relationship. Customers avoid face-to-face contact.
  • Gave away information and assistance for free via salespeople.
  • Knowledge is separated from execution. Charge for execution and consulting.
  • Provided customers more than expected.
  • Meet customer expectations (i.e be “good enough”) to control cost.
  • Service and quality are differentiators.
  • Service and price are expected. Price is the differentiator.
  • Key skill was sales.
  • Key skills are marketing, buying and logistics.
  • Improved quality drove prices higher.
  • Quality improvements raise costs.
  • Protect price at all costs. Add additional services at no cost.
  • Offer customers price reduction by decreasing services.
  • Controlled your image through branding and advertising.
  • Social networks (like Yelp) control your image.

This is just an introduction to the changing model of business. In Part 2, I will review his model in more detail.

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