Red Page director, Michael Smith, said: "a number of clients and site visitors have asked me to increase the range of resources on our site and I am now pleased to be able to do so. There will be more to come in the weeks and months ahead - and I am always open to suggestions from site visitors".

The resources are available via a simple log in procedure and are all available in pdf format. To view the resources, click here.

The course, on Practical Marketing Management for the Smaller Publisher, covers four main areas: Understanding and Monetizing your Brand; Developing your Message and Price Position; Choosing from the Marketing Mix; and Setting Up, Managing, and Developing a Marketing Department.

The course will be held at Book House, Wandsworth, on September 14th 2010; with future repeat courses in March and September 2011.

Discounts must only be given when they relate to a condition of sale, for example:
Order in 14 days Order by 31st January and receive 10% off
Buy one, get one free (BOGOF)
Save 20% if you buy Product x and Product y together
Buy any three named products and receive the cheapest free.
In an approach based on conditional response, you do two things: encourage sales of products and preserve the pricing position of the product under normal stand-alone conditions.

However, a difficulty arises when sales teams are out in the field. In this hairy face-to-face sales environment, even the best sales people bottle it. Discounts are given for fear of losing a sale. Extra product is thrown in. Often sales people will try to draw your eye to the value of what has been sold rather than the immediate and long term profit of the sale.

But if you have a dog that keeps digging up your lawn, whose fault is it? Yours or the dog’s? If the lawn owner is the one getting angry with the dog, then the owner is at fault. The dog, after all, can be trained and the lawn owner is happy. If the lawn owner doesn’t care, then the dog is at fault. The dog is on the scent and it cannot stop itself from digging the lawn. So it is with the sales team.

The problem is that sales people are driven by the scent of commission rather than maintaining a profitable relationship between the company and the customer – opting instead for a profitable relationship between themselves and the customer. A sales person, naturally, will want the biggest deal to create the biggest commission. But the company wants the best long term profit and minimal profit erosion through the price waterfall. So how best to deliver benefits for the company while keeping a loyal sales team?

In preserving the “lawn” of your profits, it pays to know and communicate the following to your sales team:

The deliverable component features of each product (i.e. features which can be added or removed in bargaining)
What each of your product does for the end user
Why each of these products is better than competitor products
Where competitor products are better (yes better) than yours
A logical individual price structure of each product which relates to the competitive environment (e.g. if a product is weaker than a competitor’s, a customer WILL expect to pay less for is)
A price matrix, compiled with assistance of the finance team, which reflects accurate unit profitability based on numbers sold
A price matrix for each product which logically presents a price reduction system based on volume purchase (and which can be used on your internal computer systems)
A multiple price matrix which enables complex multiple purchases from different elements of the product mix

With a pricing system rigorously enforced around a robust matrix, and with a sales team trained in intimate knowledge of product/key account component delivery, sales can be delivered which will be profitable for the business and for the sales person. The key is that the pricing structure itself relates to an acceptable price/value transaction relationship. If this component, too, is in place, then long term relationships are assured, sales teams are rewarded and the company survives longer.

And with the money you save, you can treat the dog to a new sand pit.

This article was written by Michael Smith, Director, Red Page Ltd. It originally appeared in the Red Page Blog, A Brand Day Out in June 2010

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What is conjoint analysis?
Wikipedia defines conjoint analysis as: //“a statistical technique used in market research to determine how people value different features that make up an individual product or service.
The objective of conjoint analysis is to determine what combination of a limited number of attributes is most influential on respondent choice or decision making. A controlled set of potential products or services is shown to respondents and by analyzing how they make preferences between these products, the implicit valuation of the individual elements making up the product or service can be determined. These implicit valuations (utilities or part-worths) can be used to create market models that estimate market share, revenue and even profitability of new designs.”//

What does conjoint analysis help you to achieve?

In its simplest form, conjoint analysis is a tool which lets your customers decide which product attributes they value most. Using sophisticated tools, you can then use this information to develop an understanding of what customers will be prepared to pay for your goods. It also helps you understand value features in your goods which may be missing but which the customer is prepared to pay for.

For example, you may produce a newsletter which features:
• Weekly digests of key news
• A daily alert to readers in-boxes
• An online archive of news stories
• A directory of suppliers
• A directory of senior board executives
• Daily statistical changes affecting the industry (e.g. KPIs)

You might find that a competitor has moved in on your territory and you are trying to find out what your readers value, what they are prepared to pay for and what they don’t really want.

The value of such analysis is that it can let you:
• Tailor your product to customer needs
• Price efficiently
• Remove underperforming areas of your product which have limited value
• Reduce costs
• Target sales and marketing staff more efficiently to help conversion of new customers and retention of old customers

Is there an alternative to conjoint analysis?

The beauty of conjoint analysis is that it is objective, and helps you avoid opinions by focusing on facts. Sales people are often keen to emphasise the need for reducing prices for example because lower prices helps them achieve targets. Conjoint analysis allows a calm-headed look at a product, its environment and pricing.

However, conjoint analysis is expensive. An alternative is to have expert panels within your company comprising sales, marketing, production plus to have the input of key account heads. This “expert” group will at least let you get a feel for what can be changed and what can be improved or dropped in the pursuit of efficient pricing.

The danger of internal experts is that they can carry internal baggage on pricing, production, delivery etc which could obstruct objective thinking and result in inappropriate pricing positions.

Can I find out more about conjoint analysis?

A simple, and very helpful, introduction to Conjoint Analysis can be found at Sawtooth Software by following this link.

Please note, we have no affiliation with Sawtooth but we point to these pages because of their practical utitlity.

There is also an excellent book called Getting Started with Conjoint Analysis although this is now getting hard to find.

Here is a very good video lecture about Conjoint Analysis from Video Lectures. This item provides a case study and how conjoint analysis was used to resolve a problem.

This article was written by Michael Smith, Director, Red Page Ltd.

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1. Always promote your website clearly and include a special bonus for ordering online (special price, special incentive).

2. Promote your website on your products – listing special benefits of buying online in future. Remember – don’t just list the web address, but tell them why they need to go there and what they will get.

3. Include a “bucksheet” or small flyer with every order you despatch telling the customer about some great deals online.

4. Include a small flyer with every product, alerting customers to a free download or other benefit.

5. Develop a strapline to accompany your web address on point of sale/exhibition display materials. Don’t just rely on people seeing the web address and going there – give them a reason to visit.

6. Encourage online competitions at exhibitions where people can sign up.

7. Promote a web-only offer in all your PR. In many cases, magazines will often mention a product but not how to get it. By including an offer in the press release there is a chance the magazine will also refer to the offer and generate web traffic to your site.

8. Position your logo next to your web address – today, time is short so any visual cue with a linked association will help people make the leap into the “intangible space” of the web.

9. Promote your website and core benefit even on your envelopes. Eventually, you want people to associate a core value (“how to save £50 on your heating bills”) with your logo and your website. Even if the envelope isn’t opened, the message still gets across.

10. Remember the power of the PS in your sales letters. Refer to your website there and the core offer of the letter. After the initial salutation, the PS is read before the body of your letter so use it to get the message to sink in.

We have also produced a special guide to capturing more customers and data from your website, including a range of ideas for special offers and promotions. This is available FREE at the Red Page downloads page (Resource RP0009). Click here to view.

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In cases like this, e-marketing has to be stepped up. It is said that 80% of sales don't come from sales or marketing outbound initiatives but come from prospects finding you.

So, as in the old days of direct mail, it is important to establish a dialogue with customers so that your value is understood and the move towards the sale is more likely. Content, contectualised content, is therefore of paramount importance.

Here are 10 tips for maximising your internet marketing message:

1: Review your database of existing customers. Work out how the database segments so you can classify your marketing initiatives.

2: Talking with these customers, understand what they do and how they use your product to achieve that. This will be a time consuming process and relies on the fundamental support of senior management (who may be inclined to view short term targets for the marketing team as of more importance than contextualised content).

3: Write case studies showing how your solution has worked for these clients. Given that you will be introducing these case studies to new prospects, structure the case studies so that they can be delivered in chunks acording to where your prospect is in the sales cycle. Don't forget all the people in the buying process - you need to be reflect their needs too.

4: Ensure that your case study structure is built into your website to enable your sales people to use it, your customers to find it, and your blogs etc to link to it.

5: Talk with your sales people about the typical sales cycle for the different kinds of customers you are approaching. Define your case study approach on a segment by segment basis (e.g. large corporations may take months to decide; smaller companies may take less time). Develop a communication model for each customer category.

6: Develop a social presence on the web (blogs; twitter; contributions to forums etc) so that people come across you and begin to trust you. Keep your presence/message consistent to increase credibility. Again, it is crucial to gain management support for such initiatives and not allow them to be wasted. For example, try to avoid the temptation simply to use blogs/twitter etc as a way of selling products. In any case, such techniques are frowned upon in communities.

7: Understand your value to the position of the customer. Develop stories/articles which add value to the prospect so that trust is built and value understood. On the web, the story is findability and consistency of thought. Remember the golden rule: if value is demonstrable then price becomes irrelevant. Value definition is therefore crucial to the successful complex product sale.

8: The rules defined by <a href="http://www.sv-institut.de/english.php">Siegfried Vogele </a>in his dialogue method are as relevant to the web as they were to direct mail. With your case studies, web pages etc, key value is demonstrated by headlines first, then images, then captions, then paragraphs.

You know from earlier stages what you want to say, now you must structure the information so you can say it so it sinks in. In email communications, for example, keep the most important part of the message at the top (so people can read it in their in-box); use bullet points (but keep them relevant and focused on value); limit the number of calls to action etc to avoid going for sales overkill...

9: Much of the communication strategy described above relates to customer interaction through search. Yet outbound is equally important because even with low conversion rates the message needs to get out to encourage discussion, debate, and of course lead generations and sales.

Therefore, never forget when conducting outbound marketing activity that the prospects you use are sales ready. Remembering what we said earlier about 80% of customers finding you, it is very important that the effort you make on the remaining 20% is targeted to those you know will be most receptive.

10: Finally, if in difficulty with developing communications, use this handy fall-back to help you structure what you want to say: What problems is the customer encountering?; why should they choose you?; why should they believe you?; can you define a measureable financial benefit that the customer can expect from using you (ask your sales team to help you)?

This is a simple guide and is by no means comprehensive. But I hope some of it is of use.

Sincerely,

Mike Smith
Red Page Marketing
Blog: A Brand Day Out

The full article is contained in our free resource, RP0016.
Download your copy here:

To avoid the commercial nightmare of low prices and high trade discounts, you need to get back to basics – deal direct with your customers, learn what they want, and provide it – at a mutually agreeable price.

You need to build a database of customers so you can regain some control of your business before it disintegrates into a business focused on cost-cutting rather than revenue building.

What is a marketing database?

A database can comprise two key groups: Prospects (people who have not bought from you) and Customers (people who have and are either current or lapsed/cancelled).

From this basic standpoint you can then look at subgroups: prospects broken down into different interest areas; past buyers who need to renew; lapsed/cancelled customers who you want to get back; buyers of products who might buy other products; people you can upsell to, etc.

You can also use a database to show you who is buying your products so you can search for lists of similar individuals in similar organisations.

The starting point in building a database is a good prospect list, who then convert to customers – building into a substantial list over time

Some simple guidelines for publishers looking to build a database

Assuming you are starting from scratch, here are some tried and tested ways to build and maintain you database:

Insert cards into all your products and/or your email messages, directing them to other products they can order. The building of an in-house list of book buyers will be your hottest list for future growth – out performing any other list.

List rental/swapping. Talk with your peers at other publishers about list rental or swapping. Do NOT fear that you are giving away “your” customers, you’re not. Mutual trust between publishers leads to greater commerce over time. Swapping is cheaper than rental but many publishers retail their lists through brokers.

Targeted mailings to the demographics you are seeking. You are publishing a directory world wines and want to reach wealthy ABs? As well as going to wine magazines you can also make assumptions about the demographic and do targeted mailings to other people in your area such as lawyers, managing directors etc. Think laterally!

Wherever possible, however, aim to rent lists of people known to order via direct mail. This means they are “DM responsive” so that your pack is likely to succeed as well (provided of course it is well-written and designed).

Affiliate marketing offers additional ways to grow data: inserts into relevant mailings of related organisations; special deals with organisations so members can get products cheaper; offer targeted individuals certain products at lower prices

When you need to rent lists from brokers, ask the broker for lists which have buyers who appear on other lists. These merge/purge lists offer even greater promise given the higher potential fail rate of a prospect list.

A final option is to build your own list – research using the web, directories etc. The problem with this approach is that you are relying on data which is potentially obsolescent (if not obsolete) and you have no knowledge of whether they have bought something.

Some simple ways for publishers to manage their database

Many publishers report to me that they have a database but it “could be better”. In truth, most databases “could be better”. But half the battle is having top level support for the database from the MD downwards. If there is a belief in the data at the top, then the quality of the database will be questioned more frequently.

Some guidelines for managing a database include:

Managing “gone-aways”. In the old days, you could say that 10% of your database would change in a year. These days, in recessionary times, this change figure could be double or even treble that figure. It is important therefore for your envelopes, order forms and websites to give the capability for people to add their change of address.

Managing data fields. Are all your fields filled in? Job title? First name, second name, post code etc? Produce regular reports (monthly) showing deficiencies in the database so that corrections can be made/plans agreed for correction

Competitions/Freebies/Premia mailings to encourage response so that records can be corrected.

Ensuring codes are captured showing the source of the order – not just from a particular campaign but also whether the customer originated from a prospect list or your in-house buyer list

Why publishers should care about databases

If you don’t know your readers, you cannot create for your readers and your future lies in the cloudy mist of ignorance and hearsay/received wisdom from the sales force and the trade. These groups are not forecasters, they are only commentators.

If you always do what you have always done, you will always get what you’ve always got. So data is important so you can see who is buying your books and so you can contact them about similar products/conduct customer surveys.

Publishers who do not care about data, or who are lax in its management, will ultimately end up on the treadmill of endless creation of random titles, hoping desperately that one will hit the big time and produce some money from somewhere.

Having a good database also means you can sell your products direct to the end reader at the value/price ratio you prefer – rather than a random price charged by retailers fighting their own high street battles.

Conclusions

Data, therefore, is the key to selling well, gathering information, and responding with knowledge to customers future demands. While it is true that many publishers survive without databases, it is equally true that those who manage data correctly are stronger and more financially robust. Today, for brands to survive, the link between end user and product provider has never been more relevant. Data is the key to long term, profitable customer relationships.

Very best,

Michael Smith
Red Page Marketing

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There is no doubt that response rates have dived in the last ten years. But think about it – banks haven’t given up mailings for credit cards even when the market is now the toughest it has ever been. Women’s clothing catalogues are still as popular as ever, as are home improvement mailings.

The purpose of direct mail for publishers

Direct mail has a real purpose. For publishers, it is critical. Why? Because the publishing industry is in grave danger of being subsumed by online retailers who have no concerns about how a publisher survives, only about how they can sell their books.

Put your business in the hands of retailers and you say good bye to strategic direction and value-based profitability.

For publishers, direct mail is a crucial part of the mix because it gives a tangible link between publisher and reader. It develops and sustains brand. It acts as a data generator to enable discourse. It is also a driver of channels – even if the order goes elsewhere than directly back to you, the producer.

The key to using direct mail is to understand your aims, know what you are measuring, and grasping the cost/revenue facts that lie behind its successful use.

The financial returns of direct mail in publishing

Of course, the financials are very important – and the pressures are higher than ever. 10 years ago a 2% response would have been excellent for a newsletter and today marketers are talking about 0.1% - or lower.

Not so long ago I was achieving response rates of 10% for an annual legal publication; my colleague Janson Woodall was getting the same for a transport annual – how times have changed!

If we combine this with an average mailing cost of say £500 per thousand and a targeted mailing to 4000 prospects, you would need to recover £2000 to achieve breakeven. At a response rate of 0.1%, this means a requirement of 4 orders at a value of £500 each.

For newsletter publishers, publishing a newsletter in the £500 bracket, this is acceptable because renewal rates should grow that investment significantly in future years.

But for publishers of books or management reports, the prospect is less attractive. A management report, requiring an ROI of say 400%, would have to be priced at the £2000 per copy bracket!

For book publishers, publishing titles at prices as low as £5.00 and as high as, say, £30, the task is enormous. At the higher price, our book publisher would need to sell 66 units to break even or 270 to achieve an ROI of 400%.

That equates to a (difficult these days) response rate of 1.65% to break even or a frankly incredible response of 6.9% to achieve target ROI.

Why publishers should still invest in direct marketing

So is direct mail still worth doing? Clearly, publishers of high value management reports and subscription-based magazines and newsletters can continue to benefit from direct mail.

Direct mail for high value B2B publishers permits: sophisticated packs to describe value; the ability to override objections via demonstration; contextual marketing to push customer “hot buttons” and to give “ownership rehearsal” prior to ordering. Because these publishers charge high prices, DM is critical to make price irrelevant.

Direct mail for conventional book publishers is more problematic. These publishers should instead take a more holistic view of what they are trying to achieve. For these publishers, DM can achieve direct sales and must achieve reasonable volume but the tool also drives other activity: sales through online, trade, your own website, libraries and others.

For all publishers, direct mail hangs around longer in the customer’s premises – many pieces are hoarded for future reference. These direct mail pieces are critical to building your brand and for maintaining customer awareness of you and your unique selling points.

Measuring the effectiveness of direct marketing in publishing

For subscription-based products, it is still reasonably reliable to track response via orders into your business via business reply envelopes, white mail, phone and web orders. From here you can measure financial performance and calculate ROI.

In my experience of direct marketing cheaper books (i.e. books below £50), the task is more complicated because the consumer can go elsewhere following a prompt from you.

As well as the response channels which apply for subscription products, book buyers have other channels which might already command their brand loyalty: online sites (Play; Amazon etc); bookshops (high street and their websites); libraries etc

For these publishers, a pure assessment of campaign ROI will make for highly depressing reading. You need instead to look at the trading background in a period before your campaign (say 3 months) when no marketing was done and also check sales through other channels (book trade, overseas, library sales etc).

Then measure results through these channels in a six month period after your marketing has gone out. There are two caveats to this approach: firstly, make sure that you watch out for seasonal uplifts which may be nothing to do with your activity; secondly, remember that uplift through the trade carries the additional cost of the discounts taken off so account for revenue net of discount.

For book publishers though, the real benefit of direct mail is keeping in touch with your end readers. Fail to do this and your customers will look elsewhere and soon forget you.

Conclusion

Direct mail is expensive and relies on good lists to make it truly effective. For publishers of subscription-based products it offers a sophisticated way to sell complex, high-value services and reduce price objections.

For book publishers, it offers a tangible way for publishers to maintain contact with their customers and preserve their brand recognition. Measurement for all publishers should be based on an ROI assessment but for book publishers it is critical to keep track of sales uplift through other channels – remembering, of course, to net off the trade discount to arrive at a true ROI assessment.

The devil, as always, is in the detail!

Very best,

Michael Smith
Red Page Marketing

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Henry V fought at Agincourt knowing his strengths, the landscape, his enemy’s strategic plans, and tactical competencies of each of his battle groups.

He adopted an early form of “benchmarking”: well-trained men-at-arms on the international chivalric model; disciplined missile troops far beyond mercenary competency; a small, manageable command structure compared to the individualistic model used by the French.

Publishers need to benchmark in the same way. England punched above its weight and now you can do the same!

Effective benchmarking for publishers

Which of your competitors do you admire? Put another way, which of your competitors is/are getting up your nose? If you’re a big player, it’s probably a small operation taking out core niches of your business. If you’re a small player, you’re probably looking at the models of more established publishing brands.

The point is, to benchmark do not obsess yourself with people you think are your competitors, but look at best practice and develop yours to similar standards – or better.

What to benchmark? Brands don’t develop on product alone. Look at Amazon – they’ll sell anything to anyone but their brand is based on one aspect: customer service. So, if you have a website, benchmark delivery against Amazon. If you want to know how to run newsletters and B2B subscription services profitably, look at Informa. If you want to know about branded books for the trade, study Wiley’s Dummies series.

How to gather benchmarking data for your publishing business

But don’t just look and copy. Get objective data where possible:

• Management reports on your segment
• Industry association surveys (e.g. PA, PPA or SIPA)
• Surveys by suppliers to the industry (e.g. Vista/Publishing Technology)
• Networking among your peers at PPA, SIPA, PA and other events; be open with others and they will be open with you (within reason, of course)

Of course, a key source of data though is your customer database. If you are a trade-based publisher, this is problematic because your customers (the bookshops) can only tell you what sells. They can’t tell you why they sell, why things don’t sell etc. Yes, the trade can tell you how your service compares to other trade publishers but ultimately you need to talk to your customers. They are unlikely to want to help you with substantive market research.

With a customer database publishers can:

• Validate data by recency, frequency, purchasing trends and financial value
• Contact by mail via mail surveys (still one of the most valid methods, even today)
• Contact via email with simple questions or links to online survey systems
• Contact via Phone
• Contact face to face
• Organise focus/discussion groups via a third party

Using the data you can question customers on key variables you wish to discuss: customer service; pricing; order delivery times and more.

Today, online forums and networking sites are also a great way to track customer feedback. Use sites such as LinkedIn to post questions; set up Twitter pages, blogs, etc. Or just do it the old fashioned way – cards in the backs of books so you can gather names and addresses.

Using benchmark data to change the way your publishing company works

Once you have gathered the data you need to benchmark your publishing business against the best, what do you do with it? There are four outcomes from your findings:

1. You are working below industry par and you need to act
2. You are already operating at best practice levels
3. You are operating above best practice
4. You are in a new industry with limited benchmarking

Excluding example 4, you now need to compare competitors against your findings and then seek to resolve so that you are either on a par or better than your benchmarked companies.

Outside the remit of this article is then the management of change within your company to deliver brand-leading solutions for your publishing business. These tasks will fall within standard project management considerations.

Some considerations before deciding to change your publishing business following a benchmarking programme.
As with all things, never take what you see or hear at face value:

• when assessing your findings consider alternatives and be prepared to measure and test against variables for objective analysis
• anticipate that your benchmarked competitors may change and think how they might do that
• understand why your competitors might operate like they do (this could conceal things you have not thought about
• uncover how your competitors work internally on issues such as marketing, sales, pricing, product delivery, financing npd, not forgetting how businesses are being managed

The management of competitive intelligence in publishing companies

Finally, in an environment where you are gathering competitor data for benchmarking purposes, consider where your findings should be held or retained. In many publishing companies, marketing is seen simply as a department for distributing brochures and catalogues.

In truth, competitor activity should be monitored and delivered by product managers within a strategic marketing department or, in larger organisations, by a specific competitor intelligence team.

Competitor data is too important to be the preserve of individual publishers, sales directors, or a managing director. Competitor data is a function of strategic marketing and should reside under the marketing function of a business, being openly distributed for the development and delivery of strategic (as opposed to product specific) goals.

This article was written by Michael Smith, Director, Red Page Ltd.
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Confused about your pricing? Worried that pricing might involve hiring an expensive consultant? Before you drive yourself mad with conceptual theories and investing in conjoint analysis software, here are eight practical ways you can help give your pricing a little more focus:

1. Collect competitor information on pricing BUT don’t be bound by the price neighbourhood. Remember, their prices are not prices designed to help your business. A price neighbourhood policy does nothing to help price to value and can commoditise your brand.

2. Design a pricing matrix which rewards volume. The more people order, the cheaper it gets. This is not altruism, this is a fact of nature and cannot be overcome by meanness. I heard of one company recently which offered 1 free product for every 12 ordered. If a customer bought 144 units, they got 12 free. In other words, beyond 12, there is no scale of discounting or saving.

3. Make sure any offer you provide is conditional on a response by the customer. Never simply cut costs to get sales – you only encourage customers to think you will always be flexible. This applies to offers via your sales team, on any sales letter or brochure, or online on your website.

4. Your cost base is of no interest to your customer – avoid cost-plus pricing as it is artificial and does not respect the real value of your product to the customer.

5. Never launch a new product cheaply. It is always easier to come down in price later than start putting prices up. The world-famous mini car made no profits in its first years because the company failed to understand the real value of a tiny car – economy, funkiness, space, utility – and failed to price for that value in its marketing.

6. Make sure your sales and marketing people know WHY your product is valuable and give them a pricing structure based on the company’s needs and not on the needs of the sales team to close a deal. Employing a good copywriter who understands value-based copywriting techniques is a recommended way to create a real understanding of your brand.

7. Remember to include pricing promotions in your budget at the beginning of the year. It is crucial you anticipate revenue based on prices charged rather than a multiple of full price x units sold

8. Understand the 80:20 rule and avoid pricing gimmicks designed to attract unprofitable customers.

If you only remember one thing, remember that low prices serve to cripple businesses by piling pressure on internal overheads. Price to value and communicate your value to ensure consistent and profitable pricing.

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The world of advertising and marketing is full of free goods, discounts, BOGOF and more. A classic in today’s retail world is TM Lewin, the shirt retailers, who never seem to have a day go by when there isn’t an offer at their shop or on their website. This is not desperation, however. This is strategy.

Reuben Swartz in his pricing blog argued (I paraphrase) “free is not a pricing strategy. It’s an advertising strategy, a promotional strategy, a testing strategy”. He’s right. The purpose of providing free offers, discounts, premia etc, is nothing to do with altruism or largesse. It’s to do with testing the tipping point for customers and, when found, to continue to engender a relationship with that customer.

At the end of the day, offers exist to encourage a financial response - sales. Google, a great online brand with a marketing reputation as a great altruist, appears to offer a range of phenomenal free products and services. Yet it does this for a reason: to give people a reason to come to their website, creating traffic – in order to sell advertising online.

Not many businesses are as successful as Google but all businesses can learn one sales and marketing lesson from the application of “free”. It is this: offer nothing free that does not generate a financial response somewhere which is greater than the cost to you of the free product or offer. And never let a customer think they got something for nothing – you will only encourage price buyers, cheapskates and profit drainers.

If you offer something at a discount, or for free, or with a premium, make sure the customer knows that this is because you want them to do something in return (e.g. order within 7 days). Strangely, even buy one, get one free (BOGOF) does something really odd: it preserves the FULL price of the product in the mind of the customer.

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Customers perceptions of your products are the key to delivering profitable sales says Michael Smith, Director, Red Page Ltd.

The problem of defaulting to cheap prices arises in a recession because companies suddenly forget what makes their product ranges good. Instead they run like headless chickens into the “pile ‘em high, sell ‘em cheap” solutions offered by online retailers such as Amazon and Play.com. Result? Customers don’t see your company, your brand, your value proposition; they instead see the branding, pricing and value proposition of the supplier. Oh dear…

And then it gets worse. Companies who decide to rely on third parties to convey their brand values suddenly realise that they are losing control of their customers and their customers’ perceptions. Do companies like Amazon pass onto the supplier the data on the people who are ordering their products? No. Are they altruistic in the discounts they offer to the supplier? No. So your brand perception is hijacked, along with your pricing, net revenue and, more importantly, your customer data. That’s right, you lose access to your real end-user customers – the very people who you should be contacting to grow your own business.

Even if your business is fundamentally reliant on third parties for sales, make sure at all costs that you invest in your brand assets to keep people coming back to you. A brand is not a logo, it is an inherent set of properties which distinguish you from your competitors. These inherent properties are otherwise known as your value proposition and you abandon them at your peril.

What are your brand assets that you can exploit in your marketing and use to retain customers and grow profitable sales? If the answer is low prices and cutting your costs to stay profitable then you’re in the wrong business. Focus on your customers and their needs for sure, but never lose sight of why you got into business – to make money for your company. This can only be achieved by engaging new customers, earning their trust, and converting them to brand advocates who keep coming back for more.

If you only remember one thing, remember that aiming for low prices and relying on third parties to safeguard your business ends up divorcing you from your real customers. Try to understand your brand and communicate it to your real end-user, before it is too late.

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