Raise prices, cut services and keep smiling: Marketing through our economic times
In tough economic times, there is a temptation to be a
little deceptive in marketing. Companies have had to cut back anywhere they can
trim and many times that can include what they deliver to the client. Are you
fudging the lines between what you tell your clients you will do for them and
what you can deliver? There was an interesting case that was settled this past
week. Discover was fined for deceptive marketing and sales tactics in promoting
add-ons to their credit cards. Discover is alleged to have either signed up
customers for services they had not agreed to purchase or not made it clear
that there were fees for items such as payment protection and credit score
tracking. In any event, as part of the agreement between Discover Bank and two
federal agencies, $200 million will be refunded to cardholders impacted by the
add-ons and a $14 million fine will be paid to the federal government. Ouch!
Let’s face it; times have been tough. Anywhere you can make
an extra dollar; you better take advantage of it. For some companies, that has
meant cutting back on services they used to do at cost or as a loss leader
below cost. For others, that means charging more for those types of services.
Marketing is given the chore of making all of this look good to the customer.
Our job is to promote the finer points of the product or service and entice the
customer to purchase it. Let’s suffice it to say it is never popular to tell
your customers "we are going to charge you more and give you less.” The
temptation is to go one of two routes: make claims you cannot backup – similar
to a snake oil sales pitch – or hide the charge somewhere else and hope the
customer isn’t paying attention. If you do either, you are asking for trouble.
If you are caught, there could be truth-in-advertising fines similar to what
Discover is paying. However there is a bigger price to pay. That comes in loss
of respect from the marketplace. If you fall from grace because you are
crossing a line in your marketing and underperforming in fulfilling what you
claimed you would do, you will face an uphill climb to regain the confidence of
your consumers. Outside of pushing products and enticing sales, the bigger job
of marketing is to put the best face on the company. The company is brand
number one.
So how do you move forward when you have to make adjustments
to your services or pricing? For one, you can just be honest, especially when
you are raising prices. Your customers will complain in the short term, but
most understand in the long run. Business is full of adjustments. It may be
worth a little pain now for long-term success. You can also look for add-on
services that increase the value of your offerings without raising your bottom
line. Think about putting some of your services online. Typically offering a
service online is cheaper than offering it in any other medium. In other words,
are there low cost, high value services that can be added to your products or
services that will help the customer pay more for what you are producing? Take
an inventory of what you can do cheaply and then go ask a test group of your
clients if it would be an added value to them. Most customers can justify
paying more if they think they are getting more. It is a mind game they play
within their own heads, but may be the ticket you need in marketing to hold
them as clients.
The
last test on raising prices and cutting services is what will the market bear?
In other words, where is the line that will cause your customers to bolt to
shop your services with the competition? On the flip side, what is the
competition doing? Not that you have to do everything in lock step with your
competition, in fact this can be disastrous – if your competitor is going out
of business, you don’t want to follow suit. However, it is a good idea to get
information from a consumer analysis (what does the marketplace think about
your service offerings) and a competitive analysis (what is the competition
doing). It will help guide you to know what to do in your marketing through
these tough times and beyond. You still want to stand out from the competition,
but what will do the trick in your case? For instance, Huntington Bank began
marketing their 24 Hour Grace this past year. If you overdraw your consumer
bank account, you have 24 hours to deposit money into your account without
incurring a fee. Huntington made a calculated move in marketing to bank
customers. They understood that bank fees are new sales killers and eliminating
one of those fees – albeit not entirely – would stimulate a surge of new
customers. Did they eliminate all of their fees? No, in fact they did not
eliminate the overdraft fee, they simply suspended it until the second business
day instead of the first. This
really didn’t cost Huntington anything and gained them a favorable response
from the marketplace. You want to find that one low cost, high value item that
causes the customer to stick with you even if you raise your prices. When you
find it, hang your marketing on it.
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Regulators slap Discover with penalty for deceptive credit card marketing, by Peter Schroeder, On the Money, The Hill.com,
9/24/12
Huntington
Bank 24 hour Grace, https://www.huntington.com/grace
Original photo by Marcela Barsse