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The premiere publication that assists with startup financing, production and marketing.
Nothing is more discouraging to the new business owner than providing a superior product or service, and finding that consumers pass it over for an inferior product from a better known manufacturer.
Better Mousetraps
If you think a better mousetrap is the key to success, you're wrong! (And you will have a difficult time developing a good marketing strategy until you acknowledge this fact.) So, let's put that idea aside for a moment, and look at some human factors that must be recognized in order to make your company a success. First, we'll concentrate on visibility and trust, two factors which are essential to getting people to buy your product.
In this article, we describe some of the characteristics of the buying public, followed by suggestions as to how you can improve your business image, your product image, and your potential for success in the marketplace.
Buying Habits The buying habits of consumers are not as mysterious as they might seem. People like things that are new, as long as they are not so new as to be unfamiliar. They like things that are cheap. And they like things that are familiar or recognizable in some way. Unfortunately, for startup businesses, the above simple tenets can be seemingly insurmountable hurdles. Let's look at them individually.
Familiarity
Why do you think established companies spend millions of dollars promoting their company name and logo?
To answer this question, suppose someone showed you 3 boxes of similarly-priced computer diskettes, told you to choose one for your company, and that the boss was going to evaluate your purchase. Box number one is an unknown generic brand with no label. Box number two is manufactured by Smithy, and box number three is Sony. Most people will choose Sony. Why? Are the diskettes necessarily better? No, they may not be, but you know Sony will still be in business next week, so even if you find out the diskettes are defective, you feel sure you can get a refund or exchange if needed. Name brand familiarity engenders trust.
Surprisingly, this is true even if the product is known to be of poor quality! Anyone who has read consumer annual car guides knows that there some badly manufactured cars which continue to sell well, year after year. Why? Because their names are well-known. To some people a sense of familiarity is a stronger buying factor than common sense.
If you are a startup company trying to promote a new, or superior product, you have to find ways to make the consumer feel familiar with your company name, and comfortable with the purchase. This means choosing a good company name, and a logo which fits the archetype of the industry in which you are competing. In addition, your product packaging should be similar enough to major brands to make it feel familiar to consumers, but different enough to make it seem new or special.
Major companies run advertising campaigns that last for weeks and months in order to further a sense of familiarity. It's almost impossible for a startup to spend large sums on advertising and promotion, but keep in mind that if you post an ad, or send out a flyer, then it will take about seven repetitions before customers really notice your name and product. This fact should be considered when you plan your marketing. If your budget forces you to choose between doing a variety of promotions, or selecting two or three and running them consecutively, the second choice is probably better. Just remember the golden rule of advertising: keep track of your responses, so that you can further develop techniques that work, and stop spending money on those which don't.
New and Improved
Have you noticed that cereals, dish detergents, soaps, skin creams, shampoos, and almost all day-to-day consumer products come out two or three times a year with a new, improved version? How many times can a dish detergent really be 'improved?'
These questions are worth examining, since, of course, most household products can't improve by an astonishing 200 to 300 times of their original effectiveness. (Your grandmother's dish detergent was probably as effective as most detergents manufactured today.) So what are advertisers really doing?
There are several reasons why manufacturers change their products. One is to recapture the attention of their buyers if sales are levelling off. They'll change the color or scent of a shampoo (the essential ingredients rarely change) to make it stand out, and so they can put the word NEW (a very powerful psychological draw) on the label. This also allows them to promote the product (by sending out press releases and flyers) to keep the attention of distributors and the folks who create the store displays and stock the shelves.
If you can find a way to incorporate the word new into your packaging or promotions, it is usually an effective way to get the customers' attention.
The Bottom Line
One of the most interesting consumer battles we've witnessed lately was between two cartridge drives. Both are good, practical products. Both have name brand recognition. Both have snappy, friendly names. Both are well-promoted in magazines and catalogs. So we evaluated them more closely and discovered that technologically, the faster one with more features was also the least expensive! But consumers bought the competitor. They thought they were saving $20! Which brings us to an important quirk of human beings. In spite of 12+ years of public school, most people can't add, or don't take the time to do so!
Let's look at at the pricing of these two competing products in more detail:
Drive number one (the slower one) originally sold for $20 less, but the cartridges were more expensive, and held less data. Clearly, if you bought 2 or more cartridges, the faster, more powerful drive was less expensive!
Now that the market has been shaking out for about half a year, it appears that drive number one has better market penetration, and now sells for less (presumably due to volume sales).
As suppliers of business information, this product battle was interesting to us, so we questioned newsgroup participants, and friends and relatives who purchased the drives, and asked them why they chose drive number one. Almost universally they responded that it was cheaper. When we pointed out that it wasn't really cheaper if you bought two or more cartridges, and that it was slower, most of them seemed surprised. They hadn't added up the cost of cartridges, and most of them hadn't noticed the difference in capabilities. They had known that the drive they bought was a little slower, but decided the $20 apparent difference justified a small loss in speed. A few of the people we talked to mentioned that drive number one was also 'cuter.'
What does this mean to you as a business owner? Did the better mousetrap win? Did Beta beat out VHS? Which computers sold more, PCs or Amigas? When the Amiga was released in 1985, its apparent price was higher than a corresponding PC, but the Amiga came standard with serial ports, joystick ports, a color graphics card, a stereo sound card, NTSC capability, multitasking, and a mouse. In 1985 PCs didn't come standard with a mouse, built-in serial ports, high resolution graphics cards, sound cards, or multitasking, and if you added all those 'extras,' it ended up costing $600 more than the Amiga. Name brand recognition, and the lower initial offering price of PCs, motivated consumers more than the long-term costs of the product.
On the other hand, some companies have succeeded in developing businesses based on superior products.
As a new business owner, is it better to create a product is clearly superior to the competition? Or should you release the first version with fewer bells and whistles, and use the revenue from sales to finance enhanced versions of the product line? In the end, each business owner has to decide for him- or herself.
Summing Up
What can you learn from the above anecdotes?
Other articles in this issue:
Hanging Out Your Shingle: Finding the Right Office Space
The Alternative Office: From Garages to Sailboats
The Online Store: Setting Up Shop on the Web
Point to Point: The Illusion of Free Enterprise
Selling Your Software: Even if You Hate Doing Business
Book Review: Launching a Business on the Web
Suggested Web sites for information related to this article:
Suggestions for Success
American Demographics Marketing Tools
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