Higher price point could be right, but you won’t know until you try
Sacramento Business Journal - by Wil Schroter Contributing writer
Any entrepreneur who has ever tried to bring a new product to market must deal with one frustrating fact — no one knows what to charge for it.
No matter how well you think you can predict the market or how much research you’ve done, until people start paying for your product, you’re still just guessing.
Even when people begin forking over their hard-earned cash for your product, you still don’t know if you’ve optimized for the best possible price to generate the greatest number of sales.
Fortunately, there are some simple strategies you can employ to give yourself a little peace of mind.
The binary nature of pricing
The first pass you’ll want to take at pricing is to eliminate all of the people who weren’t going to pay you to begin with.
When it comes to a consumer’s perception of pricing, it’s not always the actual amount that scares people; sometimes it’s whether or not they have to pay at all. Pricing is more or less binary for consumers — they are either going to pay or they won’t. The actual price is incidental.
Having launched 10 companies myself, all in different industries ranging from automotive to financial services to television casting, I can tell you that I’ve seen both types.
There’s something that goes off in a customer’s head when he or she must pull out his or her wallet. Up until that point, the value you were providing might have gone relatively unnoticed. But when the customer has to break out the credit card, they give the value of the product a second thought.
Instead of developing your pricing to lure the group of people unwilling to pay for your product, focus on maximizing the yield of those who will. It’s a lot easier to get someone to pay 10 percent more for your product than it is to reduce the price in the hope that more people will buy it.
The ‘freemium’ model
Next, you’ll want to figure out how to separate the paying customers from the non-paying customers, without alienating either.
Leave it to overzealous Internet nerds like me to invent a word like “freemium” to explain a basic price gateway model. Freemium is a word used to describe giving a portion of your product away for free in order to attract interest, then charging the most passionate customers for premium benefits.
I’m not entirely sure, but I think this model was pioneered by Baskin Robbins every time it handed me a free sample of chocolate ice cream in order to convince me to buy an entire cone. These days the freemium model appears on iTunes. I can listen to a sample of the song for free but have to pay to download the whole song onto my iPod.
The beauty of the freemium model is that it lets you test two pricing strategies simultaneously. You get to see how many customers would be interested in your product for nothing at all and learn what about the product people are most interested in paying for.
It pays to try everything
Once you’ve separated the paying customers from the non-paying customers, you still need to settle on the right price to charge. There’s one simple answer here: Try every possible price.
I’ll give you an example.
At Swapalease.com, a site that allows people who want to get out of a car lease to connect with people who want to get into a car lease, we charged people to post their car leases online. The problem was, we didn’t know how much to charge them, so we tried every possible price.
Our early estimates figured we would probably get around $24.95 per posting on the site. We constantly tried new pricing strategies to figure out what would be the right price that consumers would accept.
Wouldn’t you know that after six months of testing, we found out the number was more than $100 per post.
Had we gone with our gut instincts, we would have vastly undervalued the product and left a whole lot of money on the table.
The only thing you can rely on when picking the price of your product is having to change it — a lot.
If you can develop a system to test as many possible price points with as many consumers as possible, you can hopefully uncover that hidden gem that is your perfect price. Until then, keep trying something new. It’s the only surefire way to win.
WIL SCHROTER is a serial entrepreneur, author and chief executive officer of Columbus, Ohio-based Go Big Network. Reach him at wilschroter.com.
Thursday, March 12, 2009
Wednesday, March 11, 2009
Google Toys with Behavioral Advertising, Keeps Users Apprised
Marketing Vox-
Today Google will unveil revised privacy measures that give users more control over behavioral targeting.
When Google serves banner ads on publishers' sites, ads will feature links that explain how and why they were served. Clicking through will lead to information about its behavioral advertising program — which terraces consumers based on interests in goods or services, reports MediaPost.
The program is currently only in beta. But once a sufficient number of publishers have joined, consumers will be able to view what categories they've been listed in — and also tell Google to remove them from given categories as they see fit. A separate browser plug-in will enable them to opt out of the program permanently, or opt in to specific types of product offerings.
VP-Public Policy Mike Zaneis of the Interactive Advertising Bureau (IAB) praised Google's actions. "It's really a consumer empowerment tool, which is great," he said. "It's one more example of how industry is competing on the privacy issue, to the benefit of consumers–and also to the benefit of businesses."
But others were more skeptical about the details. Counsel Amina Fazlullah for media and telecommunications at the US Public Interest Research Group argued that an opt-out system means only sophisticated, privacy-minded consumers will make use of the new controls.
"If they asked people, 'Do you really want to be followed around and served ads,' most people would say no. Most of us don't really value advertising in any solid way."
A recent survey found three in five web users think sites track their behavior. This month, Google was one of a number of major search providers that signed off on new behavioral advertising guidelines released for the UK market by the IAB. Guidelines included stipulations that users must be given clear information about how their data is used, and a means to opt out.
Today Google will unveil revised privacy measures that give users more control over behavioral targeting.
When Google serves banner ads on publishers' sites, ads will feature links that explain how and why they were served. Clicking through will lead to information about its behavioral advertising program — which terraces consumers based on interests in goods or services, reports MediaPost.
The program is currently only in beta. But once a sufficient number of publishers have joined, consumers will be able to view what categories they've been listed in — and also tell Google to remove them from given categories as they see fit. A separate browser plug-in will enable them to opt out of the program permanently, or opt in to specific types of product offerings.
VP-Public Policy Mike Zaneis of the Interactive Advertising Bureau (IAB) praised Google's actions. "It's really a consumer empowerment tool, which is great," he said. "It's one more example of how industry is competing on the privacy issue, to the benefit of consumers–and also to the benefit of businesses."
But others were more skeptical about the details. Counsel Amina Fazlullah for media and telecommunications at the US Public Interest Research Group argued that an opt-out system means only sophisticated, privacy-minded consumers will make use of the new controls.
"If they asked people, 'Do you really want to be followed around and served ads,' most people would say no. Most of us don't really value advertising in any solid way."
A recent survey found three in five web users think sites track their behavior. This month, Google was one of a number of major search providers that signed off on new behavioral advertising guidelines released for the UK market by the IAB. Guidelines included stipulations that users must be given clear information about how their data is used, and a means to opt out.
Friday, March 6, 2009
Search Ads Vs. Display Ads?
By Chris Crum - Sat, 11/08/2008 - 08:50 How About Search Ads AND Display Ads
Many online advertisers continue to struggle with the decision to use either search engine advertising or display advertising. Google AdWords, Yahoo Search Marketing, Microsoft AdCenter and the like, or good old fashioned banner displays. Both offer valid reasons, and each outperforms the other in different areas.
Why Not Use Both?Perhaps you should consider using a combination of the two to truly get the most out of you campaign. There is a common belief that search engine advertising delivers a better return-on-investment, but according to Matt Lillig of the Yahoo Analytics Team, a combination is more likely to do so.
He says that advertisers just aren't measuring display ads in the best fashion. He writes on the Yahoo Search Marketing Blog:Specifically, many advertisers primarily use conversion percentage to measure the success of their display ads and search keywords.
For example, if a display ad converts poorly (it has a low conversion percentage) then the advertiser typically lowers the budget for the ad, shifts the budget to another channel like search, or pulls the budget entirely.The problem with only using the conversion metric method is that it is a “last click” metric. “Last click” means that the ad only gets credit for the last click the visitor made before they converted. For display ad and search keyword purposes, a last-click model doesn’t reveal the true value of the ad.
For example, a display or search ad wouldn’t get the credit for driving conversions to other campaigns. This can be a major issue, as advertisers might end up cutting the budget on an effective display campaign that is driving additional conversions, brand awareness and increased visitor traffic to your web site.
He then goes on to discuss the "assist" metric in Yahoo Full Analytics, which measures the number of times that display ads or search keywords contribute to the conversion of another ad or keyword.Things Have ChangedThere is no question that Pay-Per-Click search engine advertising has gained tremendous popularity over the years with the rise of the services mentioned in the introductory paragraph. In their early stages, they appeared to be a fresh alternative to banner ads that seemed to be attracting less and less attention.
Perhaps more importantly, they brought a relevancy to ads that was not really present in older display ad campaigns. The fact that they were based on searches assured a targeted audience that was more likely to be interested in the products being advertised. This concept was and continues to be a very attractive one to advertisers.
However, display advertising platforms are now offering such a concept, which combines not only relevancy and targeting, but the branding power of eye-catching visuals. In addition, platforms like the Google AdWords Display Ad Builder, MySpace's MyAds, and others allow the advertisers themselves to easily create professional looking ads without having to go through designers or ad agencies.
Many online advertisers continue to struggle with the decision to use either search engine advertising or display advertising. Google AdWords, Yahoo Search Marketing, Microsoft AdCenter and the like, or good old fashioned banner displays. Both offer valid reasons, and each outperforms the other in different areas.
Why Not Use Both?Perhaps you should consider using a combination of the two to truly get the most out of you campaign. There is a common belief that search engine advertising delivers a better return-on-investment, but according to Matt Lillig of the Yahoo Analytics Team, a combination is more likely to do so.
He says that advertisers just aren't measuring display ads in the best fashion. He writes on the Yahoo Search Marketing Blog:Specifically, many advertisers primarily use conversion percentage to measure the success of their display ads and search keywords.
For example, if a display ad converts poorly (it has a low conversion percentage) then the advertiser typically lowers the budget for the ad, shifts the budget to another channel like search, or pulls the budget entirely.The problem with only using the conversion metric method is that it is a “last click” metric. “Last click” means that the ad only gets credit for the last click the visitor made before they converted. For display ad and search keyword purposes, a last-click model doesn’t reveal the true value of the ad.
For example, a display or search ad wouldn’t get the credit for driving conversions to other campaigns. This can be a major issue, as advertisers might end up cutting the budget on an effective display campaign that is driving additional conversions, brand awareness and increased visitor traffic to your web site.
He then goes on to discuss the "assist" metric in Yahoo Full Analytics, which measures the number of times that display ads or search keywords contribute to the conversion of another ad or keyword.Things Have ChangedThere is no question that Pay-Per-Click search engine advertising has gained tremendous popularity over the years with the rise of the services mentioned in the introductory paragraph. In their early stages, they appeared to be a fresh alternative to banner ads that seemed to be attracting less and less attention.
Perhaps more importantly, they brought a relevancy to ads that was not really present in older display ad campaigns. The fact that they were based on searches assured a targeted audience that was more likely to be interested in the products being advertised. This concept was and continues to be a very attractive one to advertisers.
However, display advertising platforms are now offering such a concept, which combines not only relevancy and targeting, but the branding power of eye-catching visuals. In addition, platforms like the Google AdWords Display Ad Builder, MySpace's MyAds, and others allow the advertisers themselves to easily create professional looking ads without having to go through designers or ad agencies.
Measurement of Online Advertising ROI: The 100% Solution
By Gian Fulgoni
I think it was H. L. Mencken or Albert Einstein (a quick search showed me that they are both cited as authors) who said: “For every complex problem, there is one simple – but wrong – solution.”
I was reminded of this quote when I read a blog posting on the Adify site where the discussion focused on how to measure the effectiveness of online display advertising.
For me, the quote sums up the challenge. While it’s alluring to believe that there is one simple, easily-obtainable metric that will accurately and reliably predict advertising success, I believe this is a siren’s song. And, I suspect that most experienced researchers who have spent decades searching unsuccessfully for advertising’s Simple Holy Grail have also come to the conclusion that, while there certainly are simple metrics that can give you some insight, they’re far, far from foolproof as a measure of advertising’s impact on sales. And sales, I would argue, is the one undeniably relevant metric for evaluating ad effectiveness.
Unfortunately, however, measuring advertising’s sales impact is something that’s often difficult to do – especially since it’s often vital to measure advertising’s cumulative impact on sales across time and channels and to cleanly separate this from the impact of everything else that’s going on in a brand’s marketing mix.
This brings me to the validity of the click as a measure of advertising effectiveness. For many years, the click was used as a supposedly accurate measure of the effectiveness of display advertising. Now, I would be the first to agree that – for some direct response ad campaigns – the click remains a relevant metric. However, when it comes to measuring the impact of brand building advertising, the idea that consumers’ immediate response via a click is hard proof of the effectiveness of display advertising is just plain wrong. Perhaps, in the early days of online advertising when click through rates were running at levels of 5% or so, it was easy to believe otherwise. But, as click rates have dropped to a fraction of one percent it has become clear that some other metric is urgently needed. To believe otherwise today would be to acknowledge that display advertising has no impact at all. Perish that thought!
comScore’s objective in conducting the click study with Tacoda and Starcom was to prove – once and for all – the limitations of the click as a relevant metric to use to measure display advertising effectiveness. I believe this is a critical step in the evolution of online advertising because if our industry is to continue its torrid growth, we have to look beyond direct response advertising dollars. We have to convince the brand-building advertisers that they should move more of their ad dollars from traditional media to the Internet. Rest assured, we’re not going to be able to do that using clicks as the metric of choice. Instead, we have to be able to show that display advertising increases brand sales over time and across both online and offline sales channels. I think that Einstein would agree.
I think it was H. L. Mencken or Albert Einstein (a quick search showed me that they are both cited as authors) who said: “For every complex problem, there is one simple – but wrong – solution.”
I was reminded of this quote when I read a blog posting on the Adify site where the discussion focused on how to measure the effectiveness of online display advertising.
For me, the quote sums up the challenge. While it’s alluring to believe that there is one simple, easily-obtainable metric that will accurately and reliably predict advertising success, I believe this is a siren’s song. And, I suspect that most experienced researchers who have spent decades searching unsuccessfully for advertising’s Simple Holy Grail have also come to the conclusion that, while there certainly are simple metrics that can give you some insight, they’re far, far from foolproof as a measure of advertising’s impact on sales. And sales, I would argue, is the one undeniably relevant metric for evaluating ad effectiveness.
Unfortunately, however, measuring advertising’s sales impact is something that’s often difficult to do – especially since it’s often vital to measure advertising’s cumulative impact on sales across time and channels and to cleanly separate this from the impact of everything else that’s going on in a brand’s marketing mix.
This brings me to the validity of the click as a measure of advertising effectiveness. For many years, the click was used as a supposedly accurate measure of the effectiveness of display advertising. Now, I would be the first to agree that – for some direct response ad campaigns – the click remains a relevant metric. However, when it comes to measuring the impact of brand building advertising, the idea that consumers’ immediate response via a click is hard proof of the effectiveness of display advertising is just plain wrong. Perhaps, in the early days of online advertising when click through rates were running at levels of 5% or so, it was easy to believe otherwise. But, as click rates have dropped to a fraction of one percent it has become clear that some other metric is urgently needed. To believe otherwise today would be to acknowledge that display advertising has no impact at all. Perish that thought!
comScore’s objective in conducting the click study with Tacoda and Starcom was to prove – once and for all – the limitations of the click as a relevant metric to use to measure display advertising effectiveness. I believe this is a critical step in the evolution of online advertising because if our industry is to continue its torrid growth, we have to look beyond direct response advertising dollars. We have to convince the brand-building advertisers that they should move more of their ad dollars from traditional media to the Internet. Rest assured, we’re not going to be able to do that using clicks as the metric of choice. Instead, we have to be able to show that display advertising increases brand sales over time and across both online and offline sales channels. I think that Einstein would agree.
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