Pricing is tricky and you better pay attention what effect your next raise will have on customer demand. But, seriously! What made this Thai Restaurant change their mind? Why did they bother telling us in the first place? And, why didn't they make a new printout?
Translation: Honoured guests! August 28 we raise our lunch price to 65 kr 64 kr (64 kr = $9.00)
I have one very important principle when working with behavioral change: Don't call an idea stupid, until it's proved stupid. Because too often the most stupid ideas are the most successful.
Which perhaps will make you pay some respect to this project in Dundee, Scotland.
According to a new study in Great Britain, the gas price, despite record levels, must double before people will stop driving and start using public transport. 1.83 pounds a litre is said to be the tipping point, compared to 96.7 pence today.
In fact that makes perfect sence since the price has risen significantly already, without any major changes in people's driving habits.
This is an important signal for those who favor free public transport. Free transportation never will substitute private driving because price is not what's important. Freedom is.
May I present an alternative solution: develop a new public transportation cathegory that may compete with private driving at a price two or three times the price of today. Smaller vehicles, more fine-grained driving routes and easy to access. If freedom is what people want, that's what they should get.
Last week I was working in Vienna from my hotel room. To hook up on the Internet my only option was to use a 24h wifi-connection from T-Mobile for €16. So I did. I spent an hour by the computer before breakfast. When I returned I couldn't log in. So I tried to open from the original login page, only to discover a new €16 period kicked in - By accidentally having pressed one single button I was now paying €32 for 26 hours of airtime.
I was furious. I spent 20 minutes writing and trying to send an e-mail to customer support. It didn't go trough. During the lunch I was telling everyone I met about the story, just to get it off my heart.
Coming back to Gothenburg I checked the mail. There I discovered a letter from an English book distributor that I had asked to quit the distribution of a 4 years old fashion book my wife has written. They finally had. They also enclosed a check of £83 which was totally unexpected. In fact I thought we had to pay up our selves as the sales during the last year had been exceeded by the costs for storage. But obviously they owed us.
I shrugged my shoulders, my wife did the same thing. I don't think we even smiled. Sure it's great to get £83 but it's not really changing your life. Not even your day.
So, what's the catch with these two stories?
Well, to loose money, especially if it doesn't lead to anything, that hurts. Winning money is great but as long as it's not a substational amount it doesn't really engage us. What's substational is however depending on the context. Finding £83 on the street can make us happy an hour or two. Another £83 as a part of our everyday business is close to nothing.
Yesterday, this year's limit for new heating systems subsidies in Sweden was reached. Those who wants a €1,500 tax break for changing to renewable energy solutions now has to wait to the 1st of January 2007 to buy it, when the next round of €300 million is to be spent. Of an investment that totals to €15,000 and is financed by your house loan with record low interest rate, €1,500 is in fact not that much. Actually you will save more money in 10 months if you go from oil to wood pellets, which means there is no reason to wait. Research I have made also shows that people that have got the same kind of tax breaks before would have made the investment anyway.
But if you invest now, before 1st of January 2007, you will loose €1,500. A €1,500 you actually are entitled to.
And loosing - that hurts.
How much more productive are you using a Blackberry compared to when you had to bring your lap top? How much happier are you when you are using your Ipod compared to your old CD player? Exactly how much better does a Starbucks latte tastes compared to an ordinary coffee?
Not easy to answer, is it. Well then it´s rather hard to define how much these new (once they were) ideas are worth, even compared to similar products we previously were using. Ideas, products and services that enhances quality, make us happy or more sexy are worth paying for. For the vendor that means: Superb margins!
Products that give measurable enhanced quality or are more effective in quantative terms, wouldn't they be even more valuble then? Nope. If they are positioned only around their measubable features they are doomed to compete with these. And that's bad.
All this pops up in my mind when reading Nicholas Carrs comments on the price of search-based ads. He argues that Google Adwords has, or at least soon will, reach the point where prices must drop. Only because customers can measure, they also will see they aren't getting as much value as they were expecting, and thus turn to other channels. "The ability of advertisers to precisely measure the value of a click makes search ads attractive. But it also ensures that, in the end, the price will come to rest at a rational level"
I can agree to a certain point. If something can be measured, it will. Which is why you shouldn't give that possibility to the customer.
But. Many advertisers don't really pay much attention to the real cost of advertising, that is: how much do I pay for a new customer or increased sales per customer. Why? Two reasons:
1. There are other measures involved. How easy is it to manage and admininistrate? What's the quality of the audience (do they buy a lot, do they talk to other people)? - Price per click doesn't reflect this. Someone searching for "sending flowers" on Google is probably much more valuable to an online florist than someone who just was exposed to an TV commercial on Hallmark.
2. Advertisers are quite often rather stupid or lazy. They never put two fingers across to figure out what kind of effectiveness their offline advertising had. Which means they haven't that much to compare with. That concerns especially an early majority which now start to invest in online ads.
My point is that even in some measurable businesses price doesn't matter that much we expect it to do. Which is a good lesson. Don't bother to much to show how effective you are. Because it will always be someone who is a little more effective to half the price.
Happy new year everyone!
Especially if you're prospective hybrid car buyer in the US or a small house owner in Sweden. Because then you can profit from tax breaks you never asked for from the very beginning.
In the US you now can get a +$3,000 tax break if you buy the right hybrid car. In Sweden every new heating system, from heat pump to wood pellets stove, will lower your taxes (even if the exact amounts still are not in place).
The funny (or the sad) thing is the tax break's contribution so far is less sales. In November the US hybrid sales dropped for the very first time. And manufacturers of heating equipment in Sweden report on much lower sales during the fall.
And still, the underlying demand is sky high:
Tax incentives may not matter much to drivers anyway. Hybrid dealers
report long waiting lists and fast-selling cars, regardless of whether
people will qualify for the 2005 or 2006 tax breaks. Ahmad Rabiei, a Honda salesman in Gardena, Calif., said he has a list of 20 people waiting for hybrid Civics.
"If the car is available they get it as soon as possible," he said. "You have to be lucky."
People don't care for 30 per cent discounts if they really want something. Haven't politicians ever been christmas shopping? But if the effort to get it is little enough we can wait a few weeks for our car or heat pump.
Maybe politicans with market making ambitions would listen to the old engineering expression:
If it ain't broke - Don't fix it!
Basically, innovations can do two things: they can decrease costs and they can add quality.
The most praised innovations are the latter ones. Those that bring new functions and features, that enable us to do things we never would have been able to do before. Like the Otto engine, the mobile phone or the airplane.
However today the most successful innovations seem to be the money-savers. Inditex, Walmart, Ryan Air and IKEA all have used innovative thinking to save costs for them selves in order to sell their goods and services cheap to their customers and thus grow their market share.
Then perhaps it's not that strange that many businesses are inspired by these successful giants. "Special price" is the key to success! Unfortunately, what so often is forgotten is the fact that there is an innovation behind that ENABLES these companies to keep their low prices.
Especially this is true in the environmental industry. Innovations that add quality for the society are marketed as they were saving money for the producer. But they are not. Often the manufacturing costs are much highter than for the current alternatives, which means you are selling products cheap while producing expensively. And those who are to blame are the politicians who seem to know little about marketing.
Just look at some Swedish examples:
- The goverment wants to cut sales tax on organic foods - despite the fact it's much more costly to produce it will sell for less. When it in fact adds quality.
- Ethanol is marketed on price - despite the fact it would be as expensive as gasoline if the two fuels would have been tax neutral, if not more expensive.
- Wood pellets burners are sold as a cheap heating solution - when it in fact is not if the same level of comfort should be maintained for the consumer, as compared with oil-heated systems.
All these products add quality to the consumers. Organic food are better for our health, ethanol adds better performance and may have better local availability and price stability than gasoline. And wood pellets is better for old houses, adds genuine heating comfort and also have much better price stability than oil and electricity.
Conclusion: Politicians are lousy marketers. And they create sales arguments that only excist in fake markets. You can't sell British Airways or SAS tickets the same way you sell Ryan Air tickets. Because they are produced differently. Very differently. This is true also for environemtal products. If you have something that is better than the current alternative, then market it that way. And if it's not cheaper. Then don't market it as it was.
I don't know the rate of heart attacks caused by parking trouble, but I am sure it's significant. Thus solutions are welcomed.
In Pacific Grove, a coastal resort town by the Monterey Bay in California, they have found a solution inspired by the hospitality business: increased parking turnover. By using a digital system that charges you more and more per hour they enable people to make small arrends while long-term parkers are to find spots outside the city. The parking spots are equipped by a wire grid under the pavement that triggers a sensor when the car moves, resetting the level to the next parker.
Hopefully the solution can decrease the so annoying hunt for parking spots, which also causes a lot of polution.
