Archive for March, 2009

Your Marketing Should Stress Time, Not Money

March 24, 2009

In her blog today, Kelly Spors, entrepreneurship columnist for the Wall Street Journal discussed a study by Stanford Business School which suggests that marketers who emphasize time as opposed to money when promoting their products and services tend to have better sales.

One experiment the researchers did was to have two six-year old girls set up a lemonade stand, and tested three signs: “Spend a little time and enjoy C&D’s lemonade.”; “Spend a little money and enjoy C&D’s lemonade.”; and simply “Enjoy C&D’s lemonade.”  According to Spors’ post, the researchers were asked to pay between $1 and $3 for a glass of lemonade and were then asked questions about their impressions about the lemonade. 

The experiment found that the “Spend a little time…” sign attracted twice as many passersby than the sign emphasizing money, and those who were attracted by the “time” sign paid almost twice as much for the lemonade and said they were more likely to enjoy it than those who saw the “money” sign.  

Despite the recession, time still seems to be more precious than money to most people.  And it also seems that people are more judicious with their time and will pay more for something that either makes the best use of their time, or – as suggested in the blog post – helps them achieve a great experience with a product or brand.

Marketers might be better advised to try building engagement with their brands rather than promote it as a money saver. 

Kelly Spors’ blog post can be seen here.

Online Marketing Research is Great, but it’s not the be-all and end-all

March 20, 2009

Today I came across a blog post by “Lawn Mower Belts” entitled “Role of Research in Online Marketing.”  Lawn Mower Belts stresses the importance of conducting marketing research, but seems to suggest that doing the research online is the best approach.

While the Internet has indeed made the collection of data much faster and easier, it has its own share of problems.  Doing a survey has never been simpler, thanks to the Internet.  But that does not change the principles of marketing research;  you still need to define your business problem, you must still decide the population you wish to research, and you must still select (randomly) a representative sample to whom you administer the survey. 

Even if using the Internet to conduct secondary market research, you must still keep in mind the objectives of the researcher whose work you referenced and you still need to assess the findings of that research critically.

To ensure that you get the best outcomes from online research, a good approach would be to:

  1. Start by using the Internet for exploratory research.  Look to see what other people are saying about your market, product type, or industry.  This can help you formulate hypotheses and define your business problem.  You can also informally ask people for in-depth information (qualitative research), which can also help you in this regard.
  2. Define and refine your business problem after #1, and determine your target population.
  3. Think of online places where members of your target population are likely to congregate.  See if you can make arrangements with the owners of those sites to administer your survey (or other research method) to their e-mail lists.
  4. Send your survey to the people on the e-mails you borrow or rent from those sites.

Although this process will still be slightly unrepresentative, it won’t be nearly as bad as if you simply stuck a survey on your web site and let others self-select to do the survey.  Online research may be cheap and easy, but it can cost you time and money if it’s not done carefully.

“…And then there are statistics”

March 18, 2009

Benjamin Disraeli once said, “There are lies, damned lies, and then there are statistics.”  Everyday we are bombarded with all kinds of statistics: the unemployment rate, a baseball player’s batting average, starting salaries for teachers, findings from a recent survey, and so on. In the marketing research field, we live, breathe and dream statistics.

Yet, most people do not fully understand statistics and many blindly take them at face value. As a marketing research consultant, I love when – in fact, I insist that – my clients challenge the statistics I give them. Since marketing research can be expensive, clients should make their research vendors defend their claims; it is their right.  

Today’s post is to give you an example of how to analyze statistics critically.  The example I share is from a UK blog post, entitled, Report: Using analytics can boost email marketing returns, by Greig Daines.  In this post, Daines references a report from Nedstat, a European web analytics firm.  Let me reiterate before I go any further that my purpose here is NOT to say the claims or findings in this report are wrong or biased; the purpose is to show how to place the findings in perspective. 

The Nedstat report claims that, according to a survey it conducted, the e-mail marketing revenues of firms that use web analytics are almost quadruple those of firms that do not.  The survey also found that companies can increase their profits from e-mail marketing 18-fold by using  web analytics to track and refine their e-mail campaigns.  Impressive, isn’t it?

That’s where the critical thinking begins.  The first question to ask is: “Who conducted the survey?”, followed by “What is their motive?”  Nedstat is a web analytics firm.  They certainly want people to see the value of web analytics!  Also, you need to ask: “Who was surveyed?” and “How many were surveyed?”  According to the report, 159 e-mail marketers in the UK, France, and Germany were surveyed.

“How were these 159 e-mail marketers selected?”  If these 159 e-mail marketers were selected randomly – that is every e-mail marketer in these three countries had an equal chance of being selected for the survey, then Nedstat has a representative sample.  On the other hand, if these 159 marketers self-selected to do the survey, the sample is not representative, and the claims made above cannot be generalized to all e-mail marketers in those countries.

“How many people were invited to take the survey?”  Surely, 159 marketers were surveyed; but what if 1,590 marketers in all had been invited to participate?  Then only 10% of those invited responded.  Are the 159 e-mail marketers different from the 1,431 e-mail marketers who did not respond?  Perhaps the 1,431 non-responders felt that their web analytics efforts were not working, and didn’t want to divulge that in the survey.  Maybe they were very successful and didn’t want to alert their competition.  Maybe the 159 responders had a vested interest in the field web analytics and wanted to sound off.  If any of these are the case, the survey findings are bogus.

Other questions you need to ask: “What was the average revenue and profit of the e-mail marketers who did and didn’t use web analytics.”  18-fold and four-fold don’t mean anything until you know the average.  “What was the standard deviation for revenues and profits?”  That is, how spread out is the data.  There are many more questions you can ask, but these are enough to get you in the driver’s seat.


  1. Make sure your market research vendor clearly explains its methodology for data collection and analysis;
  2. Consider the source of the data.  There’s always a purpose for their publishing those numbers;
  3. Make sure you are given all the statistics you need to know the full story so that you can make the most informed decision; and
  4. Go with your gut.  If research findings sound too good to be true, most likely they are.  Challenge your vendor all the more. 

Customer Loyalty Key to Restaurants Surviving Recession

March 16, 2009

In just the past year, we have witnessed many restaurant chains filing for Chapter 11 bankruptcy protection – Black Angus Steakhouse, Metromedia Stakehouses (which operates Bonanza and Ponderosa steakhouses), VICORP (operator of Bakers Square and Village Inn Restaurants) – and the Chapter 7 liquidation of Bennigan’s.  The economy, undoubtedly, was a key culprit in these restaurants’  troubles.

While it is true the people dine out less when times are tight, it is also true that people do not stop dining out all together.  In fact, loyal customers continue to patronize restaurants that deliver a highly satisfying dining experience, according to an article in the March 2009 issue of Quirk’s Marketing Research Review by Joe Cardador and Mark Hunter of Kansas City, Mo.-based research firm Service Management Group.

According to Cardador and Hunter, highly satisfied restaurant guests spend slightly more money than guests who were merely satisfied.  In addition, highly satisfied restaurant patrons are twice as likely to return and three times as likely to recommend the restaurant to others than those patrons who were simply satisfied.

Creating the highly satisfying experience  that creates a loyal customer begins with the server, say Cardador and Hunter.  “By simply greeting guests, checking back with them regularly, thanking them for their business and ensuring that a manager is visible in the dining room, restaurants can nearly quadruple  (emphasis added) guest satisfaction compared to a guest who receives zero or just one of those behaviors.”

The authors go on to say that patrons who come to a restaurant either because of a highly satisfying prior dining experience or a recommendation tend to spend more money than those patrons coming into the restaurant because of a promotion or ad.  And customers who experienced all of the service behaviors stated above tend to tip better.

Cardador and Hunter’s article can be viewed online at Quirk’s web site.

The lesson applies not just to restaurants, but to all businesses.  Customers can be made loyal when businesses deliver more than they expect to receive.  And this does not mean giving away the store.  Overdelivering can be a simple and costless as those server behaviors above, or courtesy calls to customers telling them the status of an order.

In any case, it is far cheaper and more profitable to provide knock-your-socks-off service to customers than promotional discounts.  The former creates customers who value your company and your brand; the latter generates price-sensitve customers who will switch to your competitors for a better offer and lowers your brand’s image in their eyes.

Pricing Demystified, Part II: The Van Westendorp Price Sensitivity Meter

March 12, 2009

Several different analytical approaches are available to help marketers determine the optimal price to charge for their product or service.  Here, I will discuss the Van Westendorp Price Sensitivity Meter, which is simple to employ, yet gives some very useful information.

Start with Four Questions

Van Westendorp starts with a survey asking respondents just four simple questions about price:

  1. At what price would you consider this product so expensive that you would not consider buying it? (Too expensive)
  2. At what price would you consider the price of this product so low that you’d question its quality? (Too cheap)
  3. At what price would you consider the product starting to get expensive – not out of the question, but you’d need to give some thought to buying it? (Expensive)
  4. At what price would you consider the product to be a bargain – a great buy for the money? (Inexpensive).

Graph the Responses

Once you have compiled this information, group the answers to each question into frequency distributions and plot the cumulative frequencies on a graph.  Each question above will have its own line on the graph.  The percentage of respondents should comprise the vertical axis; the price points, the horizontal axis.  Since the lines need to intersect, invert the cumulative frequencies for the “Inexpensive” and “Too cheap” on the graph.

Determining the Acceptable Price Range

The price at which the “Too cheap” and “Expensive” lines intersect is described as the “Point of Marginal Cheapness,” or PMC.  PMC represents the lower limit of the acceptable price range.  Similarly, where the “Too expensive” and “Inexpensive” lines cross is the “Point of Marginal Expensiveness,” or PME.  This is the upper limit of the acceptable price range.

Determining the Indifference and Optimal Price Ranges

Next, the point where the “Inexpensive” line and the “Expensive” line cross marks the “Indifference Price Point,” or IPP, the point at which the same percentage of respondents think the product is either cheap or expensive. 

Finally, the point at which the “Too cheap” and “Too expensive” lines intersect is known as the “Optimal Price Point,” or OPP.  It is at this point where the percentage of respondents who say the price is too cheap equals that who say it is too expensive.  OPP is optimal in the sense that the price senstivity to the product for being cheap is equal to that of being too expensive, and is often the recommended price.

Using the Results

  1. The OPP is the recommended price for your product or service.
  2. Competitive products will rarely be priced outside the acceptable range (between PMC and PME).
  3. If your goal is a healthy balance of revenue and market share, price as closely to OPP as possible.
  4. If your goal is to maximize market share or penetration, price somewhere between PMC and OPP.
  5. If your goal is to maximize revenue, or “skim the cream,” price somewhere between OPP and PME.


Finally, be aware of four limitations or dangers of Van Westendorp:

  1. Your data is derived from surveys, so questions must be worded properly to avoid biased responses, and sample size must be large enough for statistical accuracy;
  2. Different customer segments have different price sensitivities.  Hence, if you serve multiple customer segments, the OPP and acceptable range may be different for each;
  3. Even if you price within the acceptable range, you can still price too low such that you lose money and/or get regarded as low quality; and
  4. Even with a skim the cream strategy – pricing within the acceptable range –  you can price your product too high that your competition wins your customers.

All this said, continue to know your customers intimately and, using Van Westendorp’s points for a guide, experiment with different price points until you find the one that brings you the closest to achieving your marketing objective.