A recent conversation with a business owner proved to be very interesting. When I asked the owner what the marketing approach was for the business, he returned a blank stare.
Our conversation was initiated because the owner had expanded products and services and the new offerings were not producing as expected.
The business had been operating with primarily price point marketing strategy that was appropriate for his industry. The new products and services were higher price points and his operational approach and “selling” and promoting approach to these items was the same as the price point product. The well-known approach was resulting in disappointing sales for the new offerings. What went wrong?
Let me back up…..When you use a price point marketing strategy, the process is simple. Keep operational prices low and prominently advertise your low prices. This is a good approach for commodity type items. As an example, grocery stores use this approach and a lot of retailers utilize it on “specials” to get attention and traffic and then rely on other tactics to upsell. It is a tried and true strategy but it doesn’t work in all situations or industries.
In the case of the business owner I met with, the price point strategy was not the winning approach for their expanded service and product line. It was failing, so in came a “consultant” (not me at this juncture). The consultant went full throttle with the price point model and began slashing operating expense to make each item sold more profitable. Not a bad approach in some cases, but the wrong one in this case.
The items being sold were high quality, specialized and leant themselves towards customization. Reducing costs and customization rarely go together and in this instance, cost reductions eliminated customization. Sure, there was more profit in each item sold but the number of items drastically dropped, rendering net profits to almost null. What to do?
I explained to the owner that although he had been very successful with price point marketing in his primary business, the new items required a different approach. They required relational marketing.
Relational marketing requires you to build relationships with your buyers and to cater to them. This is one of the most solid differentiators in marketing. As an example, if you sell coffee to commuters, what makes people buy from you over the plethora of other providers? In most cases, it is because of how you treat them. You allow them to feel special, make special requests and if you are good, you know their name and have loyalty programs. This will keep your customer coming back and it will make them choose you over price point almost every time.
For this business owner, he is now in the process of repairing those relationships with lost customers and building new relationships with new ones. It is an uphill battle, once you have lost customers, but it will work if you can act swiftly and are persistent. It is important to note that sometimes your marketing strategy is not a one size fits all. You may have several strategies needed for your company. Choose wisely!
When all else fails, consult a professional with years of experience who knows the correct strategy, tactics and tools required to make your business thrive.