A customer came to Pablo Picasso and asked for him to paint her a portrait.
He did so in 10 minutes. And then asked for $20,000 dollars.
The customer was perplexed and said – “But it only took you 10 minutes?”
His response: “It took me 40 years to be able to do that!”
Startups: The price needs to be a function of value created, not the time taken.
The latest trick of many airlines is to segregate elements of their product cost
– Introducing the “Fuel Surcharge”
Apparently this provides pricing transparency. Thanks Mr Airline, but we know the price of oil is rising.
Isn’t fuel a fundamental input cost for airlines? (30%)
Do they think we care what their input costs are?
Do they realize that we’d rather the total price – no tricks?
Do they know it reduces ‘trust’ in their brand and industry?
And just to show my total disdain for fragmented and aggregated pricing here’s a few questions I’d like to propose to the airline Industry:
Does Nike have a shoe lace surcharge?
Does Ford charge extra for the steering wheel?
Does Coke have an aluminum can surcharge?
Does Nokia charge extra for the buttons on the cell phone?
Fuel is not an ‘optional extra’. So work it out, include it and charge us a price. That’s what business is…. Businesses are meant to be working this stuff out to reduce the complexity in our lives. That’s what business does.
No wonder airlines have the highest business failure rate of any industry, and the worst profitability of any Industry in history. (which by the way is a net negative over the past 100 years)
Start up blog says: Consumers hate ‘Oh, by the way’ charges. Avoid them at all costs.
The factors we’ve considered:
There needs to be an actual business or brand behind it
Not just something funny
The idea or product was primarily spread by others.
Not ‘driven’ by paid media.
Based on effectiveness only, (ignores insensitivities / political / religious views)
A little explanation is next to each
In order.
Add to, agree, disagree, complain and disdain in comments below!
Quite often we must make decisions by looking at the balance sheet. It’s a fact of business life. But when it comes to marketing such decisions can be the death of a brand. The fact is, most marketing efforts are immeasurable before the decision.
Irish brand Waterford Crystal has just done some Balance Sheet Marketing.
A quick summary for the uninitiated:
Waterford city is the Crystal County of Ireland
Waterford has been making crystal here since 1783
Currently one fifth of their products are made in other parts of Europe
They haven’t made a profit in 5 years
They’ve just cut 500 jobs in Waterford Ireland to move all production
Their Chief executive Peter Cameron was quoted as saying, “We can source things from Eastern Europe under the Waterford fanchise. That’s not going to be an event that will change the perception of the brand”
Maybe Waterford Crystal have underestimated the emotional links passionate users have with brands.
Start up blog view:
Maybe they should charge what it costs
Maybe consumers would pay what it’s worth
Maybe they should tell consumers they must increase price or leave Waterford
Maybe ‘all’ production should be in Waterford Ireland
Maybe they should sing this fact as loud as possible
Maybe they should leverage their history a bit more
Maybe that would turn a profit
The best financial decisions protect innate brand equity, not destroy it.
Below is a picture of a ‘brand on fire’– Crocs. The basic summary is Crocs are a highly functional rubber sandal which are really very comfortable.
They have really caught the imagination of the public. But the thing about crocs is that in real terms, they’re pretty ugly shoes. Not very sexy at all. Nothing compared to other sexy consumer products like the ipod or a bottle of San pellegrino. They look a bit like hospital theatre shoes.
But Crocs have made their way into an every day fashion. Love them or hate them, brand ambassadors are now wearing them for their ‘cool appeal’. They’ve become fashionable on beaches, city streets, sailing decks, at swimming pools, cafes, sporting events, as in home slippers and surfers are wearing them to hop over rocks to their favourite reef break. We even see pairs matched up with socks in winter!
The thing is, Crocs work. They really have a multi purpose usage which sandals, thongs, or runners don’t. They grip, they’re water proof, they fit nice, they don’t cause blisters, they absorb shock, they protect and they last a long time. I can’t even begin to imagine how big the profit margins are on Crocs. But the recent range proliferation tells me that it’s substantial – check it out here, or in your local Crocs store to be blown away.
Start up lesson:
If you want to be ‘fashionable’, focus on being ‘functional’.
Marketing expert Ben Rowe was ahead of his time on the Gillette Fusion launch, as can be seen here.
The jury’s in. For the first time in their illustrious history, Gillettes latest innovation hasn’t become their best seller. Gillette Fusion 5 blade razor launch has failed for two reasons. I speak with authority as a former employee at Gillette.
Reason 1: We don’t have a shaving problem
Reason 2: Innovation and research are not consumer benefits
Reason 1 details:
The Gillette Mach 3 and its various spin offs have made shaving about as good as it can get given we are running a sharp blade across our faces. We no longer have a shaving problem. It’s smooth, safe and comfortable. They’re trying to fix something that doesn’t need fixed. In this situation very few people will trade up, before we even consider the price premium they’re asking.
Reason 2 details:
8 years of shaving innovation and research doesn’t translate into an actual consumer benefit. It’s a diary, not a benefit. They’ve even placed stickers on other Gillette shaving products trying to convince consumers to switch. We won’t.
In the early days the Gillette strategy of obseleting themselves was a good one, but no strategy works forever, and there is always a point of diminishing returns. Seems Gillette has reached theirs.
Start up lesson: If your innovation doesn’t solve a problem or significantly improve the consumer experience, you haven’t got one.
I’m not about to define a brand, I’d be wasting your time as there are plenty of marketing books to do that. I am about to talk about some qualities that many brands used to have, and more importantly the features that tomorrow’s hero brands do have.
function first
reliable consistency
thin product range
you’ll travel to buy it
limited distribution
you found out about it by recommendation
limited if any advertising expenditure
no external branding
you don’t care if people don’t know your using it
often founder defined
An example for me personally is Herringbone shirts. A Sydney based shirt company. Their specialty is shirts. 
They’re expensive, but the quality is remembered long after the price is forgotten. Only those who have one would know you’re wearing it. We know the cut, the feel, the fabric and they just sit like quality garments should.
A lot of global brands once fit the above description. Then due to the brand’s own success they simply became ‘corporations’. Once this happens, the rot sets in. They go public, product ranges get expanded, the founder loses control or sells out (as they deserve to), production is outsourced, quality is compromised, distribution is expanded, branding becomes overt and crass, sales targets must be met, prices get cut, customer basses expand, the product adapts to the larger vanilla consumer…. – rinse and repeat. Until their core consumer moves on.
Outrageous commercial success often predicates a brand’s inevitable decline because it is hard to retain the focus that drove the success in the first instance.
What is your – yesterday’s hero brand?
What is your – tomorrow’s hero brand?