8 Cardinal Principles to use Personas Effectively in Marketing

Best practices to make personas an effective tool to guide marketing activities by increasing customer understanding and empathy

A version of this post was first published on the OpenView labs blog.

The recent focus on content marketing has brought increased attention to personas. They can be a very effective tool for guiding most marketing activities by increasing customer understanding and empathy. But, like with every tool, you must get the fundamentals right to get maximum value out of it.

Despite all the attention on personas, many marketers find the concept somewhat ambiguous or confuse it with segmentation. making effective use of personas in practice has been often ineffective. In this post you will learn 8 ideas or best practices, to help you make personas a key tool that increases the effectiveness of all your marketing activities.

The concept of personas is not new. It was developed in 1998 by Alan Cooper, who also invented Visual Basic, as a tool to help with software interaction design. In 2002, Tony Zambito developed the concept of buyer personas to focus on buyer behavior and to guide customer strategies. Continue reading “8 Cardinal Principles to use Personas Effectively in Marketing”

How can a higher price result in more sales?

Value and Price

The concept of sales going up with a higher price is counter intuitive. It goes against the basic concept of price and demand taught in school. It defies the ‘law’ of demand. But it is real. Here are a few examples:

  • I wrote about a post about doubling price with no decrease in sales and a dramatic increase in profits in A Pricing Lesson from the Concorde it’s one of my most popular posts.
  • Here is a story of doubling the price of software and selling ten times as many copies.
  • Another software product originally selling at $3K was doubled in price with no impact to sales volume.
  • An entrepreneur quadrupled subscription prices with no impact on unit sales, effectively finding a 4x sales increase with the same demand..

But the question we need to ask us is Why? Increasing price is fantastic for any business because the additional revenue goes straight to the bottom line. If you have been reading this blog, you know I am a fan of leading with value rather than discounts. Not that I every advocate abusive pricing, which is simply a form of bad profits.

Back to the question – Why is it that customers are willing to buy more products at a higher price? The answer is straightforward: price communicates value. Maybe we can be bolder: price establishes value in the mind of customers.

Imagine I told you I just found a wonderful whiskey that sells for $5 a bottle. It is not credible. Your first thought may be that I don’t even know what is good whiskey (and you’d be right, but that’s another story). Conversely, when you are at a restaurant and you see a bottle of wine priced at $150. you immediately assume it is of very high quality.

You can charge more money for a product and see higher sales when your price and the value you deliver to customers is not aligned. In other words, when you are leaving money on the table.

How do you know if you are in this situation? The first and most common clue is when the price for your products or services is determined using a cost plus model. You have a target profit margin that gets added to your total costs and that becomes the price. This happens often when finance is in charge of pricing. The alternative is value-based pricing.

Building a value-based pricing model requires understanding your customers, what aspects of your product or service they value, and how they quantify that value. Often times, the value customers put in a product or service is determined by pricing anchors. Pricing anchors are prices in the mind of the customer that provide a range of costs for a product, a service or to solve a problem.

Pricing anchors are the reference points customers use to judge the relative price of your products. In a future post, I will explore how you can set these anchors using techniques such as Goldilocks Pricing.

For now,  imagine you need to replace the furnace in your home. You may think a furnace is going to cost you somewhere between $700. and $1200. (these are the numbers that came to my mind)  Whether those figures reflect the range of prices in the market is irrelevant. When you call the repairmen you will judge the price based on the range established by these anchors.

As in the post about the pricing lesson of the Concorde, when your price and the expected price are misaligned, you can make a correction without an impact to demand. You can also do this with products that don’t have a strong price elasticity.

Understanding your customer segments, their anchors, their values and their price expectations is fundamental for value-based pricing.

Let’s look at another example: As told in the book Playing to Win , when P&G was re-launching the Olay brand they did test on three prices:

  • At $12.99 the sales were good. It was affordable to the mass market.
  • At $15.99 sales tanked. Not expensive enough to be considered a premium cosmetic for the mass market, and to cheap to be a credible quality product for the prestige shopper
  • At $18.99 sales were great. A good value but not too cheap for premium shoppers, yet credible as premium and still affordable for Mass market

Launching at $18.99, Olay became a $2.4 billion dollar business for P&G with double digit growth and fantastic margins.

Pricing can make or break a business. I want to suggest another resolution for the new year (the first one is at the end of this post): understand the value model for your products and services, and use it to review your pricing strategy.

The Basic Formula for Business Success

what makes a business successful

What drives business success? What is the one thing any business can do to increase its chances of surviving, thriving and growing?

We are always looking for a single thing that can give us success, the ephemeral silver bullet. It’s called the delusion of the single explanation (read more about this one and 8 other delusions here). In business, like in most cases, it is always a combination of factors that results in success. Strategy is probably at the top of the list. Other factors include execution, passion, culture, and some may even say luck (timing is usually a better description).

While I believe Strategy is the #1 factor, I was looking for a formula to create a strategy that could be applied broadly, to almost every business, of any size and industry, to increase its chances of success. I think I found it.

The Formula for Business Success

Long time ago, probably in the early 90s I saw a magazine ad for Lotus (I believe) which had a central message designed to make small business owners feel empowered. The headline read:

Give Customers What they Want, Make Money, Repeat

Since, it stuck in my mind because of its simplicity and power. I am sure most people read it and thought “d’uh! – of course!’. Some of the most powerful concepts in business and in life are hidden behind simple phrases like this one. Often we fail at the basics. Often we get distracted by complex stuff and ignore the basics. My college professor used to say “Marketing is common sense, which is the least common of all senses. Never underestimate the Power of Simplicity.

Why is this simple customer so powerful? Let’s break it apart:

  • Give Customers what They want – offers four insights:
    • Giving customers what they want is very different than giving customers what you sell. This means you must change your marketing and your entire organization around customer needs, not around your products.
    • Second, it means you must first find out what customers want. really listen about what they want and make fundamental changes to deliver it. Like Domino’s when they changed the recipe for their pizza based on customer feedback.
    • Third, it means you need to decide who is your customer. It is very hard for a business to try to satisfy every kind of imaginable customer. You need to understand market segment,s buying behaviors and the type of customer you are better suited to serve. You can start with  simple terms – do you want to serve a quality oriented customer, a price conscious customer or one that values full service?
    • Fourth, the ‘Give’ talks about the delivery model. I think about it as understanding how your customer wants to consume your product. What format, what pricing model, what packaging, what place, etc.
  • Make Money – This is about having a fundamental understanding of your business metric. Understanding your cost to acquire a customer, your fixed and variable costs, cash flow, profitability, margin, cost of capital – start with the basics. If you talk to owners of small businesses, you may be surprised how many have no clue about many of these metrics. The same can be said of product managers, marketers, and even large companies. Remember the dot com bust? The focus on making money also means your business must be market driven, not technology or buzzword driven. Another no-brainer that is often the cause of business failure.
  • Repeat – This is a key part. It talks about building the culture, the processes and the company around these basic principles. Listening to customers once is not good. Looking at your balance sheet every now and then is not good management. These need to be habits. Even more than that, they need to be made core of the way you think about your business – as an entrepreneur, as a CEO or as a product marketer in a large company.

I hope this formula can help you and your business, or at least re-think your overall strategy.

A Pricing Lesson from the Concorde

Are you pricing your products right or are you leaving money on the table?

The Concorde was one of the most innovative machines ever built. The first and only supersonic commercial aircraft capable of flying at twice the speed of sound is also one of the most beautiful machines ever built. The Concorde story provides an interesting lesson on pricing.

During the first 6 years of operation, the fantastic Concorde lost money for British Airways. Losses were so bad, in 1982 BA’s boss Sir John King gave the responsibilities of the newly created Concorde division to  Captain Brian Walpole and gave him two years to turn Concorde losses into profits. If he failed, BA would terminate operations, shutting down Concorde for good.

The COncorde team decided to do some market research. They asked businessmen how much they thought a Concorde ticket cost. The answer, “Most of them didn’t know. It was their secretaries or travel companies doing the bookings. When they were asked to guess, because they were senior, very important people, they all guessed that the fare was higher. ” – explained Captain Jock Lowe, Concorde resource & Planning Manager.

This insight led to a new pricing strategy. Captain Lowe described “So very simply, we said, we’ll charge them what they think they are paying. And so we put the fares up”.  There was a discrepancy between what the company was charging and the value customers saw in the product. Have you asked your customers how valuable is your product or service to them?

Concorde ticket prices were doubled to over $7,000,  one way, in today’s prices. As a result, Concorde was repositioned to provide a super-elite class for bankers, the rich, and the famous. Concorde became the place to be seen.

Despite the high price, sales were very strong.  For one particular day, half the tickets for its first fare-paying London-New York flight were sold out in the first two hours of booking, (source).

Concorde started making money. Lots of it. “We made about $500 million pounds in net, clear profit.”. Estimates point to $50 million pounds in profit per year. That’s significant, even for a company the size of BA.

Many companies build their pricing strategies based on cost + margin. Often, there is a predetermined margin based on an overall pricing strategy or on a corporate profitability target. The story of Concorde sows us the power of market-based pricing and the importance of understanding the true value of the products and services your company offers. Do you know what is the price elasticity of your products?

Source: “Concorde, Flying Supersonic” – Smithsonian TV, 2010

Concorde photo courtesy Flickr user Howard N2GOT – Creative Commons

Building an Effective Influencer Strategy

Influencer strategy seems to be one of the pillars of social media marketing. There are many questions about how to identify, reward and empower influencers. So let’s say you have identified the top 1000 influencers in tour space. And then what?  It reminds me of the U2 song that goes “We thought we had the answers….it was the questions we had wrong”.

 What is an influencer? Often an influencer is measured in terms of the number of friends of twitter followers. Fans and followers are a measure of reach or popularity, not influence, but it is related. An influencer is someone who can convince other people to buy from you. That’s all that matters. From all the options for social media marketing activities the only ones that matter are those who result in someone buying from you.

 “influencer” is not a label for people in general. It’s not a species. There is no influencer gene that I know of. People have different levels of influence in different topics, it is contextual. For example, I am an influencer when it comes to photography, but a normal guy when it comes to sports and very much not an influencer in terms of cosmetics.

 How do I know I am an influencer in the context of photography? Because many of my friends and colleagues have purchased digital cameras based on my recommendations.  Many people I don’t even know have done the same – people I have never met, never exchanged emails with, people that don’t follow me. How? I have influenced them because they have read my opinions online and relied on my knowledge to make a buying decision. They trust me because I am a a normal consumer, like them, and I have lots of passion and experience about photography.

 All consumers, myself included, avoid or ignore advertising. When exposed to advertising most people don’t believe what it says. Grab a photography magazine and look at the ads: all of them say their cameras are awesome. People don’t trust marketers. But they trust people like them. They will be influenced by other customers who have experience with the products they are considered. People who like talking about their experiences, share their knowledge and opinions are advocates.

 The most common influencer strategy is to find the top influencers and reward them for their advocacy. Depending on the nature of your business, this could be a good strategy – or not. Often these customers, identified as influencers, are already predisposed to buy. Surely they deserve some recognition and special treatment, and you must empower them to be advocates. However, you cannot influence the influencers easily. They are experts; they know their stuff and probably know more about your products than most people in your company.

 Here is an interesting idea: instead of finding influencers why don’t you create influencers. Or better said, you can turn a customer who is very satisfied into an advocate by empowering him or her to influence others.

Imagine you are in the banking business. Now imagine you have a customer that is really happy with your checking account, the service from your credit card and your credit services. This customer is willing to tell other people about how great your bank is.

Imagine how powerful it would be to put this customer in a center of a room full of customers who are interested in checking accounts. Imagine if he had the ability to share his experience with your bank, in his own words, to all these potential customers. That would be really powerful, right? This room full of prospects is your website, they are visiting the “checking accounts” page, or the “credit cards” page. They are interested in your services, why else would they be there?

 That’s the power of empowering customers to share opinions and experiences (what we at Bazaarvoice  call reviews and stories). They allow customers to become influencers, enabling “normal” people to become advocates for your brand, in a very authentic and very convincing way. By enabling this conversation on your site, on your product or service pages, you are creating an influencer strategy that results in more sales. It’s a proven system.

 A great thing about a customer influencer strategy is that you don’t even have to find these influencers. You don’t have to identify them or know their name or pamper them with special treatment. However, you can still recognize them. You can give the more influential customers a badge that recognizes their contributions or their expertise.

 And this recognition can be helpful for customers. It helps them find among dozens of other customer opinions and give content to these opinions. In fact, customers can vote on the helpfulness of other customers contribution and sort them based on their helpfulness.  The helpfulness votes help identify the most influential customers, those that write reviews that help customers make decisions, which earn them badges in turn.

 All these pieces work together to promote advocacy, identify and recognize influencers in a way that helps customers buy. This system of advocacy and influence is customer centric, customer-driven and helps customers. Except for the sales, which benefit you and your business.

 10 ideas for developing an influencer strategy:

  1. An influencer is someone who helps other people buy from you
  2. Influence is contextual
  3. Popularity is not influence
  4. Passion, knowledge advocacy and popularity are factors of influence
  5. Everyone can be an influencer about the topics they are passionate about
  6. You don’t have to know your influencers (but it can help). Instread of finding them allow influencers to sel-identify
  7. Influencers are “turned-on” by empowering them to be advocates
  8. Most influencers are hard to influence. You can’t buy influence – stay authentic
  9. Your most influential customers are already predisposed to buy from you
  10. Influencers are often driven by status: recognition is more important than rewards
  11. (bonus) If your products suck it will be really hard to find influencers. The opposite is true, of course.

How often should we email our customer base?

This is a key question every large company has two answer, especially when different groups want to contact customers with messages about training, events, new products, promotions, surveys, etc.

When I was responsible for the Developer audience at Microsoft, I tried to create communication channels that would carry all these messages: the MSDN site, MSDN Flash newsletter, sub-audience specific sites, blogs, etc. But there is always a need for more formal communications that would go via email. The audience owners had to approve any communications going out or any new channels to avoid spamming customers and having a massive number of newsletters. At some point many companies have a discussion about how often they should be sending emails to their customers.

I have seen companies who have a rule about not sending broad emails to the customer base more than once a week. Some companies think it should be every two weeks or every month. Some companies have no rules and every one is free to spam everyone who has ever opted-in. Defining a fixed cadence to contact customers misses the point altogether.

The key for customer communications, either via email, RSS, twitter, fax, etc., is relevance.

Yetserday at the Omniture Summit, Forrester Analyst Emily Riley was sharing how after two years she still enjoys the weekly email newsletter sent by BabyCenter and read it thoroughly because it is relevant – it has information that is useful for her becaus eit has been targeted based on her baby’s age.

But when I get emails from a similar site (to remain unnamed) those emails are spam. My two daughters are 7 and 9, I don’t care about pretty much baby anything, the communcation is not relevant. Now, if the company had a Pre-Teen Parent newsletter, I might be interested. After all, they have my information, my permission (I haven’t opted out, my bad) and the exact age of my two daughters. Whay wouldn’t these companies continue to provide relevant information to parents as they grow? from diapers to cell phones and college.

If I am a developer heads down on a project or trying to understand a technology, I will dig every piece of relevant, useful information you send my way. If the information is useful, I will be grateful for that information even if I get an email every single day, scoring points for your brand. But if you send me information that is not targeted, relevant and useful, then every email is spam even if I only get one every leap year.

Content is King, Relevance is the Crown that makes Content the King.