Pricing Strategies: Is Competing on (Low) Price A Sustainable Strategy?


The following statement is part of “Pricing Strategies 1 on 1”: positioning your brand as the lowest priced competitor is a risky strategy. And in most cases it is, at least in theory.

The economic reality is different. With little to no meaningful differentiation between products,  operating on skinny margins is a common strategy. The low price pressure is experienced by everyone in the supply chain: manufacturers, distributors, agents, and service providers.

The “Extreme” Consumer

As a society, we’ve come to expect excellent products at rock-bottom prices, and flawless customer service. Consumers have become polarised in their spending habits: the same person can spend a lot of money on things and experiences that convey a certain status, and close to nothing on other life necessities that are not as “flashy”.

There are many reasons behind this trend:

-the job market is more precarious than ever, especially for millennials. Full time jobs that pay well, are relatively stable and offer good benefits that have been enjoyed by the baby boomers are quickly disappearing. The new jobs are often short term, part-time, and offer hardly any perks, hence the need to spend wisely.

-the gap between the rich and the poor is widening globally. More people live frugally, either by choice or necessity.

-millennials are less obsessed with owning “things” put more value on “experiences” . “Owning” has been replaced with “sharing”.

-the same person can illustrate the spending extremes, indulging in luxury purchases that convey a particular status, while rationalising drastically in non-essential categories.

The “Stuck In the Middle” Danger

The above trends illustrate a new reality brands have to face in search for identity: the mid-market segment is slowly disappearing. Being “stuck in the middle” is a serious threat for many brands.

Nowhere is this trend more noticeable than in retail. In North America, 2017 has been a brutal year for retail. Many well-established brands, that have been a staple for many generations, have either filed from bankruptcy or announced massive store closings: Sears, Toys ‘R’ Us,  Gymboree, Payless ShoeSource, RadioShack, just to name a few.

As players is the medium price point are struggling to find their value proposition, brands at the 2 extremes are prospering.

Given this reality, brands will have to make a choice to move either up or down, and re-invent themselves. Many will find it easier to move down, as turning a generic brand into a luxury one is an almost impossible task.

Is the Low-Price Strategy Viable?

As we’ve seen above many brands are forced to consider becoming a low-priced competitors, which begs the question: can you make the low-price strategy work?

The short answer is yes, if executed properly. Many businesses claim to offer “best-value” to their customers, but for most the promise is just a meaningless slogan.

When it comes to executing the “best value for money” strategy to almost to perfection, I can’t think of a better example than American retail giant Costco.

For those of you not familiar with the brand, Costco is the second largest retailer in the world after Walmart, and  the largest retailer in the world in certain categories such as wine, organic beef and rotisserie chicken.

While most  retailers struggle to attract customers via expensive marketing campaigns promoting aggressive price cuts, Costco customers have to pay an upfront annual fee for the privilege of shopping there.

Enjoying a yearly membership renewal rate around 90%, Costco plans to open another 28 locations in 2018. Costco has also built a reputation of looking after their employees, who enjoy good benefits and work conditions.

How does Costco manage to prosper, at a skinny margin (said to be between 8%-10%) in an environment where most competitors are forced to close stores or file for bankruptcy? A closer look at its business model will give us the answer.  Here is how Costco does it:

Narrow product assortment- traditional business wisdom dictates that the more products in the assortment, the higher the sales. Line extensions are the preferred growth strategy, to the point where consumers are overwhelmed by the number of choices in every category.

Costco assortment consists of 1 or 2 choices in each category, which translate into high inventory turnover, low acquisition costs, and maximised store space. Costco shoppers deal with less uncertainty as to what product to buy, the limited options forcing them to make a decision.

Smart packaging: every product manager knows that packaging costs can really add up. For some brands packaging is part of their DNA (Apple for example). For Costco, packaging has a strictly functional value. As a result most products are backed bulk, directly on pallets, with no fancy signage. In its quest for cost efficiencies, the retailer pays attention to the smallest detail, such as how the shape of the packaging influences the number of products that can be stored on a pallet.

Excellent buyers-Given the narrow product selection, Costco buyers are tasked with the major responsibility of selecting the 1 or 2 items that will make it to the store shelves. They have the understanding of the market, product knowledge, negotiating skills, and decision-making capabilities to always deliver on the brand promise: the best value for money. Costco’s success is due in part to its buyers being the best in the business.

Minimal (but great) service: A low price always comes with trade-offs, and Costco is no different. The retailer does not offer many of the services offered by traditional retail (in exchange for a between price), while over-delivering on the essential ones.

Costco does not employ sales clerks, merchandisers or store designers. Costco stores are basically giant warehouses. However, Costco is famous for its excellent service: best exchange/return policy of any retailer (including membership refund in case you are not satisfied), no risk purchases, cashback rewards, speed of service and the overall customer service.

High quality products (including a reputable private label). We often associate low price with low-quality products. This is not the case at Costco, which has built a reputation for high quality products. The retailer assortment consists of brands consumers are familiar with, eliminating the need for expensive advertising and educating the consumer. The retailer also managed to build and one of the most trusted private label brands in retail, Kirkland, which generates a quarter of its total sales.

In a nutshell, Costco turned the traditional retail model on its head, by doing the exact opposite: narrowing the assortment, rationalising packaging, investing in employees, eliminating non-essential expenses, and offering high-quality products.

Your brand might have to adopt the same bold strategy in order to succeed. That being said, simply copying the strategy above will not be enough, as many brands have already discovered. What sets the winners apart is the discipline and consistency in execution.

Photo Credit: Mike Mozart on Flickr

Branding Inspiration: How A New Business Can Enter and Succeed in a Highly Competitive Category


This marks the start of  the “Branding Inspiration” series of articles that will focus on newly launched brands that have become successful in super competitive categories.

I hope these success stories will prove that it’s not impossible to enter and carve a niche  in mature categories with the right differentiation strategy. These brands will also provide you with needed inspiration and motivation for our own branding initiatives.

And who knows, this reading might bring some of you closer to starting your own business.

Meet Harry’s

Classic marketing books teach us that if you are not number 1 or 2 in a category, it’s better to invent a new category. Easier said than done.

Most start-ups are launched with the mission of redefining existing markets rather than creating new ones. That’s the strategy Andy Katz-Mayfield and Jeff Rider, the founders of Harry’s, decided to pursue in the shaving industry.

Carving a niche in a market dominated by giants such as Gillette and Schick looks like mission impossible. However today’s featured brand did just that.

I found out about Harry’s by accident. One day, while visiting a friend, I noticed an unfamiliar presence beside the bathroom sink: a Harry’s razor kit.

What grabbed my attention was the simple and elegant handle design, and the minimalist yet effective branding. A startling contrast versus the brands commonly present in Schick and Gillette products that have a plastic and mass produced look and feel.

Harry’s is online retailer and manufacturer of razors and accompanying shaving products launched in March 2013. Since 2014 their blades are made in their own factory in Germany.

I am a Gillette user and never thought of switching brands. But Harry’s makes it difficult for me to resist the temptation to try their products.

So I decided to put on my Marketer hat and take a closer look at the things that make their offer so compelling:

A Clearly-Defined Value Proposition

Harry's Value Proposition

A new brand has to make a simple and bold statement, in its attempt to change the category’s status quo.

Harry’s brand positioning strategy is bold and clear: better quality and less-expensive shaving products versus the existing players’ overpriced alternatives.

It is bold because in makes a direct comparison with its big competitors, by positioning their offer as inferior and outdated.

It is clear because it uses plain language to explain a benefit many people can relate to.

Solid Reasons To Believe

Step number two in any brand positioning exercise is to support your claim with sufficient arguments to make it believable. Harry’s provides at least three good ones.

Quality products at low prices. This sounds like a cliché but Harry’s really delivers on this promise: their products look great and are indeed inexpensive. The compelling stories and excellent product photography work hand in hand to reinforce this claim.

Distribution channel. Online selling is almost immediately associated with lower prices, that become possible with the elimination of the middleman, and lower overhead costs. I am not sure if Harry’s is a profitable business, but their distribution model is a perfect justification for their lower prices claim.

Country of origin. The “high-quality product” perception is reinforced by linking the production of their blades to the country that actually owns the “high-quality” attribute in the mind of most people: Germany. A perfect example of how the country of origin can be used to support a brand claim.

Narrow Product Offering

Narrow product offering

Harry’s product offering consists of only 2 standard shaving kits, one special edition kit and a range of refills. For comparison, Gillette lists 36 products in just the razors category.

Having a lean product offering brings many benefits to a startup:

-it makes it easier to own a word (in this case “razors”) in people’s minds

-the offering can be quickly presented and explained

-it is possible to become the product expert by servicing the market exceptionally well

-it allows for a more efficient allocation of resources, instead of dividing the efforts across multiple lines.

Outstanding Shopping Experience

The uncluttered design, compelling stories, and outstanding photography on Harry’s work together to create a compelling case for trying Harry’s products.

Each product page is very informative and eliminates all potential barriers to purchase.

Product Page

The outstanding packaging not only reinforces the quality claim but also gives consumers a great visual of what they expect to have delivered to their homes:

Harry's Packaging

Communication Strategy That Builds Credibility

No flashy advertising, to huge sponsorship deals. No cute kids, dogs and cats, no supermodels or famous athletes.

Harry’s marketing strategy seem to be focused on building trust in the brand through old-fashion PR, which is the quickest way to build trust.

In the two years since the brand was launched, Harry’s has been featured by important mainstream media outlets: ForbesNew York TimesCNBCFinancial Post.

Their PPC campaign reinforce the same (simple) message.

Harry PPC Message

You can argue that Harry’s was built with backing from important financial investors. And I agree: raising $122 million is not something you or me can (easily) do.

However, to put this number into perspective, Gillette invested 800 million in worldwide advertising alone in 2011.

In my next article I will review another inspirational brand that was started while the owner worked a 9-5 job. Sounds more like you and me? Stayed tuned for details.

Pricing Strategy: How To Find the Optimal Price for Your Product or Service

Pricing Strategy

Finding the optimal price for your product or service can be a challenging task. Charging too little might have a disastrous impact on profitability, while charging too much might leave you with no customers.

The classic demand curve shows that a lower price results in more units sold, and vice versa. However, your pricing strategy is reflected well beyond sales volume and profitability, and has a profound impact on how consumers perceive your brand.

Developing an effective pricing strategy is a fundamental skill in brand management. As we’ll discover below, finding an optimal price is a complex process that often require many strategic trade-offs.

In Search of the Optimal Price: Maximize Profits or Market Share?

The optimal price is the price you are able to charge your customers that ensures maximum profitability for your business.

A question that is asked a lot is: what should be the goal of our pricing strategy? Maximize profits or capture market share?

Ideally your goal should be profitability. Contrary to popular belief, a business with dominant market share is not always profitable. Some of the strongest brands launched in recent years, often labeled as “category disruptors”, such as Uber and Tesla, are yet to record a profit.

If your goal is to increase market share, your first temptation will be to slash prices, to a point where profitability and brand building initiatives such as advertising and new product introductions might be put on the back burner.

Not a wise long term strategy.

What “Too Expensive” Really Means

A business deals with mixed customer feedback in regards to pricing: some feel that current prices is an accurate reflection of the brand, and some who think your product or service is too expensive.

The words “Too Expensive” cause a lot of frustration, especially among sales people who are quick to pressure management for lower prices as soon as they hear customers complain.

In most cases, too expensive doesn’t mean “I can’t afford it”. What it really means is “the perceived value the product delivers is not worth the price charged”.

Let me give you an example.

A friend of mine drives a luxury car but refuses to pay for cable TV. Instead, he’s using an over the air antenna and is very happy.

His argument for cutting the cable was “it’s too expensive”. What he really means is not that he can’t afford it, but for the amount of TV he watches, paying for cable doesn’t make sense.

People often complain about the price of everyday necessities; the same people will line up to get the latest smart phone, or go on expensive vacations.

Soliciting customer input in your pricing strategy can lead to confusion and frustration. Instead, pricing strategy should be an internal decision that best aligns with the desired brand image, while ensuring profitability.

Factors That Affect Your Pricing Strategy

The goal is to find the right the right balance between the price you charge and the quantity sold. The relationship is not linear. Here are some factors to take into account in your search for the optimal price:

Fixed and variable costs– the obvious first step is to account for all the costs associated with the product or service being marketed. Most established businesses have pretty good systems in place to track fixed and variable costs, however new businesses might experience lower than expected profits due to costs that were not anticipated.

Availability of substitute products-if consumers are able to find alternative products that satisfy the same need, your ability to charge a premium price for your product decreases substantially.

Brand image-there is a direct relationship between how a brand is perceived in the marketplace and its pricing strategy. Many great products fail to gain market traction because they are marketed under the wrong brand.

Volkswagen Phaeton had features comparable to the Mercedes-Benz and BMW models, and was priced accordingly.

Sales fell short of expectations not because of the lack of features or marketing efforts, but simply because luxury consumers could not associate the Volkswagen brand with “premium”.

Level of product differentiation– companies who offer innovative and differentiated products are in most cases able to enjoy comfortable profit margins and should charge a price premium. A higher quality product is most costly to develop and produce, so the higher profits could be used to offset some of these costs and deliver sustainable innovation.

Level of competition in the category-as a general rule, the more competitive a category is, the greater the pressure or price and profits.

Demand seasonality-if most of your sales occur during a specific time period, your prices will have to be adjusted accordingly.

Market segmentation-a valid strategy to improve profitability is targeting distinctive customer groups, such as residential and business customers. Generally speaking business customers are willing to pay more for a particular product that might be only slightly more costly to produce than the equivalent consumer version.

Ability to offer complementary products-these are products that is sold and used with another product. Examples of complementary products are printer cartridges, or razor blades. Complementary products are highly profitable as they enhance the core product or make it fully functional.

Go-to-market strategy-if you design your product to appeal to a lot of consumers (mass market) the price you will be able to charge is typically lower. If you adopt a niche market strategy, which usually involves a certain level of product innovation, will attract consumers are who are willing to pay more.

As you can see, understanding the demand curve for your product or service is key in determining the optimal price.  A sound pricing strategy also requires a thorough analysis of your business capabilities and good understanding of the competitive environment.

How To Generate Leads: 5 Proven Techniques

How To Generate Leads

Creating growth through new customer acquisition has been consistently listed as Chief Marketing Officers’ top priority. With the explosion of available data and continuous fragmentation of communication channels, reaching the target audience is not going to get easier.

In order to generate the proper leads you have to  know your customer. Moreover, not all strategies generate immediate results, so choosing the right one depends on the importance of attracting new customers in your overall business strategy.

Need New Customers Badly?

If the answer is yes, you need to focus on strategies that bring immediate results.

We all understand the importance of search engine optimization, building your own email list and investing in content marketing. However these strategies will not yield the immediate revenue your business needs to operate.

This is what will.

Cold Calling

The old fashion method of picking up the phone and call your prospect is still one of the most effective way to generate qualified sales leads.

The good news is the “cold” aspect of this technique just got a little “warmer”. There is plenty of information available online that will allow you to overcome the biggest obstacle of a cold call: the fear of a quick rejection or even angry reaction from your potential lead.

In a recently completed project with a lead generation company we used a combination of direct marketing, followed by phone calls, to successfully generate leads for our sales team.

The goal of the direct mail piece was to introduce the company and prepare the prospect for the call.

The results were very positive. With a conversion rate of close to 20%, the sales team had plenty of fresh leads to work with.

Paid Email Programs

How do you receive updates from all social media platforms you subscribed to? Via email.

Email is one of the most effective conversion tool. Owning your own email list makes your life easier, since all email service providers will only accept you as a customer if your list is 100% opt in.

The downside of this technique is that list building takes time to grow to a size that will allow you to monetize it.

But what do you do when you have to start from scratch and have to generate immediate revenue? You make use of paid email marketing services.

Simply put paid email marketing services means using a third party email list to generate new leads.

Every serious industry association, trade magazine, and show organizers maintain an email list that is available for rent. In other words, they will send the email on your behalf, based on the designed approved by you. This option eliminates the risk of you  being flagged as a spammer.

Another option is to use a third party email list provider. The key here is to deal with a reputable one, that has been in business for many years and enjoys a solid reputation.

I had relatively good experiences with Scott’s Directories, a company that provides highly segmented email lists at an affordable price.

This article lists other reputable email list providers.

Direct Marketing

With email marketing becoming more and more permission based, direct marketing will become once again a favorite lead generation tool.

A well designed, highly targeted piece will go a long way to generating the call to action you are looking for. The key to a successful direct marketing campaign are design creativity and simplicity of the message being communicated.

In other words you have to make your direct mail piece stand out.

Direct mail pieces are also relatively easy to track, from the moment the package is sent out to when it arrives on your prospect’s mailbox.

Direct mail fits very well in a multi-channel effort that might also include a follow up call, or a digital component.

One thing to keep in mind: avoid making your piece look like junk mail. It will otherwise end up the recycle bin.

Put Your Lead Generation Process on Autopilot

Regardless of how urgent you need to new customers, a portion of the Marketing budget should be directed to SEO and content marketing. The benefits of these medium and long term strategies extend beyond lead generation.


A good search engine ranking for keywords relevant to your customer base is a proven lead generation strategy. Since it’s not advertising,  consumers tend to trust results in organic searches more.

Although the initial upfront cost to set up a SEO friendly website are high, once it gains traction, all that’s required is maintenance, which is less costly.

Content Marketing

Content marketing is a great strategy to build brand credibility and trust among your target audience. Fresh, relevant content also helps with SEO rankings, and allows you to build your own email list.

Content marketing doesn’t mean only blog articles. Any medium you decide to use to inform and educate your audience is considered content marketing.

Which Strategy Should You Focus On?

All these tools have to be looked at from your company’s perspective. Some of the tools are more suitable in a B2B environment, while others might be budget restrictive.

Regardless, the best results come from a multi-channel approach that motivates the potential customer to take action.

Do Brand Extensions Really Work?

brand extensions

I was reading somewhere that 70% of new products are brand extensions. Using a well-known brand name to enter a new segment or category seems  to be a preferred strategy to grow a business.

Brands take years and a lot of resources to build. So the temptation to leverage the trust consumers have in a brand to expand the into a new category is understandable.

The perceived benefits of brand extensions can be summarized into one sentence: by using an existing name that people are familiar with the marketing costs related to creating awareness, trial and penetration will be much lower.  The time to market will also be considerably reduced.

A Better Term

I like to use the term brand stretching to define this strategy. The reason is, by slapping a brand name to products in totally unrelated categories, the original perceptions consumers have the brand are stretched, sometimes to the limit.

Moving a brand up or down the price ladder also qualifies as brand stretching.

Kia recently announced the introduction next year of the K900 model, a car packed with luxury features and a $70,000 price tag. Kia officials call the model “a 7-series value for a 5-series price”.

Is Kia stretching its brand by making this move? Definitely.

Kia will never be a luxury brand. The lower-tier brand of Hyundai (already positioned as maker of affordable cars) has built its reputation by offering feature-packed automobiles at very attractive price points.

Stretching Kia from the bargain segment to the luxury one is not going to work. I am not saying Kia will not sell any K900. I just have a hard time envisioning a luxury car buyer having a hard time deciding between a BMW and a Kia.

Volkswagen tried the same strategy with the Phateon model, a car twice as expensive as the Passat. Sales were in the end disappointing.

Brand Stretching: A Few Things To Consider

Successful brand stretching has very little to do with product features, and everything to do with its original positioning. I am sure the Kia K900 offers a greater array of standard features than the BMW or Mercedes-Benz similar models. But product features alone don’t turn an ordinary brand into a luxury one. It’s the luxury brand’s intangibles that command the high price tag.

Stretching a brand up and down the price ladder is as ineffective and entering a totally unrelated category. Many companies are not happy with their current position in the market place. Brands aim to move up to the more profitable premium or luxury segments, or down to entry level segments usually covered by new entrants.

The quote below from Mazda CEO Takashi Yamanouchi “We came to the conclusion that if we make ordinary cars for the mass market, there is no reason for us to exist.”. The new Mazda 6 is supposed to mark the car manufacturer’s push into the premium segment.

The danger is still the same: brand dilution and customer confusion.

Brand extensions could be more expensive than launching a new brand. This comes down to the fact that is much more difficult to change current customer perceptions than to start fresh.

Before considering brand stretching, the question should be asked: is there anything in the current brand perceptions that we can leverage into a new segment or price point?

A well-known name in a category doesn’t mean that the success can be replicated in a different one. Each category has different competition, and customer expectations.

The Final Verdict

Being personally involved in many new product introductions, I am very reluctant to stretching a brand beyond its original positioning. I believe the disadvantages of using this strategy  are greater than the benefits.

That being said marketers are under a lot of pressure from top management to pursue this strategy because of the perceived cost savings. A decision has to be made on a case-by-case basis. That’s because there are at least two scenarios in which brand stretching might actually work:

The brand owns a positioning that can be applied to more than one category. The Disney brand is perceived as “the ultimate family entertainment”. As a result the company successfully competes in various categories where this positioning is applicable, from family cruises to theme parks.

The brand owns a “lifestyle” positioning. Harley Davidson successfully expanded into perfumes, leather goods, and other accessories. The brand “rebellious and wild lifestyle” positioning makes these logical additions to its portfolio.

Expanding a brand into a new category or price segment has to make sense. Otherwise a company is much safer with launching a new brand rather than diluting an existing one to the point of loosing its core customers.

In the end I will leave you with the 10 best and worst brand extensions, according to AdWeek.

3 Ways Marketing Can Help A Business Grow

Photo Credit: Teddy James on Flickr“The business enterprise has two, and only two basic functions: marketing and innovation.” (Peter Druker)

The management of many companies don’t agree with the statement above.

I was talking recently to a friend about the company he works for: 3 locations, 300 employees, $100 million in revenue.

Profitability? Not that great.

I was surprised to learn the company had no formal Marketing department.

Marketing: Key Strategic Function or Unnecessary Expense?

Many organizations see Marketing as an expense rather than the department responsible for taking a business to the next level.

This perception is popular not only among small companies that can’t afford a Marketing department. Large organizations, like the one in the example above,  don’t seem to understand how Marketing can help a business grow and be profitable.

One of the reasons is because just about everybody thinks they can do marketing, be it the company owner or the in-house sales and marketing clerk.

Instead of a specialized department, the Marketing function is bundled with other responsibilities, such as sales or administrative support.

There is also a lack of knowledge about Marketing’s role within an organization. I will take a moment to clarify it.

On the short term Marketing is responsible for generate immediate revenue (sales). Medium and long term its role is making sure the company survives, remains profitable and grow.

Many marketers are asked to focus exclusively on generating immediate sales. Hence the prevalence of promotions, price discounts, and other “limited time” deals.

While these short terms campaigns are needed to generate the revenue the business needs to operate, it is the medium and long term strategy that drives the company forward.

For a more detailed explanation of Marketing’s dual role within a business I recommend Dr. Emily Coleman’s excellent article The Mission of Marketing.

3 Things Marketing Should Focus On

The three areas under Marketing control that bring the most noticeable positive impact to the company’s bottom line are:

Building the Company’s Image

A key function of the Marketing department is to build a strong and differentiated image for the company in the eyes of the target audience.

The modern consumer does extensive research before committing to a purchase. It has been said that companies today have less control over how their brands are perceived in the marketplace.

I tend to disagree. A company has a great deal of control in building its reputation by offering a good product, combined with a well-thought differentiation strategy that is communicated clearly and consistently.

Building the right image is a long term project. There is no such thing as quick branding. Brands are built over time by consistently acting in accordance to the image they want to project.

Introducing New Products

Product life cycle has shorten considerably. Rapid adoption of latest technologies and global collaboration are contributing factors.

What looks new today becomes obsolete tomorrow. A company that is not able to update its offering regularly ends up loosing market share to new, more innovative competitors.

New product introduction is a proven method to grow sales. Sales teams love them. It gives them something new to talk about with their customers. Distributors are also looking for something new to show their end-use clients.

Marketing should be in charge of developing new products and improving existing ones. Resources should be made available to hire industrial designers, product managers, quality testers and other key personnel that can generate innovation.

Supporting the Sales Team

The sales force is the interface between  the company and its customers. In a thriving business the sales team is under constant pressure to improve the bottom line.

Marketing’s role is to help the sales team be more productive and close more deals. Here are 3 ways to do it:

Brand related training. One of the most frequent questions a Sales person has to address is “Why should I buy from you and not competition?” Marketing has to provide all the training needed to make the Sales team confident in the product, and the company behind it.

New product training. Sales need to have a clear picture of how each new product fits into the overall company strategy, its functional characteristics, as well as strengths and weaknesses of competitive offerings.

Joint sales calls. Traveling with your Sales team to client presentations greatly increases the chances of closing the sale. Sales and Marketing should complement each other and provide the customer with a compelling offer that can’t be turned down.

Support in identifying new prospects. Marketing should design and implement campaigns that will identify new customers and generate their interest in what the company has to offer. Once the ground work has been finalized Sales can move it and close the deal.

Each of the strategies listed above can impact a business in significant ways. The key is to find a balance between implementing short term tactics that generate immediate revenue and long terms strategies the ensure growth.

8 Reasons Why Your Business Needs Strong Competition

Image Credit: throgers on flickr

Number one, cash is king…number two, communicate…number three, buy or bury the competition. (Jack Welch)

Marketers have a pretty combative mindset: in order for a brand to succeed, others (competitors) must fail. We are trained to see marketing as a war, competition as enemy, and our primary job as putting them out of business.

In reality you will never succeed in completely eliminating a competitor. No matter how good your offering, you cannot please everyone (nor should you try). There will be customers who will choose your competitors for various (rational and irrational) reasons.

Since competition in business is something we all have to live with, it’s time to look at the bright side of things.

Having strong competition is not all bad. In the right circumstances you might be able to make them work for you.

Your competition might become the reason for your success.

Let’s see why a strong competitor is beneficial to your business:

A motivator to do things better. Competition in your business keeps you alert and focused on always improving your offering. In his book “Driven“, Robert Herjavic believes that “a business that is not growing is dying”.

Without the challenges competition brings to the table, your company will probably become stagnant, and the motivation to grow will probably be lacking.

A benchmark you can use to highlight the superiority of your offer. People like to compare before they commit to a purchase. Comparison shopping makes them feel confident that they made the right choice. It also helps them justifies the choice to their peers.

If your offer is superior then your customer’s habit of shopping around will help you get the business.

Many brands use competitive benchmarks to highlight their product superiority.

Competitive benchmark

A reason to charge higher prices. The general belief is that more competition leads to lower prices. This is the case if customers perceive the competitive offerings as being similar.

But if your company has the ability to offer a superior alternative that can be easily quantifiable then you can definitively charge a higher price. It comes down again to bench-marking against your competitor’s inferior product.

Dyson vacuum cleaners justifies their premium price through product innovation: the vacuum cleaner that doesn’t loose suction. Of course there are other reasons that explains the price tag: elegant design, bag-less operation, to name just a few.

A classic example of using the competitor’s inferior technology (ordinary vacuums loose suction) to charge a premium price.

A source of new product ideas. Most new products are improvements of existing, competitive products, rather than the result of a breakthrough idea.

Apple’s iPhone was positioned as a superior alternative to existing smartphones. Steve Jobs used Blackberry in his launch keynote to highlight the phone’s superiority.

Competitive products are a great source of new product ideas. The options are many: your version can improve functionality, design, accessibility, or be cheaper. All these possible because there is competition.

A reference point for positioning your brand. The whole process of positioning a brand starts with studying the competition. Re-positioning a competitor as inferior is a commonly used strategy. Avis’ “We Try Harder” campaign against Hertz is good illustration of this strategy.

The reason for your customers’ loyalty. The concept of brand loyalty does not exist in a non-competitive environment. Loyalty implies the ability to choose and is preceded by comparison, trial, satisfaction, and getting the feeling that the brand provides the best overall experience.

A partner in achieving economies of scale. A supply partner that also services your competitors will be able to achieve economies of scales and pass the savings to you. Personal computer manufacturers such as Dell and Toshiba, use Intel and AMD processors instead of developing their own.

Intel, in return, is able to invest in research and product development while lowering the price for existing models, due to its large client base that allows the company to be highly profitable.

A partner in capturing a new market segment. Your company’s weaknesses are probably your competitor’s strengths. In case you identified a segment none of the players can target alone, you should consider a strategic partnership with a competitor that is able to complement your offering. Two companies should be partners in creating the pie, and competitors in dividing it.

A bitter fight with competition in your business might not always be a good idea. Your own success might be dependent on how well your competitors are doing. In many cases, a strategic partnership without stealing each other’s customers might have a positive impact on each player’s revenue.

How To Market a New Small Business Against Big Corporations

How to Market A New Small Business

Many great ideas fail to translate into profitable business opportunities. Often the reason is the perceived lack of opportunity to compete with large, established brands that dominate a category.

However, real life facts shows that the small, independent, family owned business can successfully survive and thrive in mature categories.

In Fact small businesses are at the core of any economy. For example, according to this report, small businesses were the mighty engine that lead the US economic recovery.

If you have a great idea but are stuck on how to market your new small business, here are three essential strategies for success.

Be A Specialist

Probably the most common marketing error large companies make is stretching into various categories totally unrelated to what made their brand successful in the first place. Publicly traded companies in particular are heavy users of this strategy.

In order to market your new business successfully you have to adopt the opposite strategy: focus on one thing, and do it very well. The narrower the focus, the better the chances of getting uniquely positioned in your customers’ mind.

Let’s take a look at sports apparel, a category dominated by giants like Nike and Adidas.

Airwalk  managed to build a strong and profitable brand by focusing on one sub-segment for which it become the brand of choice: board sports.

One quick Google search for “yoga apparel” will reveal the number one brand in the niche: Lululemon Athletica. A narrow focus, a premium-priced product and great community building programs were the key ingredients of its success.

Be Fast To Adapt

An adaptive company tweaks its business model with the changing times. This requires great vision and timely decision making.

A notorious weakness of big companies is the slow decision making process. As companies get bigger, new layers of management are added, which moves the approval process to smaller specialist teams that have to come to an agreement for the common good.

Today’s super competitive environment combined with fast and often unpredictable changes in consumer preference, makes timely decision-making a strong competitive advantage. That means new products can be brought to market faster, existing products can be quickly improved to respond to evolving needs, and new communication tools can quickly be established.

The key here is an in-depth, almost personal knowledge of your target audience. Once you notice an emerging trend be the first to embrace it and your brand will be a winner.

Be Personal

A small business is about “putting a face” to the person you’re dealing with: your employees, suppliers and customers. By default a small business is more “personal” in nature than a big corporation.

Make sure you build on this positive perception your customers have about your small business. Answer your clients’ questions personally. Be involved in your community. Support a cause your customers value.

But more importantly, have a compelling brand story.

One of the most important piece of information on a small business website is the copy on the About Us (or Our Story) page. And I will use the Canadian electronics retail space to illustrate this concept.

The Canadian electronics retail space is divided, as you would expect, between big box retailers (Future Shop and Best Buy) and smaller, independents such as Bay Bloor Radio.

Let’s get more familiar with the two brands, and what they stand for. What would you rather read, Bay Bloor Radio’s amazing story or their big box competitor Best Buy’s Investors page?

These strategies to market a new small business will give you a head start and create the desired perceptions about your brand. But as Steve Jobs once said: “Everything is important-success is in the details.”

You also need a consistent and timely implementation plan, which requires discipline and know-how. Because “Strategy without tactics is the slowest route to victory” (Sun Tzu, Chinese General).

Otherwise the big guys will catch up, and you will have to start all over again.

10 Strategies to Ensure Business Growth

Business Growth

Image Credit: Anirudh Koul on Flickr

Business owners have one (big) expectation from Marketing: to dentify strategies and implement programs the lead to business growth.

The number of Facebook fans, e-mail open rates, number of visitors on the website- these are meaningless statistics without a quantifiable impact on the bottom line.

I am not saying these metrics are not important. It’s just that we need to find ways to translate them into positive sales results.

How To Generate Business Growth

Simply put there are basically four ways to grow your business:

-sell more existing products to existing customers

-sell more existing products to new customers

-sell new products to existing customers

-sell new products to new customers

The ideas below fit one or more of the four strategies above. Not all of them will be applicable to your business, so use this list for inspiration only.

10 Way to Grow Your Business

Launch a New Brand

Many consider this business growth strategy only when the existing brand(s) are struggling. However this is not always the case.

Lululemon Athletica is a well known designer and marketer of yoga-inspired athletic apparel. The brand basically owns the Canadian yoga apparel market, by offering a distinctive product line backed by a strong community-focused marketing approach.

In 2009 the company decided to leverage its expertise and target a different, younger audience. That’s how Ivivva Athletica was born as a line of “dancewear and activewear for girls”.

There are a lot of scenarios where launching new brand makes sense:

-the company wants to enter a new market segment where the current brand image cannot be leveraged.

-existing brand has become irrelevant as consumer needs are changing. Kodak was the leader in film photography,  but the brand could not be stretched and adapted to the digital photography revolution.

-price pressure from new market entrants. This is a scenario that many premium North American brands are having to deal with as they  face intense competition from imported products.

Many companies choose to stretch the existing brand into the new category (brand extension). The safest option, while more time consuming and expensive, is to launch a stand alone brand with a meaningful positioning in the new category.

Expand Internationally

Today’s global economy makes it easier for brands to expanding beyond their national borders. Depending on the product offering, and with the help of today’s technology, a company can expand internationally with much less investment than even 5 years ago.

The Internet is an invaluable tool for researching various trends and attitudes of the international market you are targeting.

Most governments have programs in place to help companies expand their reach globally through financial support, market research data and even joint trade missions to specific countries. Check out my article on global marketing for further information.

Identify and Target Complementary Markets

The first step when pursuing this strategy is to ask a simple question: “What business is my company in?”.

An insurance company might provide the following answer: “We are in the business of selling insurance products such as life, home and auto insurance to our customers”.

This is a very simplistic answer that does not enable business growth.

When answering this question, one has to think of the following: “What client needs does my product/service addresses?”

“What benefit do my clients seek for when buying my product?”

Coming back to our insurance company example, one answer might be “we are in the business of providing our customers with peace of mind by having them covered when the unexpected happens”.

This much broader definition allows the development of additional products and services for a market where “piece of mind” is a valued benefit.

Launch a New Distribution Channel

If you feel the current distribution channel does not provide the much needed business growth, then it’s time to revise your  strategy. This process might present some challenges, so careful planning is required.

The most common obstacle is channel conflict. A company that has built its business selling through independent distributors, might have a hard time making drastic changes.

Distributors want exclusivity and don’t like competition, in particular from the online channel.

The reality is that modern consumers have many shopping options: some of them prefer brick and mortar stores where they can touch, feel, and try the product before buying it. These “traditionalists” will be loyal to that channel, no matter how tempting the online channel is, and is willing to pay a price premium for this privilege.

Others prefer the convenience of buying online, in which case the distributor will not get that business anyway.

With careful planning and integration, using multi-channel distribution system should help a business improve its bottom line.

Implement a Loyalty Program

If you are not convinced of the benefits of implementing a loyalty program, check out these interesting facts.

A loyal customer base is a characteristic of a strong brand.

Besides encouraging repeat purchases, a loyalty program allow brand owners to influence customers’ buying behavior,  identify purchasing habits, and a positive brand image through word of mouth.

A common perception among small business owners and new entrepreneurs is that loyalty programs are for big budgets only. This is not the case as there are companies offer online loyalty platforms that fit most marketing budgets.

Focus on the End-User While Keeping Distributors Happy 

Independent distributors are rarely loyal to a particular brand. They are in the business of making money and, unless their customers ask for a specific brand, will push whatever brand brings them the most profits.

Many companies that sell through distribution use e PUSH strategy exclusively.  They are afraid that distributors will not be happy if communication campaigns are directed at end users.

However brands are built with the ultimate beneficiary of your product, the end user. A joint programs with distribution to target the end-users could be the win-win solution. You bring more business to distributors while selling your products in the process.

Invest in Your Brand Image

We feel most comfortable with people we know. As consumers we tend to choose brands we are familiar with.

Investing in marketing programs that creates awareness and demand for your brand a proven method to grow sales.

While word-of-mouth recommendations is the most desirable outcome of your communication efforts, gaining people’s confidence happens slowly over time. Social media is a great way to establish one to one dialogues with your customers and transform them in brand ambassadors.

Develop New Products

New product introductions is a classic method of generating business growth. The most successful and profitable new products dramatically enhance performance within an existing category or create a new category.

Even existing products in the brand portfolio that customers are not aware of could also be considered “new”. Take a look at products that were introduced 2-3 years ago but didn’t gain much traction. The solution might simply be a revamped communication strategy.

A new product launch reignites the dialog with your customers and energizes your sales force. They offer a reason to call back on old customers with exciting news.

Explore Co-Branding Opportunities

Developing a product or service is partnership with another brand can offer a significant boost in sales. Co-branding, carefully planned and executed, will provide positive results for both brands involved in the process.

There are many benefits of using this strategy: exposure to a complementary market your brand doesn’t currently serve; positive brand associations; reduced product development costs; and lesser risk associated with a new product launch.

On the negative side if the partner brand goes through an image crisis, your brand will probably suffer as well.

Co-branding has to make sense in order to work: the partnership between Intel and big computer makers such as IBM under the “Intel Inside” campaign was a huge hit, as the two brands complement each other.

Franchise Your Business

A popular strategy for expanding the brand rapidly and cost efficiently into different geographical markets is by franchising it.

Not all business can be franchised: in many instances, a particular business model is location or staff dependent and cannot be replicated. That being said, franchises bring benefits for both the franchiser and franchisee.

The initial franchise fee and on going royalty certainly improves the bottom line. These funds can be used to promote the brand and build a more desirable franchise.

The franchisee avoids the higher costs of having to build a business model and a brand from scratch. Initial training and ongoing support also increases the chances of success.

In the end a good fit between the two parties is essential to success.

Your Thoughts On Growing a Business

This list is by no means comprehensive. I am sure you have your ideas and experiences.

Feel free to share them with us in the Comments section below.

6 Ways to Set Your Marketing Budget

marketing budget

Year-ends are usually times of reflections and planning. Setting next year’s marketing budget follows the same process: looking back at this year’s accomplishments and defining next year’s goals and resources.

“What should the marketing budget look like next year?”

That’s the big question for which there is no easy answer.

Coming up with a marketing budget is just half the battle. Getting it approved by senior management requires a well-planned strategy.

Look at The Big Picture

Setting a marketing budget begins with answering a few questions:

  • What are the major strategic goals for next year? How many of them can I realistically accomplish?
  • Who is my target audience? What are the best communication methods to reach them? What is their level of brand loyalty?
  • How difficult is it to reach my target audience? How easy it is to track their actions and reactions?
  • Is the category my brand operates in  highly competitive, with many brands fighting for market share?
  • How strong is the competition? How aggressive is my competitors’ marketing?
  • What is the budget amount the management team feel comfortable with? (I realize that in some cases this is difficult to assess, but there are ways to do it. Look at past years’ approved budget and have preliminary discussions about their vision and plans for next year.)

How to Set Your Marketing Budget

Below are some of the options you can use to come up with the optimal amount for your next year’s marketing expenditures.

A Percentage of  Revenue 

Many companies set their marketing budgets by allocating between 1% and 10% of their revenues to marketing.

This method assumes a direct relationship between revenue generation and marketing. In many instances this is not the case.

For example, launching a new brand usually requires  important marketing resources, while the revenue it generates is zero.

Check out this 2011 report for some insight on the advertising expenditure as a percentage of sales in various industries.

Marketing Budget History

A detailed look at last years’ budgets versus the accomplished goals offers marketers a good idea of where they need to be in the year to come. If the management team is happy with the accomplishments then these budgets represent a solid starting point for next year.

If major strategic changes are to be implemented then previous budgets might not be relevant. This is also the case for new companies (brands) with no marketing budget history.


One simple way to set the budget is to tally up the costs of all marketing activities planned for next year. The total amount gives you the market budget for next year.

One thing to keep in mind is that obtaining accurate costing from various vendors in advance might be challenging. Another downside is that this method does not offer much room for adjustments in the strategy during the year.


Matching what your competitors are spending is another way of establishing your marketing budget. The assumption here is that if you want to remain competitive you have spend as much as them.

There are a few challenges here. Firstly this information might be difficult to find, depending on the industry. Moreover, there is no way to know if the number made public is accurate or not. And thirdly, you might be able to use your budget more efficiently, and get more done with less money.

If you want to know what industries are the highest spenders check out this report. You can also see who the top 100 US advertisers are here.

Random Allocation

This method is more popular than you might think. Used mostly by companies for which Marketing is an afterthought, this methods follows no plan and requires no justification. In this case the Management team (or the owner of the business) randomly picks up a number he/she is comfortable with.

This method inhibits any strategic thinking and planning. My advice is to avoid it if you can.

A Hybrid Method

My favorite method makes use of many principles outlined above to come up with a realistic marketing budget.

This approach takes into account the business as an whole, rather than the specific needs of an individual department. It also looks at the competition and, most importantly, how much you can realistically afford to spend.

Setting the Marketing Budget: Track Every Penny

There are some many ways to spend your marketing dollars, depending on your marketing goals. One thing is certain: it’s much easier to set a marketing budget and justify it if you are able to track the effectiveness of its allocation.

I personally review the dollar amount spent on each project against its goals.

The other thing I do is not rush to conclusions: I give each new marketing initiative at least 2 to 3 years to justify its existence. Some tools, such as social media and e-mail marketing are a try, learn and adjust process, that need time to prove their effectiveness.

Some initiatives are easier to track than other. However you should do your best to measure the actual performance against the expected results.

I am interested in learning about the method(s) you use to set your marketing budget.