Niche Marketing Matters

Undoubtedly, pricing an offering is one of the more important decisions that an entrepreneur makes, yet it is my observation that it seldom gets much thought. Pricing decisions are often emotionally based and made quickly, while prices are long lived (like it or not).

The market can dictate a price point or price range for a commodity product when it is offered by many competitors. If that is the case, you are kind of stuck with market prices unless your offering has unique characteristics or benefits.

Otherwise, there are some basic questions that you need to ask yourself about your product, the customer, and the selling environment before you establish the price:

1. What does the customer look like for the offering? What is the region or geography served? How many potential customers can be served? These simple questions will determine your channel of distribution costs.

2. How will you market the offering? Over the web? By mail? What are the costs of promotion and advertising? Similarly, your promotion mix will make a huge impact on your cost of sales.

3. Is price elasticity a factor? Does product demand change if you move prices up or down? OK, this sounds simple, but it can actually be vexing to many entrepreneurs. Lowering price does not always increase sales volume; it can be a hard lesson learned once you lower a price and get stuck with it.

4. What does your product really cost? This can be a really hard one for small firms since true cost accounting does not normally exist. Most small firms “estimate” cost and then apply a multiple of 3 or 4 to get a sales price. The problem exists in the word “estimate”, since it generally means “underestimate”. Most firms don’t capture or know all the true costs. This is a red flag waving.

5. Look outside the box. Are there any environmental factors that may impact pricing that are out of your control such as weather, legal or regulatory changes, or competitor misbehavior? They may be hard to forecast, but you need to be cognizant of the impact of these external factors.

6. Pricing goals. What do you hope to achieve with this offering and its price? Maybe you want to open a new market or drive out a competitor? Or, is the offering supposed to drive big profits; if so your product margins will need to be high and pricing defended.

With these issues researched or decided, the pricing begins. It still is a choice, but hopefully it is a more informed one.

John Bradley Jackson
© Copyright 2009 All rights reserved.

Earlier this year blog tracker Technorati estimated that there were 112.8 million active English language blogs. They also believe that there already 75 million Chinese language blogs. Of course, this begs a few questions. Are there too many blogs? Who really needs this much information? Who is reading this stuff? Why blog?

These questions hit pretty close to home for me since I have been an active blogger for two years. My quick but qualified answer is that blogging remain a very viable way to communicate to others, yet you need to speak to a highly targeted audience or nobody will read it.

Looking first at blog readers it is clear that most people find blogs via a search engine like Yahoo! or Google with key words. Referrals remain a powerful source, too. Readers are looking to solve a problem, be entertained, or get information.

Readers are looking for very specific content. This means that the blog topic/s must be focused narrowly around a specific subject rather than miscellaneous ramblings about life or business or whatever. Of course, this is the essence of niche marketing for blogs: providing information on subjects that are overlooked or under-served.

Thus, blog content is everything. Readers want to read about themselves and their interests—and not about the blogger. Vanity may be the biggest mistake by blog authors. Keep yourself out the of the blog content. Generally speaking, nobody cares about you and your last trip to the supermarket.

Few people choose to subscribe to blogs. Most visit a blog once and seldom go back. Sometimes readers are intrigued and will choose to bookmark the URL, but most of the time it does not happen.

Blog writers need to “fact check” and publish only accurate information. The web is chock full of inaccuracies, errors, and outright lies. Google any subject and you will find conflicting information from multiple bloggers. This insults the reader and assaults the medium.

With that said, and opinion is highly valued and expected. Tell it like it is and explain how and why you feel about the subject.

Shorter blogs are better. Long blogs just don’t get read. In depth conversations have their place but not on a blog.

Finally, highly monetized blogs turn me off. These are the blogs that are plastered with advertisements, Google AdSense, and live links embedded in the blog text. Yuck. If I want to be sold something, I can watch network TV.

Are there too many blogs? Yes, there may be too many blogs, but there is a shortage of relevant blogs that give readers what they really want. For the business blogger, this requires them to target a very specific audience while providing information about what matters to the reader.

Blog on.

John Bradley Jackson
© Copyright 2008 All rights reserved.

This is a re-issue of a previous blog by request:

It seems that we live in a thankless world and this void seems most pronounced in day-to-day business. The ever increasing pace of commerce in the new millennium seems to leave little time for a thank you or even common courtesy. Global competitiveness seems to have sapped us of empathy and compassion. Yes, this is a cynical view of business today but I fear it is true. It is my opinion that we are mired in a deep dark thankless funk that rivals the world of Ebenezer Scrooge from Dickens lore.

For example, advertising is overwhelmingly negative. Charles Schwab, a brokerage company without analysts, ran ads a few years ago showing other Wall Street brokers to be commission-hungry con artists, pushing a bad stock; in the advertisement a full commission broker joked about “putting lipstick on that pig.” The pressure of controversy seems to have gotten the better of them (i.e. Schwab). Although Merrill Lynch was shown by New York City prosecutors to have very similar internal email conversations, CBS, thinking it too controversial, refused to run the ad. (source: The ClickZ Network).

Please note that I am a Schwab customer and that I forgave them for their ignorance and arrogance. Yet, I fear that recent financial events indicate that they were actually right. Who knew?

One only has to turn to YouTube or most anywhere on the web to read the smear campaigns that mocked political candidates in our 2008 Presidential race. Barack Obama was a victim of a Republican smear campaign which spread false information about his family history, religion, and background using a false Wikipedia citation. This is an example of negative advertising at its best with lies included. Regretfully, this negative viral message spread like crazy, misinforming thousands of readers.

Presuming that you buy into my harsh view of current affairs in the world, what should you do?

I suggest that you do the opposite. Greet the world by saying thank you to your customers, colleagues, suppliers, and competitors. Be different than the rest and look for the good in things and be grateful. At the very least, it will make you feel better. I can only imagine the shock on people’s faces when you greet them cheerfully and express good tidings.

William Arthur Ward said that “Feeling gratitude and not expressing it is like wrapping a present and not giving it.” Give the gift of your gratitude. Give often.

Happy holidays.

John Bradley Jackson
© Copyright 2008 All rights reserved.

Have you ever confronted a barrier or a problem that stopped you from going forward with your goals and objectives? Maybe it was because you did not have the support from your friends or family. Or, the task itself just seemed insurmountable. Whatever the barrier, it was big enough to stop you in your tracks.

In reality most barriers are psychological in nature. They may seem real, but most exist only in your mind. More often than not, we consciously or unconsciously give theses obstacles more power than we should.

Psychological barriers can be categorized into three basic buckets:

1. Trying to please others.
2. Trying to be perfect.
3. Fear of failure.

Trying to please everyone is not possible and it does not make good business sense. This behavior manifests itself as being unable to say no to an unreasonable request, or not fighting back when confronted with aggressive behaviors in others. The key to overcoming this self-destructive behavior is to monitor your own behavior and catch yourself in the act. Saying “no” is the best method to stop being a people-pleaser.

Perfectionism is rooted in a deep seated feeling of never being satisfied with what you have done or with yourself. This higher self-standard causes you undo stress and, ironically, can decrease your productivity and quality. More often than not, your initial effort on a task is just fine; further refinement or effort won’t make it appreciably better. Give yourself a break and be content with your initial efforts. For example, novelist Norman Mailer wrote with a pen on a yellow pad of paper and did not rewrite or edit his work—his first draft was always his best.

Fear of failure may be the biggest enemy of success. For many of us, failure is often avoided by doing nothing. Of course, doing nothing often just insures failure. Instead, welcome failure as a way to improve yourself rather than looking at it an exposure of your weaknesses. Confront fear of failure by determining the worst case scenario—while this scenario is highly improbable, it is empowering to know that even if the perfect storm happens, you will survive or even thrive.

Finally, consider reaching out for help when the barriers seem insurmountable. Sometimes we are just too close to the situation and do not have the skills, training, or awareness to fully diagnose and overcome our own barriers. A third party such as a coach, boss, or friend can see things differently and provide strong counsel. Listen to them.

I have yet to see a barrier so big that I could not walk around it and continue the journey. Repeat. I have yet to see a barrier so big that I could not walk around it and continue the journey.

John Bradley Jackson
© Copyright 2008 All rights reserved.

First movers get all the rewards or so says says the marketing myth. Don’t get me wrong. Being first can be a wonderful thing, until the other guys find out about what you are doing. It is my observation that the rewards are seldom there for the first to market.

Presuming the market is big enough for more than just your firm, it is likely that the competition has been studying the market opportunity just as long as you have. Only they hesitated to go forward and decided to learn from you.

You were the first one to market. You pioneered your way to market like an adventurer hacking your way through the jungle. Customers have been hard to find since people don’t want to take a chance on innovative products or upstart firms.

Building your brand awareness was expensive since you were not sure who your customer was and was not; given that uncertainty you threw out a big net to find out what fish you might catch. Product definition was “fuzzy” because of the lack of clarity about the customer needs. What about standards? Heck, you wrote the rules as you went. Looking back, it was easy to underestimate the difficulty of the task.

Now enter the other guys who will save money and time, since they won’t have to make the same mistakes that you did. Conveniently for them, you defined the customer opportunity and created the market. Many times the “second-to-market” or “later-to-market” firms make the bigger profits. For example, Apple’s iPod followed Rio and Eiger Labs after the market was created. Both had fully functioning MP3 players long before the iPod hit the scene. Ever heard of them?

Amazon.com founder Jeff Bezos recently warned his workers “being first isn’t necessarily enough.” For the entrepreneur in a smaller market, the impact of the second-to-market players may be less of an issue, but the same math still applies. Being first is expensive and difficult.

My recommendation for those of you who are first in your market is to quickly move on to being the best or different, since being first is seldom sustainable.

John Bradley Jackson
© Copyright 2008 All rights reserved.

Most of the successful small firms that I have studied have successfully positioned themselves in a market segment where they have little significant competition. This allows room for a decent profit margin and focuses the firm’s efforts on pleasing the customer, while not on worrying about what the competition will do next.

While this is true, some experts suggest that you should literally hide from the competitors. The problem that I have with hiding from competitors is that you may also be hiding from customers. It is hard to create a market for a new product or service if no one knows about you. You need to make a lot of noise.

A common positioning strategy is based on an innovative product. Innovation is cool, but it requires a special customer who wants to be innovative, too. You can burn a lot of rubber trying to find that innovative customer. If you cannot find any competitors who are making money in your market segment, you may want to ask yourself if there is really a business there anyway.

Another approach that is successful and can provide a possible exit down the road is to compete against big and dumb companies or institutions. Competing against smart and big competitors can be hard; when they have seemingly endless resources, it can be lethal. Big and dumb firms allow you the chance to steal their customers without their even knowing it since your firm is so small by comparison. To do so requires specialization that your customer values.

The best example of big and dumb that I can think of is the U.S. Postal Service. Two centuries of tradition and bureaucracy have made the U.S. Postal Service one of the most lethargic and disconnected institutions on earth. By providing a similar service without the lethargy and bureaucracy, FedEx grew into a marketing giant. FedEx delivers the next day with greater than 99% accuracy, which is something that the U.S. Postal Service still cannot figure out.

You can see that when competing with big and dumb competitors you might get access to a real customer base and make a nice living. By the time the big and dumb firms find out about you, your company has prospered and grown to such an extent that the big and dumb competitor might just have to buy you out at a premium. Name your own price because as you know, they are big and dumb.

In my mind, the best positioning strategy for niche market players is targeting the under-served or overlooked market.

John Bradley Jackson
© Copyright 2008 All rights reserved.

The bad news is everywhere. The stock market leaps up and down bouncing along a never ending trough. Layoffs are forecast. The big three auto makers need billions to get through the next quarter. CNN trumpets the word depression seemingly for its shock value. After a while you cannot help but believe we are on a sinking ship in a perfect storm.

But, let’s keep things in perspective. You only need one job (or, least that applies to most of us). Our IRAs and 401Ks won’t be needed until years down the road— so the losses will be replaced with gains in the long run. The losses are on paper only.

Prices for consumer goods are cascading down—that flat panel HD TV can now be added to the family room. Gasoline just fell below $2.00 a gallon and may fall much lower. Housing is now affordable for many who were locked out. Interest rates are at the lowest level in decades. In USA we are blessed with abundant food, medical help, and educational resources.

My advice is simple. Turn off CNN. Stay off the internet news sites. Watch Seinfeld reruns instead. Read the funny pages and skip the headlines. Cherish your friends and family. Read a good book. There is no sense in letting this creeping malaise get the best of us. Don’t let it beat you.

I have yet to see a barrier so big that I could not walk around it and continue the journey.

John Bradley Jackson
© Copyright 2008 All rights reserved.

You know it’s a tough market when the marketing and sales staff spends an inordinate amount of time managing collections. With cash so important during hard times, it can be a virtual tug-of-war with your customers to get the cash which is due and payable.

Here are few thoughts on how to manage your accounts receivable in a down market:

1. Manage the terms on the front end. Be sure to put all terms and conditions in writing up front and take the time to discuss them before accepting the order.

2. Do credit checks. Although a poor credit history may be a lagging indicator of a company’s health, it is best to know who you are doing business with and how they pay their bills.

3. When a net 30 invoice goes unpaid, call them right away. This sends a signal that you are on top of things and won’t tolerate late payments.

4. Talk to your late paying customers. Often when a customer falls behind on payments they become the enemy; it is common for communication between vendor and customer to stop. This is exactly the wrong thing to do. Instead, keep an active dialog with them and treat them humanely. Generally, this approach will insure that you get paid.

5. Put someone in charge of accounts receivable. While larger firms may have an accounts receivable manager, most small firms don’t. Appoint someone the honor of managing your collections and give them special incentives to help usher the money home.

6. Focus on the biggest fish. Prioritize your collection calls on the biggest dollars first. I know that this sounds silly, but it is common to work a collection list by the alphabet.

7. Have the sales department push credit card purchases for the smaller orders. This is guaranteed cash.

8. Call on Monday. This is only anecdotal, but it is my experience that the best time to call is Monday morning. People are generally happier and more optimistic on Mondays. Get their attention before the Friday check run.

9. Consider the creation of a promissory note. This may best apply to a large customer who is behind on multiple payments. In this instance, the party owed renegotiates all the outstanding receivables with the slow payer. This typically elevates the discussion with the management of both parties. Do this only with someone who is likely to stay in business and eventually pay.

10. Consider a cash only relationship for firms that consistently miss payments. It may be harsh but you may not have other options.

Cash is king, so make sure to get your fair share. Believe me when I say it is your number one priority in a down market.

John Bradley Jackson
© Copyright 2008 All rights reserved.

Your target market is the customer group that will buy your product or solution; this specific market is made up of customers who want or need what you’re offering.

Historically, marketers have defined target markets using factors or demographics such as age; an example would be such 18- to 33-year-old males. This type of segmentation in the consumer marketplace is now considered inadequate, because of the new sophistication of the consumer and of our increased knowledge of segmentation.

For example, it was commonly thought that someone in their late twenties was an adult, likely married with children, and quickly headed to middle age. Yet, in the new millennium, we find that, while some people in their late twenties fit this profile, many others of the same age group still live at home and remain dependent on their parents for financial support. Often, they are unmarried and have no children. Yet, the old segmentation lumps these two disparate groups into one bucket.

Additionally, “cohort marketing”, a term originating in consumer marketing circles, defines customer segments using a common experience or multiple experiences shared by a group of people. They have a bond and a common set of needs or interests. For example, Apple computer users who choose not to follow convention with the Windows operating systems; instead, they take pride in the cult-like creativity and independence that Apple products offer.

So, what does this mean to the entrepreneur? It means that the target market needs to be carefully defined. Your product or solution needs to match precisely with a market segment that wants or needs what you offer. If you define your market too broadly, you might find yourself with a customer who is indifferent to your offering and may be suspect to move to the competitor that better understands his or her needs.

John Bradley Jackson
© Copyright 2008 All rights reserved.

Unscrupulous negotiators will try almost anything to win in a negotiation including lying, throwing tantrums, and verbally abusing the other party. Why is winning so important to them?

It has long been thought that mean people such as this are just cold, detached, and unemotional—we have thought that they did not understand the damage that they can do to others. A recent study about “aggressive conduct disorder” at the University of Chicago confirmed that bullies actually enjoy the discomfort or pain that they inflict on others.

Rooted in this desire to hurt others is a deep-set feeling of inferiority from a lack of love and affection in childhood. Thus, bullies are punishing others for the love that they did not receive.

Unscrupulous negotiators are bullies who must win at all costs. They don’t care about the interests of the other party, nor do they value relationships since their needs trump everything else. They learn that aggressive behaviors help them get what they want; surprised by the aggression, many people back down and let the bully win.

And this is how you can beat the bully at his or her game. Stand firm and call them out. Let them know that the tactic is plainly visible and that you won’t stand for it. Unaccustomed to the challenge, the aggressive negotiator will invariably back down.

When confronting an aggressive negotiator, document everything and hold him or her to their commitment. If you don’t stand firm, you may not get what you negotiated. Don’t expect to have a long term relationship with this type person. Do business and move on.

John Bradley Jackson
© Copyright 2008 All rights reserved.