** Tig's weekly column fields questions from and for marketers. Got a question for Tig? Email him by clicking here. **
Dear Tig,
In the online environment, which is more likely to happen: Users buying less because of a price increase or users buying more because of a cost decrease? In other words, can I make more money by charging more and selling less, or by charging less and selling more?
Thanks in advance, At a Crossroads
Dear Crossroads,
This is a classic “elasticity of demand” question, harkening back to those dismal microeconomics classes you unwisely avoided in college. People trying to determine the perfect pricing point to maximize profits (as opposed to market share) try to figure out this very point where price increases produce enough additional profit to outweigh any reduction in the number of sales.
The cop-out answer to your question is: It depends. It depends on what your current price point is along the curve of your customers' average tendency to shy away from purchase due to price. It also depends on various things, such as the type of audience you have, the product category, the brand you represent, audience tolerance for frequent changes, etc.
While I can't be more specific not knowing your exact situation, I can tell you that you can begin to determine these factors and the pricing curves that they produce. It requires some experimentation--either over time or across test audiences.
This is frequently a very useful exercise. Time Warner Cable, for instance, sometimes took a single town and provided different pricing packages on each street. They might vary just the price or perhaps even the way in which customers were charged. An early test showed that people billed at the end of the month suffered from more sticker shock than those billed frequently and incrementally for individual movie purchases.
Lots of useful learnings can result, and the Internet provides a great test medium.
Dear Tig,
My boss (a COO with a non-marketing background) expects me to bring in 7,000 leads per month on a budget of around $5k. Should I just quit now?
On the Threshold
Dear Thresholder,
There are leads, and then there are leads. Your budget is anemic, no matter how you cut it, but the gulf between your boss's expectations and what you can do depends on your business and the type of lead you're expected to generate.
If he's looking for interested CEOs of major corporations, then you should quit now, change your name and move to a different country. If, though, he's merely looking for web sites interested in using your company as an affiliate marketing partner, then you're not quite so far off. Unfortunately, from the tone of your question, I'm guessing you're dealing with a situation closer to the first example.
The best advice I can give you is to attempt to reset his expectations by using data from other companies. That way, he can't dismiss your complaints as the typical internal marketing department whining. You can get competitive spending data--where you can find examples from your product category--from companies like AdRelevance.
Dear Tig,
Does sex sell?
Thanks, Sex Skeptic
Dear Skeptic,
Um, yeah, sex sells. Really, really, really well.
It's used primarily for one of two different communications tactics. Most common is the attract-the-eye tactic. Every ad needs to break through the clutter, and showing alluring body parts seems to tickle a lizard part of the human brain that drives attention. You can see this most obviously at any magazine rack. It seems (and bothers me to no end) that no matter the publication's topic, the primary newsstand sales tool is the breast. It doesn't matter if it's a magazine for women, for men, for hotrod cars or for mutual funds.
The other common form is the use-this-product-and-find-yourself-attractive-to-hot-people message. Trust me, drinking that extra six-pack is not going to make you more attractive, but when subtly delivered, this crass fiction seems to work. It operates on the premise that when making brand choices, your categorization of the different products sits somewhere in your brain next to its classification of the likelihood of the product's ability to best present yourself to a reproductive mate.
In other words, yes, it works, and we're all a bunch of monkeys.
