A word about Pricing

One of the things that often confuses people about this whole subject is pricing. People who are as Traditional as Mcdonald’s Apple Pie start to think they might be a NEO because they bought something pricey. Whereas someone else, who is as NEO as the Organic Apple Crumble at The Kitchen in Boulder, Colorado start to confuse themselves, just because they switched cable providers to save $30 a month.

Let’s try and clear this up. Traditionals spend money, lots of it. And NEOs often shop on price. In fact, (and this is really important) when price is the only differentiator, NEOs behave exactly like Traditionals.

Confused? Don’t be.

Consider telephone service. Does it really matter if you get it from the cable company or the local Telco? Not really. They are both huge corporate behemoths that are almost entirely indistinguishable. The product is basically the same – I pick it up, dial a number, talk, put it down – not much differentiation there! As a result, the only relevant factor between the services is price, so it is entirely logical that whoever offers the best price / bundle / deal is the one that both NEO and Traditional alike would chose.

This is the crux for marketers and entrepreneurs in all sorts of industries. If you are trying to sell something that is basically exactly the same as the next guy’s product or service (from the consumer standpoint not your VP of Engineering’s) then you must be the lowest price provider if you want to win. No list of features or inane lifestyle marketing imagery is going to save you (Sorry 99% of all real estate developers!)

I love Mark Wattles', the CEO of Ultimate Electronics angle on this. Their corporate tag line is “if you buy it somewhere else, you will pay to much.” Brilliant. This is price orientated Traditional marketing at its best. Lowest price, no effort. Of course it means they have very low margins and need to move a lot of inventory to make money, but that’s exactly who they are. Wal-Mart

I am in no way ever going to criticize people like the Wal-Mart or Mark Wattles and not only because they have great lawyers. These guys are rock stars, in that they have tapped into the psyche of the Traditional consumer and the undifferentiated NEO and Evolver and completely nailed it. They deserve their success.

However if your business goals aren’t defined in the millions of units, this poses a major problem. Almost every industry has a low price competitor. If you cannot meaningfully distinguish why you should be valued in a different way is obviously the king of this. No product differentiation, authenticity, design, provenance, or anything else to connect with on a personal level - just the lowest price. Guaranteed. AND understand how to connect with people who will pay the difference, then you are in a trap. Stuck in the middle between the price is everything crowd and totally missing the unique discovery higher margin group. This is not a good place to be.

After all, nobody ever got rich with a marketing plan that ran “Buy anywhere else and you will pay a little bit less than we charge.” Ask Circuit City!

NEOBLOGGER