Nomad Marketing Blog

Big-Box retailers are all on crack.  They can’t stop slashing prices.  It’s the worst kind of addiction.  The initial Black Friday sales results show high revenue from the Thanksgiving weekend, but a steep decline in the days following.  Target avoided deep discounts – and paid the price.  They are unlikely to meet 4th quarter expectations.The main problem is simple:  Retailers have trained shoppers (and themselves) to rely on discounted prices.  A couple examples:

• Macy’s enjoyed strong sales over the weekend, but have struggled since.  My family received at least 6 different discount cards and coupons from Macy’s prior to Thanksgiving, not to mention the daily free standing inserts and newspaper inserts.  I haven’t paid full retail in a Macy’s store EVER.

• Wal-Mart is so hooked on discounts they’re re-doing their Black Friday promotions – in December!  This is insane.

At the same time, upscale shoppers are spending like there’s no tomorrow – and paying full retail.  It’s the only growing part of the retail economy.OK, so the economy and consumer confidence have a lot to do with this situation.  People are buying “paper towels and Fruit Loops”, according to Reuters, but the retailers are making the situation worse for themselves.  The only factor shoppers seem to be weighing in making their shopping choices is the discount %.Going cold turkey will be impossible, but retailers need to reduce their dependence on discounting to entice shoppers.  They need to return to the fundamentals of good value for money, appealing merchandise and a pleasant shopping experience.Crack kills.  So does discounting.

Nomad Marketing,marketing,retail,black friday,pricing

Record labels should give songs away.The song is no longer the product.  Songs have become advertisements for a band.  When fans like a new song, they share it with their friends, for free.  But they buy the ringtone - for twice the price of the download.  They buy the band’s T-shirt.  They buy tickets to the concert. The low royalties artists are paid for album sales don’t keep them in beer money.  Musicians have known the value of diversification for years.Record labels are starting to figure that out, but they are moving very slowly.  Some early adopters are writing “360 contracts” with new artists, trying to lock in a percentage of touring revenue, t-shirt sales, etc.  The labels are also making a fortune from ringtone sales, the fastest growing part of the market.Yet, the labels continue to keep a strangle hold on the song itself.  They sue their customers for piracy.  They mandate ridiculous digital rights management restrictions in music downloads.  They demand royalty payments from online and brick and mortar radio stations – and podcasters.  And yet, revenue from the sales of songs continues to evaporate.Finding another wayJamglue is a great example of a vehicle for spreading songs around while protecting commercial rights.  Using the Creative Commons license structure, Jamglue allows fans to download songs, remix them, share them and embed them in their blogs.  With Jamglue, and other Creative Commons users, the song is free to do what it does best – promote musicians.  Here’s a sample of a Jamglue remix: Wyclef Jean Feat Sizzla, Mavado & Uncle Murder - “Welcome To The East” ( Clean ) New “Hot” Track (An iSpyder®™ Jamglue Community Remix) by iSpyder Music labels are alienating their customers.  They need to stop suing them, and start finding ways to appeal to them.  When they stop thinking about the song as their only product, maybe they’ll find a new business model.

Nomad Marketing,Marketing,Music,Creative Commons,Podcasting,Blogs

Black Friday is just around the corner and great deals will be everywhere.  This is great for consumers, but may not be that great for businesses.  Price promotions can be a good way for businesses to attract new customers.  They can be habit forming, though – for both the businesses and the customers.  Therein lies the danger.  Regular discounting becomes a crutch for salespeople and trains customers to delay purchasing.Just a few years ago, 4th quarter retail sales were skewed toward the first 2-3 weeks of December.  Now, the majority of 4th quarter retail revenue takes place on Black Friday.  A retailer’s quarter can be made or broken on the strength of their discount offers.  Consumers are so hyped about the sales that they troll the Internet searching for illicit glimpses of the holiday circulars.  A friend in the retail clothing business once told me, “Only fools pay retail.”The problem for businesses is simple:  price promotions reduce revenue.  The occasional loss leader or coupon sale can lead consumers to purchase other items at full price – justifying the cost of the coupon.  But frequent discounting allows consumers to enjoy all of the benefits of a firm’s goods and services without paying full rate.    And it can be addictive.Successful retailers and product marketers know that premium products can, and do, justify their pricing.  The iPod family has been the hottest product line in the country for three years running.  Apple rarely discounts – and the company has enjoyed consistent revenue, profit and share price growth since the introduction of the first generation iPod was introduced.Businesses can avoid the slippery slope of discounting.  A few key principles can help prevent the erosion of top-line revenue:

• Focus on a niche.  By narrowing the field, you enhance your advantage over other offerings.
• Know your customers.  The better you understand their needs, the better solutions you can offer.  And the more they’ll be willing to pay.
• Communicate your value.  Emphasizing your unique benefits justifies the premium price in your customers’ minds.
• Don’t lead with price.  A unique special feature or limited time bonus offer can be as interesting and desirable as a slashed price.

Don’t get sucked into the Black Friday hype.  Discounting can be a useful tool in new customer acquisition.  But too much of a good thing can be a very bad thing.  Stick to your guns – and your prices.Disclaimer:  I own 2 macs and 2 iPods – and paid full price for all of them.

Marketing,Nomad Marketing,Pricing,Business,Retail,Negotiation,Sales