That was the reaction after I sent a colleague a link to an ASP that, ironically, provides online billing services.

And what a tease it was.  The site even included this:

That’s why we offer a set of simple fixed price implementation packages to help you get started. Our team of experts can get your bills out on time and your cash coming in quickly.

There was no pricing information to be found online, just a phone number posted prominently.

For most online products and services today, the absence of a “Pricing” tab is a sure indication that a company’s products or services are expensive or confusingly priced.

In effect, the absence of clear information often equates to, “Our product is so expensive and complex that we have to employ sales people to get you to buy it.  As a result, we have to charge you more because we’ve got to pay for their salary, benefits, and commission, plus the additional overhead to manage them.”

“Please contact sales” also means, “I can’t buy it right now.  I have to wait for someone to get back to me and then I have to explain what I’m looking for and then listen to their sales pitch and then . . . ”

In all cases, the result is lost sales.

Some managers delude themselves into believing that their product or service is so compelling that potential buyers will put up with the inconvenience of having to contact sales to learn pricing.  Unless your business is a monopoly and your product or service has no substitutes, the response of a competitor to simply provide some pricing information online is the superior (and zero marginal cost) strategy.

If your company is trying to decide whether or not to post prices online, walk each member of your management team through this simple market research exercise: “What did you do the last time you were looking for something online and had a choice between a company that published prices and one that said, ‘Call for pricing?’”

Despite the obvious appeal to each of us when we’re buying products or services, some believe that when we’re a seller we shouldn’t publish prices.  These are some of these reasons heard:

• We don’t want our competitors to know our prices—Do you really think they don’t already know them?  How would you respond if one of your product managers or sales executives told you, “I don’t know what they charge and don’t have any idea of how to find out?”  You expect your folks to know what your competitors charge; they doubtless know what you charge.
• Our product is complex—Companies don’t have to publish prices for every configuration.  Instead, they can publish prices for a typical configuration.  We see this approach from car companies, among others.  If you believe that your product is so complex that you can’t do this, you have far-greater problems than just pricing.
• We don’t want to scare off potential buyers—One of the primary goals of publishing pricing is to enable the potential customer to self-select.  If you could get the potential buyer to contact you, what would your salesperson say that would cause a potential buyer to remain interested despite a price that’s higher than what he she wants to pay (relative to other similar products and services)?  If the salesperson has information that’s so compelling, why isn’t this information available online?
• Each customer situation is different—As noted above, this should not be an objection to publishing pricing for different configurations or bundles in order to give potential buyers an idea of what they might pay.
• We don’t set the price, our retailers do—Other industries have figured out that the way to deal with this is through quoting suggested retail prices or linking to the product on the sites of retailers.
• The price changes frequently—Stock exchanges, airlines, hotels, and many others have figured out how to keep online prices up-to-date.  This is a solved problem.
• We can charge more—This is a more logical argument and it’s based on the idea of price discrimination.  Specifically, that you can charge someone more if they value the item more (and are able to pay more).  Buyers, however, also understand this, and the suspicion that prices are significantly different undermines the credibility of the seller.  Confirmation that prices are substantially different can cause a buyer to terminate a relationship with a seller and to broadcast his or her negative experience.

Discussions on the floor of the Internet World tradeshow in London recently highlighted these and other behaviors in the offline world when we went searching for an e-mail ASP that made sense for the b-to-b supplier Zingzam.

We started down the aisle, stopping into the booths of some providers.  We heard them describe their service and we described our very modest needs.  Eventually the discussion turned to pricing and we quickly discovered it was more expensive than made sense for us.  After a few stops, we decided to simply start with, “What’s your minimum price?”  Invariably, this led to, “Why don’t you sit down and let’s talk about . . .”  We were able to cut these short by simply asking, “Is it less than £X ?”

A few times we were fooled.  Once we’d got past the minimum when one supplier said, “We can probably work with you . . .” only to discover that they wanted £100/month to use their API to transfer customer or lead information from our database to theirs.  Since the marginal cost to make the API available should be effectively zero, the only reason this charge exists in a competitive market is because buyers are ignorant.  Essentially, the attitude of the seller is, “We break this out so we can quote a low monthly charge and then add this back in later—and you’re dumb enough to pay it.”  Oddly, they didn’t charge for e-mail or FTP transfer, both of which would be much more expensive for them than using an API.

The other instance was at a booth with the sign, “E-mail as a service.  Only pay for what you use.”  Finally, we’d found the supplier with the business model and pricing for us.  Everything was going along fine until he added, “And there’s a £3,095 one-time set-up fee.”  As above, this is simply another pricing strategy that enables them to quote a low per-unit price in the belief that buyers will fail to compare total expected annual costs across suppliers.

All of which is a reminder that depending on your potential buyers to be and remain stupid is rarely a winning strategy (the high ratings of reality TV shows notwithstanding).

The surprising finding, as shown in the first chart below: Not the importance of reviews or the popularity of social media–Facebook, Twitter, and the like–but the very low use of the old fashioned suggestion box.  Of those companies surveyed, only 1 in 5 has a way for people to directly make suggestions and fully 1 in 3 have no plans to add this capability in the future.  By contrast, more than 8 out of 10 have a Facebook fan page.

Now compare the expected or perceived impact on sales of social media tools with the impact of a suggestion box.  As the second chart shows, after product reviews (ranked first by 78% of respondents), the ability to supply product suggestions is thought to make a much larger contribution to sales than any of the social media tools: 41% versus 26% for Facebook Connect, 13% for a Facebook fan page, and 7% for Twitter.

Chart: Current and planned use of social media and other tools.

Chart: Social media's expected impact on sales.

What’s going on here?

Three things:

1. Keeping up: Social media is all the rage and has made the leap from tech-centric early adopters to broad adoption in society. And if the marketing folks haven’t already set something up, they’re prodded by executives who ask, “Do we have a Facebook for our company?”  (Yes, that’s the way they talk.)  Setting something up on Facebook is simple and fast, so in no time their company is using social media.  Voila!  Transformation!
2. Linking tactics to sales: In most organizations, there is no comprehensive way to link sales to marketing tactics.  (Web-based businesses have a much easier time of this than those companies sell through multiple channels.)
3. Really listening: Customers want to connect directly in meaningful ways with a company in order to get products and services that better meet their needs.

It’s this last driver that ties all of this together.

• Customer reviews: “Here’s what I think of the product/service I just bought from your company.”  And often, “I wish it . . . “
• Suggestion box: “Please make or change or do this . . .”

Facebook, Twitter, viral videos, forums, and blogs are vehicles for expressing those views.

Implications

Marketing is too often the implementation of tactics.  These survey results are a reminder that it’s the content of the communications and the intent of the parties involved that really matters.

Even marketers, in their heart of hearts, understand that customers want companies to listen to their concerns.

The never-ending challenge for marketers is getting their company to listen, and for senior executives, getting their company to respond.

…

Survey details: The e-tailing group/PowerReviews 1st Annual Community and Social Media Survey, September 2009.  (The slides are here, and oddly not on Slideshare, the social media site that has great tools for displaying, discussing, and embedding notable presentations.)

The home page of Organize.com, with selected types of navigation highlighted

Much has been written about designing website navigation, but Organize.com does an especially good job of showing the kind of helpful navigation that results when you think like your customers.

By understanding that there are different types of customers that will be looking for things in different ways, the designers have created navigation that gives buyers many ways to find what they’re looking for—in spite of the fact that the navigation groupings fly in the face of the some of the traditional ways that people have thought about navigation.

Three very different approaches (also highlighted in yellow in the screenshot):

• As seen in . . . — Navigation by magazine cover (with date).  The screenshot shows the expanded view that appears when you click on the link in the main nav.
• Organized by color
• Shop by brand

In addition, the designers have included a variety of other content categories, including . . .

• What’s New—By date, making it easy for frequent shoppers to zero in on the items recently added to the site.
• Video Library—By content format; a different way to engage buyers and stimulate interest in featured products.
• Eco-Friendly—By item material and construction, though more likely this works as a psychographic profile of a buyer segment.
• Clearance—By price (i.e., lowered); attracting the segment of shoppers interested in “a deal.”
• Mrs. Organized—By application, with a blog written by in-house and guest experts.

Along with As seen in . . . , these are all in the same navigation area, the brown tabs shown in the screenshot.  What’s the common element that would cause one to group these together?  None whatsoever, other than that these work in helping the many different types of buyers.

Other main navigation items include . . .

• Gifts and Occasions
• She—A category that includes The Career Girl, The Hostess, The Mommy, and others
• College
• Kitchen, Closet, Bath, Storage, Shelving, and other locations and applications

As above, there is no logical reason that these would be grouped together.

In other words, if a person were to go through the exercise of thinking, “What goes together?” you would never end up with these navigation groupings.  On the other hand, if you were to think, “Why might someone be coming to the site?” and “What are they trying to accomplish?” and “What factors are most important to them?” one might easily end up with top level navigation that includes As seen in . . . , Kitchen, and Eco-Friendly and Shop by Color.

It all comes down to thinking like a customer rather than as an information architect, or at least the way many information architects have approached this problem.

And what brought me to Organize.com?  Trying to match a tall white plastic bin purchased several years ago at The Container Store, earlier today I stopped into one of their stores and walked down every aisle looking for the item.  I didn’t see it, and asked a clerk.  She summoned other clerks, I described to them the size, shape, style, material, and color of the item—I hadn’t brought it with me—and they said that they didn’t think they carried it anymore.

At home, I looked at the bottom of the bin and saw the name of the manufacturer molded into the bottom.  A quick Google search brought me to Organize.com, where I clicked on Shop by Brand.  I selected the manufacturer and clicked on “View all” when I got to the manufacturer’s page, and then quickly scrolled through what would have otherwise been 46 pages of items and found that they do make the same bin, though in a slightly different shade of white.  Total elapsed time from the Google search?  About three minutes, thanks to the site’s helpful navigation.

(The Container Store’s site doesn’t include the shopping brand as a navigation choice; entering the name of the manufacturer in the search box on the site returns no results.)

A note about the IDEA Process

In work for Nokia, GameStop, and other clients we developed the IDEA process: Iterative Development, Evaluation, and Analysis, which is a process for creating site blueprints (including navigation and information architecture) based on in-depth sessions with users interacting with current and development sites to complete tasks.

The Boston Globe in somewhat happier times.

This confuses many things, including what is created (a news story) with the means and form of delivery (ink on paper tossed on to my porch every morning).

A recent post by Doc Searls discussed different technologies and models that may be developed to support new payment and subscriber models.

My comment, which appears below the post, follows:

Interesting discussion, as always.

Observations from someone who grew up in a two newspaper (a.m. and p.m.) household, has subscribed to the main city paper everywhere he’s lived, and who can’t imagine not opening two papers (the WSJ and now the Globe) every morning:

- It’s helpful to understand whether a comment or conversation is about what we would like to have happen or what we think will likely emerge in the market and be sustained over the intermediate- to long-term.

- Various technology-driven approaches that require a modification of consumer behavior will be suitable for the (relatively) small number of people who who choose to make the change.  Some mass media properties will try them; others won’t.  Whether they survive at all will be based on that competition and the resulting business models that each is able to establish.  There is no reason to believe that all newspapers (really, traditional print mass media organizations) will choose the same model.  And of course some niche print and online efforts will be supported by subscribers.

- Little of the discussion around the fate of print mass media has reflected an understanding of the various value-creating components and the way in which they serve different audiences.

In the case of newspapers, for example, there is less value than ever in the traditional physical, branded collection of journalists, editors, and advertisers.

When a plane lands in the Hudson and you want an an up-close view of what happened, you may find it in someone’s phone camera images posted on CNN.  For a follow-up report on bird strikes and the response of manufacturers, airlines, and the FAA, the authoritative source may very well be someone who writes exclusively about the aviation industry for a niche site/pub.  There is no value added by having, in this case, a Boston Globe reporter trying to cover all of that.  They may, however, get the first interview with Boston-based passengers when they land at Logan, and if they do, the audience for that piece may be much larger than the audience for the Globe.

Aside from the editorial page, for online readers there is less of a connection between hard news sources and a masthead than ever before.  (The NYT, WSJ, and a few other traditional print newspapers are probably also exceptions.)

- Online, one wants to have a curated (by one editor or a crowd or a search utility) list of the news that’s of interest and an easy way to follow particular stories from the “best” source, which may or may not be from the source that broke the story.

The ability to do that online with near-zero costs for the reader exposes the fact that the traditional print media business model has a cost structure that people no longer need to pay for.  And with alternatives that many readers see as hard to distinguish, they see no reason to pay the premium.

- Online advertising is a surprisingly elegant solution for paying for content creation, despite the distaste of some that such a grubby commercial venture as selling things should appear next to articles.  After all, for many media companies that are publicly-held, the goal is to deliver target readers to advertisers.  Compelling content is the way that’s done.  Online advertising provides tremendous precision around this, with the ability to connect reader with advertiser in ways that heretofore weren’t possible

The fact that advertising rates are much lower online than in print is a function of competition among online content creators/publishers.

Print rates will decrease further as the decision makers at traditional print buyers (advertisers and their agencies) continue to be replaced with younger individuals who have no ties (mentally, emotionally, or socially) to the traditional print media advertising infrastructure.

- We will have fewer full-time traditional journalists in the future, just as we have fewer TV repairmen than we used to have.

- And the role of technology in the evolution of the mass print media?  As opposed to innovation on the payment side, broad, lasting impact will likely be in continuing to drive down the cost and increase the quality of the tools journalists (however defined) use to gather and publish news, the ones readers use to sift/sort/track and comment/share/rate, and the ones advertisers and publishers use to match message/offer with individual.

]]> http://www.peopledesigntechnology.com/technology_and_newspapers/feed/ 1 http://www.peopledesigntechnology.com/channel-competition-in-the-distribution-of-mobile-applications/ http://www.peopledesigntechnology.com/channel-competition-in-the-distribution-of-mobile-applications/#comments Wed, 04 Feb 2009 03:12:54 +0000 Lee Wright http://www.peopledesigntechnology.com/?p=43

In response to an article in Fierce Wireless, “New boutique App Store changes the rules of the game,” about changes at Apple’s iPhone App Store:

“I’m puzzled by the ‘playing fair’ concept.  Who set the rules?  Apple isn’t a public entity, but rather a for-profit corporation.

“There’s another puzzle here, though, and that’s the implication that this will somehow hurt developers.   As has been the case in the physical world, distribution and awareness can make a huge difference in the success or failure of a product or service.

“And anyone who has offered software for PCs through Download.com and others knows the challenges of competing against “free” products or those that have been some of the most downloaded.

“The evolution of the App Store will likely create opportunities for developers and for different business models that don’t exist today.

“Overall, distribution and the relative power of the owner of “the store” is simply another consideration for developers in choosing the platform or platforms they’re targeting.  And unless they own the store or have more power than the owner, they’re at their mercy.

“Any developer that lets himself get in that position will find that his only alternative is to shift resources to another platform.”

It wasn’t always this way, and it’s instructive to consider the underlying forces that drove this and the role of some of the Web’s largest companies in this evolution.

Buyer behavior today

Here’s the way in which I buy most things, which I imagine is similar to the approach of many others who buy a lot of different things online:

Determine the specific product I want—Read various review sites and read newsgroup posts, both through Google (google.com and groups.google.com).  To narrow this down, check Amazon and read the reviews there.  One of the things that Amazon has added that has been especially helpful is the information that notes, “People who shopped for this item also bought/viewed . . .”  This may add a product or two to my list to check out.

Ideally, find a unique product name or model number.

Find the low-price sellers—Enter this in to Froogle.  If I’ve already got a model number, such as for the Lutron dimming switches I recently purchased from “Beverly Hills Electronic,” this is where I start; no product shopping required.  (I use the Firefox browser with Google search built into the toolbar, which includes buttons for site search, search within discussion groups, and a Froogle search, which means that product search is available from every page.)

Rank the results from low to high, which is done with one click, and focus on those at the top of the list (i.e., those that are the cheapest).  Depending on the item, check eBay.

Assess the trade-offs for low-price seller—Look through the first few low price results for a retailer one recognizes. Check the “About us” and other information at the site to assess the degree of confidence in the merchant.  This includes their stated return policy and information from independent store rating services (if available).  Weigh whether the price difference between the cheapest and the next cheapest and is worth the difference in perceived risk? For example, is it worth saving $17 on a $300 item if that means I’d be buying it from a company that I’ve never heard of and who claims they have it in stock, versus from Outpost (a division of Fry’s) or buy.com or Amazon?

Because the Web enables anyone to put up a store front, the price competition is brutal, and since with many products the only thing you care about is price—you’ve already figured out what you want and there isn’t any after-sale service to consider—using a convenient shopping search engine such as Froogle increases the likelihood that you’re getting the best price possible.

It’s exactly this behavior that caused Yahoo to launch Yahoo stores and later drove Amazon to create their zShop program and their “sell yours” programs, and still later to purchase a small search technology company and invest in the additional development necessary to launch A9.

The new battleground

The battle now shifts to getting people to use “your” search engine.  Here are four ways in which this battle is being waged:

• Convenience: Building search into the toolbar.
• Ubiquity: Building it into the browser (MS).
• Pervasiveness: One form of this, though not specifically search, is Google’s gmail, which incorporates their Adwords ads, which are triggered by the context of the e-mail messages.  And we’ve all read about the work being done on hard drive search.  We’ll see something from Google soon that provides hard drive search and includes Adwords Ads in the results.
• Money: Amazon has created their “splitting the pi” financial inducement, which I think creates a perverse incentive for Amazon buyers to search for products outside of Amazon.

Special cases

• Travel—The travel aggregator sites have done an excellent job of making it much easier to find good prices on all aspects of travel.  On top of these have come new companies whose products search not only those sites but also the sites of some of the hoteliers that advertise that they have the guaranteed lowest rates and the specialty travel sites that offer last minute fairs, for example.  (Some of the aggregators have purchased or have deals with some of these, of course.)

• Repeated buying in one product category—In the case of someone who is buying the same type of thing over and over again, such as books, a specialty book store site or a few might be the only place one goes.

• eBay

Increasing returns to scale—One of the cornerstones of eBay’s success is the fact that they benefit from increasing returns to scale, which is essentially increasing returns to success.  In other words, the extent to which eBay is the largest auction site makes it more likely that someone listing or someone looking to buy via an auction will go there first, which puts them even further ahead of their next largest competitor.  As this process continues eBay becomes even larger.

eBay recognized the opportunity with merchant stores—The result of the four factors above is that you’ve got to search eBay separately. EBay recognized the opportunity that this created. Specifically, that enabling merchants to build out their own “stores” within eBay created an opportunity for eBay to make even more money because stores would be exposed to traffic that might not find them through searches on the general Web or shopping searches.

In the US, the game is over and one doesn’t even remember that there once were other auction sites of any size. This isn’t the case in many other countries, and eBay has had to acquire the dominant players in those countries for this very reason that it’s extremely difficult to catch up if you’re small and your competitor is big. In other markets where the two (typically) competitors are close to being the same size, they’re locked in intense competition to emerge as the dominant marketplace in that country, and once one pulls ahead by any significant degree, the dynamics noted above will really kick in. In the case of other merchants, while there may be increasing returns to scale, there is not this powerful effect which drives a huge wedge between the dominant player and the next largest.

Collectibles and things not found in stores—If you’re trolling for one of the early GI Joes, a particular tea cup from 100 years ago, or will settle for a used monitor, where else would you go other than to a place where you can buy it directly (and presumably most cheaply) from the person selling it. Who needs a “dealer” when you can buy direct?

eBay results often don’t show up—I’ve found that eBay listings don’t show up in Google search results (other than the paid ads along the right side, which are humorously off-target sometimes. Here’s one example:

Arc De Triumph
Aff. Cheap deals on
everything Arc De Triumph.
eBay.com

Those that do are sometimes out-of-date—Sometimes the results that do show up are found on pages that are created through the use of eBay’s APIs, which enable others to build applications that pull information from eBay. By formatting this information on a page that has a high rank in search engine results, the entrepreneur is hoping that at a least a few people click through, bid, and eventually buy something on eBay, which generates a commission for him. The developer programs from eBay and from Amazon have resulted in a lot of these, and since in the Google search results they don’t reveal that these pages are simply a repackaging of sometimes expired our or out of date products, it frustrates users who are using something like Google to look broadly for product and price information. Both Amazon and eBay claim that their developer programs have been very successful, but it’s clear that one of the unintended results is negative for buyers who use a search engine as a shopping interface.