Attention Researchers: I Know Everyone Likes A Discount, But Do You Like This One?
Okay, I will admit it. There are some things that I buy that I will bargain shop. No, I won’t drive all over town, but I tend to buy a lot of DVDs and will go to Target, Circuit City or Best Buy depending on price. Like I said I won’t drive 20 miles to do this, but all of those stores are within two miles of where I live so it isn’t a big deal. I am sure a number of people (if not most) go through the newspaper every Sunday looking for deals or items on sale that they either need or are too good to pass up. In essence they love a discount, yes love a discount. The reality is where does it stop? Does everything we do or buy need to have a discount? Yes I will buy some things based on sale items like paper towels, mulch for our yard and bottled water for sure. Clearly I view those items as a commodity. But where does it stop?
Not a week goes by where I don’t receive an email from a market research company not only highlighting their services but highlighting their discount. "Try us now and receive 20% off." "Use our services before the end of the month and receive a discount."
- I realize that business is challenging these days, but isn’t there another way to promote their services?
- Doesn’t it commoditize our industry and cheapen the value of research?
If I need a lawyer, am I going to go to them because they send me a 25% off coupon? What about going to a new dentist because I can save $10 on my next cleaning? The answer for me is NO, NO and once again No!. I consider those types of services professional and would never choose one because of price. I have never and will never choose a hospital because a surgery might be $400 less than another hospital. Don’t we all choose those services based on reputation, quality of service and location?
Isn’t the market research industry the same thing? Aren’t we all professionals? Don’t we want clients to use our services based on our service, quality and insight? NOT because of price! NOT BECAUSE OF A DISCOUNT. AND I WOULD NEVER USE A COMPANY FOR THE FIRST TIME BECAUSE A COMPANY SENT ME A DISCOUNT.
- Would you?
- How do you feel when you get one of these discount opportunities?
- If your company does it (clearly your choice) what is your position and strategy?
I realize this might be a controversial posting but I really look forward to reading your comments and point of view.
March 28th, 2008 at 8:48 am
As an end user, most of the research projects I contract for are negotiated. There isn’t a “set price-list”. I’ve been at this long enough that I know what research costs and I can drive a hard bargain if I need to. I’m not above paying more than the “going rate” for a project if the vendor partner can show me that it’s worth it, i.e. is demonstrating unique value. The things I prize most in vendors is a sense of partnership: that they realize the situations and constraints that I am under and act accordingly. For some projects, I am buying “brains”, for some “muscle” and for others both. These are qualities that cannot be commoditized.
Yes, I’ve received offers of “discount” prices on market research, but I have never used a vendor solely because of that or even taken them up on the offer. I hadn’t thought about in quite the same terms as Merrill, but I definitely do see his point.
ps. When it comes to discounts on DVDs, I highly recommend the DVD Bargains forum at http://www.dvdtalk.com. Here you can find out about lowest prices and upcoming sales. It’s invaluable if you are a collector like me.
March 28th, 2008 at 8:57 am
Merrill:
You’ve articulated my position on this as well. One of the fundamental things that any marketer learns is that there is no better way to erode the equity of a non-commodity brand than to introduce the “heroin” of excessive discounting. During my time running marketing for a travel service provider, I learned first hand how such practices can devalue a brand and teach customers to wait for deals, thus eroding profitability as well as brand equity.
There’s a difference, of course, in incentivizing or rewarding behavior that increases lifetime customer value (like loyalty programs or volume discounts), but for a full service research supplier..or even some field, tab or sample companies, rampant, indiscriminate discounting only serves to commoditize the service or in the case of a new provider trying to secure my business, makes me question the quality that I will receive. There’s a certain irony in all of this, in that we utilize the Van Westendorp pricing battery in some of our research…a modality that takes into account that at certain low price points, customers will question the quality of a good or service and be less apt to purchase it. That’s often my perception when one of these offers comes in cold to me or my team.
I’ve often maintained that our profession needs to become more like management consulting…where relationships, actionable insight and professional service become the differentiators. Unfortunately, there are many out there that have taken another route. We’re seeing the same thing to some extent in the magazine business, where competitive publishing houses have rendered their rate cards to be nothing more than a smoke screen. That has never been our way.
March 28th, 2008 at 9:04 am
Merrill,
I applaud you for beginning this conversation. Unfortunately, in my world (online sample), it is getting more and more difficult to differentiate the companies. I have daily conversations with clients explaining that it’s good quality data that they are looking for and why it costs money. Some clients get it and some don’t. Some are just looking for the discount.
My company chooses not to provide a discount to get in the door. We believe that it sets a bad example. If you’re a client, why wouldn’t you keep getting that discount. It would be a hard conversation to have - “Sorry ABC, now that I’ve got you in the door, the price is going up 20%.” Ha, that will not become a long term client for sure.
Anyway, hope that I provided some insight into where I/my company stands on the issue. Commodities are bad for all. Value added and so on.
Adam
March 28th, 2008 at 10:53 am
New vendors that offer a discount so we will try their services typically go into our “do not use” pile. The steeper the discount, the more likely this will happen. We just had a vendor offer us sample for 500 interviews, completely free - just to try them.
There is one place where is has been effective and acceptable to us. There are some vendors that truly offer something unique (so I’m not talking about panels, platforms or interviewing). Frequently is is a technological advance on how we do things, or some new whiz of an analytic tool. What they offer is typically a “nice to have” add-on that is not really needed for the project. Discounts, or even free, encourages us to try their product. I don’t think they commodizied their product or services in this case. And they make it very clear the offer is a one time trial only, and they share full pricing with us right up front.
March 28th, 2008 at 11:03 am
Merrill …this is truly the double edged sword, i.e. commodity vs. professional service, following the crowd to maintain competitiveness and of course the never-ending demand by end user/clients to squeeze every last dollar out of those at the end of the food chain!!
My initial response is, I look for quality providers first and foremost and as a facility owner, I insure that my services are focused on exceeding client expectations..this has a cost!! If we are ever to be considered a professional service, then we have to act like one!! Your example of lawyers and also doctors is a good one, but in todays world of negotiated rates for physician and medical services (and some legal services) the discounting is done by ones insurance carrier, so they don’t have to offer deals to the patient..that’s already done for us by our carrier..it’s the docs’ reputation that draws us to them.
Whenever I get the coupon, letter or call about discounts, my initial reaction is are they in trouble, not enough work??..and yes I think it cheapens the product/service. Yet with so many in this profession/industry offering discounts, you have to ask yourself do I follow the pack or hold tight to my objective to provide superior service as a professional and assume my clients will see that they get great value for the service…. or follow the crowd.
Where discounting seems to work is as a negotiated process, as in health care, where it’s all done up front and not advertised. I have no problem offering an existing or new client a quantity discount or a frequent flyer sort of program, but in the final analysis, I think advertising discount versus quality and reliability cheapens the brand,if you will and leads to the commodity approach where clients believe everything is negotiable, everywhere!!
So, will I advertise discounts…NO, will I negotiate up front…Yes!! Just my two cents..Carl
March 28th, 2008 at 12:09 pm
Merrill,
Some really good points have been made. As a Data Collection firm, during what could be considered slower months, I might be tempted to offer some discounts to keep the call center busy. However, when you do that, you also set a precedence for a price the client will expect on their next study - and, what do you do when you quote on a project during the “slow, discount” time and the project comes in during your busy time? There are just too many problems that can arise when you offer discounts.
I ditto what Carl said in that when I do receive a discount promotion from a supplier, I immediately wonder how long they will be in business. I see it as a sign on the wall. I also hate receiving a promotion with $$$ on it, no matter what the product is. For some reason I equate $$$ to low quality. Maybe it’s just me - but I do.
When times are slow in the Call Center, I am not opposed to contacting some clients personally and advising that due to a slow period that I could offer them a better price if they had something we could get done so as to keep the center busy. I feel most will understand the cost of losing staff and retraining new ones will be much more than the discount. But I would do this will clients I already have an existing relationship with and I would not send out a mass flyer to the industry announcing the discount days. It does, in my opinion, cheapen our product.
March 28th, 2008 at 12:33 pm
Really good comments so far - I wasn’t sure if people would respond because it is a very controversial topic.
Just a quick comment to respond to what both Carl and Connie mentioned - I think negotiating or discounting a project up front is very different to doing a mass email/mailing of a discount. When you do a mass mailing that is where the commodization and cheapening the research comes into play for me. Everyone has slow times during the year and if people need to make price adjustments they should but shouldn’t it be on a case by case basis? Just one man’s opinion
Thanks for your thoughts.
Merrill
March 28th, 2008 at 12:42 pm
Merrill, … And I thought we were just acting differently. We tried some discount pricing of services and software in the past — usually through bundling, but gave up the idea about 15 years ago. Companies and their products and services build their reputations over time. I have seen too many companies “put on a sale” to meet an externally imposed sales goal. Although prices need to be reasonable, they also send a message of quality, reliability, and confidence. Good companies have low price elasticities — to give a discount is to leave money on the table and set one up for the discount becoming the norm.
March 28th, 2008 at 2:34 pm
“All things being equal, people will do business with a friend; all things being unequal, people will still do business with a friend.”
- Mark McCormack - sports agent & founder of IMG
March 28th, 2008 at 3:09 pm
“We will never try to develop a strategy that wins on price. There is nothing unique about pricing.” -Josh S. Weston, Director, J. Crew Group
I’m with you Merrill - I don’t get it. For me, messaging centered around price is just noise. It’s terribly unimaginative and makes the often incorrect assumption that price is the leading factor in determining who you’ll select to partner with. It smacks of a last-ditch effort.
This is my all-time favorite quote regarding price:
“When you buy quality you only cry once.”
:-)kath
-kath
March 28th, 2008 at 8:23 pm
I remember one meeting in Las Vegas when it was emphatically stated by one of my favorite people: “We will not be a discount house”. I couldn’t agree more. But then…I am the most confused of people out here; I have a Dad who said “order whatever you want” to everyone at the table and always picked up the dinner tab and a Mom who cleans and reuses aluminum foil. To this day, she does that - for NO REASON. It just isn’t worth buying (in Mom’s mind) unless it’s at least 50% off.
So on one hand, I recognize the importance of the “deal”. But I turn up my nose at consistent discounts and blow out sales. I do believe in “you get what you pay for”. I’ve been burned far too many times to not recognize the truth in that saying.
When I receive my daily or weekly sales email or DM piece, my first thought is usually, “Man, I wonder if they’re in trouble” or “they must be hurting”. To me, it’s a sign of desperation to see a sale in our profession. And I couldn’t agree with you all more, that our profession should be viewed in the same light as the medical or legal professions - not retail or automotive.
That having been said, however, it would be naive to not realize the shifts in our profession with regard to pricing, competition and procurement have been a long time coming and it’s negotiating these waters that provides today’s challenge. For instance, it isn’t just the blatant discounts that jeopardize the profession; the hidden ones are just as dangerous. Preferred pricing arrangements - when they’re made with everyone! - are really just “discounts in disguise” aren’t they? Especially when they’re not contractual, but promissory in nature.
We hope, don’t we, that our clients (who are naturally more discerning) are more impressed with quality and service than low price discounts…and that they would prefer Sak’s to Target any day of the week. But that’s my optimism speaking, I think. Cause I just got word I wasn’t awarded a project because another firm across town was cheaper.
Just kidding. But that’s the point isn’t it? We have to figure out how to compete in this marketplace, without sacrificing the long term benefit of being viewed as a legitimate profession, for the short term gain of selling ourselves short to make a buck.
March 29th, 2008 at 11:57 am
What is being discussed about discounts is also relevant to professional and trade associations. There is regular and heated discussion regarding the use of discounts in marketing efforts to recruit members, conference attendees, etc. Some feel it devalues the association and others feel it’s necessary to grab a person’s attention. I admit, I’ve been very successful using discounts to recruit new members, but I’ve always wondered if I was contributing to the “coupon syndrome” - grocery shoppers who have been trained to only buy a product when they have a coupon.
Kristen Darby, COO, MRA
March 30th, 2008 at 7:21 am
Kath,
I love your last quote! I spoke to a friend of mine last night who is a terrific, accomplished salesperson. He mentioned that in the past two weeks a few of his top clients said “we love you guys, you guys have great technology and really delivery - if you can’t price your services at x I can’t use you.” All of us are hearing too many of these stories.
What happened to the days of competing on service creativity, technology and delivery! I miss those days!
Merrill
April 2nd, 2008 at 9:21 am
While I agree with the concept, Merrill, that you certainly wouldn’t choose a lawyer or a surgeon based on discounted prices, there’s one big difference - those people and industries are not being globally commoditized the way the entire Marketing Research Industry is - just a fact. While we are all experts in our field, just as a lawyer or surgeon is, but the people who use both Data Collection AND FULL SERVICE Marketing Research firms are (and have been for the past 7+ years) under the impression that you can get the same high quality and fast turnaround for less of a price. They have been shopping on price for years now, in contrast for those who look for a good lawyer, and might even look for the most expensive one, with the assumption that they must be the best.
In a business that is predictively unpredictable, with peaks and valleys that lend itself to a real feast or famine situation in multiple times throughout a year for many players in the industry, it becomes a real issue as to how to battle those times by maintaining the work flow, possibly at lower margins than normal. But, lets take a real business issue:
It’s been stated as a rule of business/sales (I’m sure you in particular have heard this before, Merrill) that assuming you are providing good quality work, one could literally double their prices overnight and end up losing less than half their clients - basically you net-net being ahead of the game. That said, those higher prices are NOT going to result in bringing in NEW business/NEW clients you didn’t already have. There are only a few reasons for anyone to switch solution providers: Resource constraints of existing provider or perceived or actual areas for improvement. The area of improvement can be something as simple as “someone else can give me the same thing I’m getting now for less.” We’re in a unique industry where, at least the way I see it, research dollars are being spent on a continual basis. It’s not like someone on my potential client list wakes up one day and says “Hey - I’m gonna try something new and do some research,” - they are already doing it - with someone else. While a consultative approach over time can certainly help drive home the advantages and core competencies of my company versus the incumbent or an existing supplier, that takes time. As a quick way to see who’s willing to switch (remember - they’re already doing their work with someone else), the idea of a sale-driven marketing campaign makes sense.
We recently tried a discounted offering during an unforeseeable slow month, and while we sent an email out to about 5000+ non-clients, we only got 2 bites. HOWEVER, both of those companies were (A) companies we hadn’t worked with before, and more importantly to the issue (B) companies that had this work and WERE ABOUT TO AWARD IT TO ANOTHER COMPANY. We never would have gotten the business had it not been for the promotion, so in my mind, it was an effective marketing tool because (A) it proved how slow EVERYONE WAS in the marketplace during the same time frame, and (B) we got two new clients from it. All we had to do was give them a reason to switch (i.e. price) in order to sample the high quality of work we perform, and now that we’re in the door (and the promotion is over), normal prices can prevail (and have on other work already awarded to us from these clients) for future studies.
We did this simply as an experiment, and I believe it was very useful - both from the business we got AND from what I personally learned from it. However, it is the first time in our 15+ years of being in business that we had ever done something like this, and I really don’t know if we’ll ever do it again. It was intended to act as a quick-fix band-aid, and it worked, but it could never replace the rapport-based solution selling over time that is what builds partners rather than customers.
I see many of these campaigns on a regular basis from other companies, which I think is a big mistake - at what point does a special or sale turn into the normal expectation? I think such campaigns DO have their place, but it needs to be timely, and in conjunction with a guided, educated sales effort. I hope you reply to my comments, Merrill, as I consider you a real student of sales and you have always been someone I have admired. Very interested if my comments have offered any additional perspective on this, to you or anyone on the blog.
April 2nd, 2008 at 9:36 am
Merrill -
I always wonder about those discount e-mail blasts I get - particularly from other data collection facilities. I agree with Ed’s sentiments on the subject - and I think that many long term vendor-client relationships forge meaningful friendships that stand the test of time and price slashing. However, we have seen more and more of the “meet x cost or we’ll have to go with another vendor” over the past years. Worse yet, we’ve seen a significant increase of RFP’s come through stating the budget the client has (which is well below what the data collection will cost on the vendor side). Basically, if you can’t meet or beat this ridiculous cost, don’t bother bidding. Cattle call, indeed! These are usually accompanied by very strict MSA contracts that indemnify the client from everything.
In all of these cases, I wonder where the quality of the work is headed. More disconcerting: do these buyers even care? It reminds me of “don’t ask, don’t tell.” As long as you get your data, that’s all you need to know…
It’s an unfortunate state of affairs, but it is the reality we all live in. On the other hand, the quality research organizations always seem to fare well over the long term and, after crying a few times, a number of the discount buyers realize that they really are getting what they pay for and return to their prior vendors.
Thanks for opening this important topic for discussion. It’s discussed in small groups often and long overdue for an open public forum!
April 2nd, 2008 at 9:59 am
Merrill,
This opens up a really important topic with lots of interesting angles.
How many of us have done research for our clients about their pricing and marketing strategies? Optimal price point and optimal marketing strategy depends on the market. Some of the comments above remind me of a luxury car dealer who says, “Forget about price, it is quality that counts.”
I often wonder about the 90% of small businesses who cannot afford quality market research. They go on-line to do-it-yourself survey companies for $19.95 per month. If they are sharp, they can get up to 1000 responses per month from their customers. If they don’t know anything about survey design and analysis (which I believe most do not) they have just wasted $20. But if they are smarter, they have found a real bargain.
As far as I know, there is no professional MR company addressing the needs of the small business community. That is a huge market that we are ignoring.
We may look down our noses at companies like WalMart or Target for selling low price products, but their annual revenues blow everyone else in the retail business out of the water. We might all prefer to shop at Neiman Marcus or Nordstrom’s, but millions of people rely on the discount stores and their low prices.
Are we being somewhat aristocratic in suggesting that only large companies deserve quality research? How many small businesses can afford $10,000 to $100,000 or more for research?
To me this question is much like the one about declining responses to Internet surveys. While everyone in the world is giving their opinions on-line in blogs, email groups, MySpace, Facebook, YouTube, etc. why do professional researchers have a hard time finding people to give their opinions? Sometimes I think that our industry is being just a bit too slow to adapt.
And, yes, to some extent, market intelligence is becoming a commodity product. I don’t think that there is much we can do about that. We certainly cannot fight it by keeping our prices high and unfordable to most clients.
The real danger in this is that there is no shortage of unprofessional companies out there ready to provide cheap and low quality products and services.
I believe that our best strategy is to provide moderate cost and high quality services. The trick is in the pricing structure. How do you charge a mega corporation $100,000 and a local small business $500 for comparable work? I think that the key is in the level of service, the degree to which the service is customized, and the level of project management. One standardized customer sat survey resold to 100 small clients for $500 is comparable to one customized survey sold to one client for $50K.
On the positive side, there is ample opportunity for bright and energetic professional market researchers to succeed with lower cost, higher quality solutions. I believe that there is an enormous, largely untapped market out there.
Regards,
Steve
April 2nd, 2008 at 11:24 am
Discounting works for some products and not others. For instance, part of Sam Walton’s success came from understanding that consumer behavior could be affected by saving people money. However, this is mostly true when discounting the price, or lowering the price of the same products your competition sells (i.e., Tide detergent, Campbell’s soup).
Dentists, lawyers, medical doctors, market research is bought mostly on the quality of these professionals skills, knowledge, reputation, and the relationships established with the client/patient.
Thus, while I’d be willing to buy a CD from Targets this week because it is on sale for that week, and cheaper than I could find at another store, a professional using discounting techniques runs the risk of seeming to have to lower their price due to something unappealing such as a dwindling clientèle, for instance. One would have to ask themselves, why is my doctor offering 50% off on clinic visits this week? Why is this research company offering me 20% off on their services?
On a similar note, there are also “Giffen Goods” in which the illusion of quality comes from higher prices. Like buying a $40 bottle of chardonnay over the $20 one, because the $40 bottle must taste/be better than the $20 one, right?……..yeah……..right.
April 2nd, 2008 at 1:02 pm
Lance,
Thanks for your comments. This is a very controversial subject and I give you a GREAT deal of credit and courage to respond.
You bring up some really good points. Let me bring out a different perspective on your promotion. You sent out 5,000+ emails with some type of promotion and got 2 bites which lead to 2 new clients. Lets just suppose the revenue on those two projects was $40,000. with a profit of 20% - which translates to $8,000. In the short term not bad, you have some revenue, some profit and maybe new clients for along time. To me there are a few questions that still need to be answered and might be of concern:
The two new clients don’t they always expect that discount?
The two new clients don’t they always buy on price?
What do you think the 4998+ think of your promotion?
Did it in anyway harm your reputation and could it have a negative effect in the long run?
Lance - to me promotions do work in some industries for some products I just don’t believe they work in the research industry. Again just my two cents.
I look forward to hearing your response
Merrill
April 2nd, 2008 at 1:42 pm
Merrill -
Thanks for the feedback, but YOU’RE WRONG! - OK - just kidding!
Seriously, that’s part of what I was referring to when I said I wasn’t sure if I would do it again. Everytime I see a sale (especially from telephone data collection companies), my first gut reaction always used to be one of “WOW - they must be in trouble,” as someone earlier had mentioned. And while I believe you cannot discount everything, as was mentioned earlier on the blog, I actually think telephone interviewing is a bit different. Why? For a few reasons, but from a business standpoint, the more people I can keep busy on a continual basis, the better I can respond to the market when business gets really busy. If a telephone data collection company has a big lull, then you will LOSE your interviewing staff, which means have to REACT to business in new hires, training, weeding out the bad ones that can’t cut it, and that means I can’t respond as quickly to the onslaught of needs that always seem to hit at once, and with little to no warning.
I do see this as much different than discounting services, and while some people may view CATI data collection as a service, it’s really a man-hour driven production environment. Take building cars. If you have no orders for cars, you will lose your skilled labor. Then, you get an order for 1000 cars, and have no one to build them. Quite different than consulting services or reselling a pre-existing database of panelists.
Regarding your specific questions:
The two new clients don’t they always expect that discount?
As I stated, these two clients in particular understood the proposition - it’s a win-win, and they have both awarded us work since then at our normal pricing. I can see if someone else would expect the discount afterwards, but once the initial promotion passes, they are no longer NEW - we got in the door, they have had the experience, we proved the quality, and NOW can demand AND justify our higher, but still competive pricing. Perhaps they WOULDN’T give me the business again, but then I know exactly the type of client they are, and I can take their work if I need it (at a continued discounted price) or not, but then it’s in OUR court, and we’ve proven the quality of our work. Without the promotion, I never would’ve gotten to prove anything to them without putting forth much greater effort through the continued rapport-building, and wouldn’t have been able to reap the short-term benefits that suited my company’s needs at the time.
The two new clients don’t they always buy on price?
In keeping with the above, theoretically that would remain to be seen, but again you will always run the risk of inviting both those that need an extra reason to try someone new versus those who are buying SOLELY on price. As I stated previously, once you know who you are dealing with, then you can know how to deal with them from a client management standpoint, and make the decisions that best suit your company needs at the time. Besides, we are also in the position where I can always offer them our Domincan facility - the entire reason we opened it is because of people who buy on price, but expect high quality. The only way to get that is to go where it costs less.
What do you think the 4998+ think of your promotion?
Some people may have been turned off, I think, but let’s face it - they weren’t clients either, so either way, they have yet to be turned on to us. Was it damaging? Who knows? But I can tell you since that promotion has come and gone, my team and I have bought in 5 new clients, who are paying full prices, and they all got the ad. One of them even said to me “wish I had the job a month ago,” to which we both just laughed. By the same token, alot of people got turned off to our company ad “Hell yes . . .Size DOES MATTER!”, but not as many that thought it was the greatest ad ever! Point being, you can’t please everyone all the time, and if you are a good company, with good client cultivation skills, an occasional email marketing campaign (sale or no sale) shouldn’t hurt your chances of conitnuing to build rapport with a potential client. I could even say that if it DID, then they may not be a very sophisticated business person, and might not be the best client to have.
Did it in anyway harm your reputation and could it have a negative effect in the long run?
I kinda view this the same as the above.
Like all businesses, we have supply and demand. When supply is high and demand is low, what happens to price? It becomes a bit worse in our industry due to end-user’s beating up my clients, or my clients beating up each other because they’re selling on price against their competitors to win the business in stead of trading off the core competencies and points of differention, and then of course everyone beats up on the data collector, but the basic economic model we all learned in Economics 101 remains in tact. See who has a sale in October - NO ONE, becasue demand is at it’s peak, and supply becomes low, and you might even get charged more then you did 6 months prior for a study with the exact same specifications - all because then you’re in a position of conflicting resources. This isn’t marketing research - this is the business world - it just manifests a little differently industry by industry, and while I’ve only been in this industry for 8 years now, even I have seen the “purity” start to fade from top down. 10 years ago, a $30/hr for residential telephone interviewing was acceptbale, and no one said “Boo.” Try getting that today as a publicized hourly rate.
By the way, doctors and lawyers DO compete for business - it’s just not as blatant. Falls into those “hidden” discounts, but as I said, it’s usually to get NEW business. But once they got you, beware that $400/hr!
Thanks again, Merrill. Great posting.
April 3rd, 2008 at 3:33 am
I have enjoyed reading the comments to date and understanding the view of discounting from both the data collectors and the end clients. The thing I am picking up on is the message you send when you provide an across the board offer to customers. This is what I fear most. When we say, 25% off, what does that tell our customers - are we desperate for your business? are we slow? should you really consider us because price is the most important thing? Have we now diminshed the importance of our service or our quality? Have we taken away the professionalism?
I thought for a second about where discounts make sense. With products, it is easier to understand - lower cost makes sense since there is no difference. With services, it is harder - if you get the discount do you really get the same service and why are they providing it for a discount (see questions above). Shouldn’t I get that discount all the time, why just now. If it is a seasonal discount, maybe that makes sense. I think it totally makes sense to discount pricing when you have a relationship with a client and it is based upon volume of work. I think it raises questions about the provider of these services but if there is a good justification, maybe I can get comfortable with it. In an industry like marketing research, I sense that an offer to anyone and everyone sends a message that is much harder to be comfortable with. As stated by many on this blog, it commoditizes our services, diminshes the importance of the service elements of our industry, creates precedence for pricing pressures in the future and I think changes the client’s perception of us as partners to vendors (hmmm, let’s buy our pencils from Staples because I have a 20% coupon and our phone interviews from XYZ because they are having a sale this week).
Maybe discounting wins us some business today but I think it hurts us long term much more. As I look at my 25 years in this business, I think about the fact that any success I have achieved has been based upon the view of building my business for the future. I can’t see changing that strategy for some short term success.
April 3rd, 2008 at 7:02 am
Lance,
Clearly this is a very, very interesting discussion. Everyone does have an opinion on the subject but not everyone feels comfortable posting. I received 3emails yesterday from readers who did give me their opinion but didn’t want to share it with everyone.
It sounds to me like you tried the promotion, you did win a few projects landed some new clients (congrads) but you might not have a future promotion like this again.
With the business environment being challenging this days - you need to try different things to move your company forward. I do admire the fact that you tried something different.
Again - thank you for your comments. I am glad you felt comfortable responding.
I hope 2008 brings you and your company only success in 2008 and beyond.
Merrill
April 3rd, 2008 at 9:46 am
Hot topic, Merrill! I’ve read every comment above and have enjoyed this discussion immensely. Really appreciate Lance bringing out another viewpoint. I will admit - the “buy on price” seems to be the mantra with end users — have you ever been involved in a reverse auction bid? Talk about cattle call. And the increasing number of purchasing divisions that handle contract negotiations has hurt as well, even if a “friend” is in the wings, used us many times, and wants to work with us. It creates a certain level of panic and frustration. However, in general, the non-discounted approach appeals to our profession. And we’ve backed it up with PRC and other MRA initiatives and PR awareness. Somehow we have to keep pounding quality into conversations every chance we get. And of course investing in the newest, brightest possibilities! Check out the MN MRA event in April - a new company who analyzes the emotions behind the comments - from the Dcypher Group!http://www.prnewsnow.com/TextNews/160868.html
Tammie
April 4th, 2008 at 9:24 am
This is a great topic Merrill. I enjoyed reading Lance’s posts and appreciate the fact that he really thought things through, even though I don’t agree with the discount offer. Interestingly enough, I recently put my sales team through an exercise where I asked them to provide me with a list of ideas on how we could really get a jumpstart in Q2 and beyond. There were some interesting and applicable ideas that came from it. A few of the ideas, however, were related to exactly what we’re discussing here. Almost all of them had at least one idea related to discounting or “new client deals.” As Lance alluded to, the perception in the market place is that research is becoming more and more commoditized. As an industry, many companies are scrambling for market share, so often they are using price to gain as much as possible. This practice is one that is hurting everyone in our industry, especially companies that spend money to improve processes and services to provide a much better quality of service. The advertised discounts and special deals might be a “hook” to get some new clients on board, but the bad taste it leaves in most peoples mouths is enough to keep me away from that approach.
As we were looking at the feedback from the exercise, one of the people on my team referred to this exact blog post, which contradicted many of their ideas. I think it was quickly evident that the approach was wrong, based off of the feedback here and my own experiences. I have often groaned when I see an email, from firms in our industry, offering to give us a break on that first job or some promotion to try us out.
As we were going through the above exercise, we also are working on another exercise to refine and define our “true” differentiators. We have a strong list of things we know we do better, that set us apart. Yet, I want us to dig deeper. I am trying to focus on those things that only our firm offers. There are some obvious ones, but this is a really good exercise to look under the hood in ways we haven’t tried before. Just because it’s unique to our firm, does it mean it’s of value to our clients? Maybe, but maybe not… The key here is to know your client or prospect needs. If you can uncover their pain and offer a solution, or provide value to them that others aren’t, do you really need to offer the discount? My experience says no.
I believe the suggestions my team made are typical of many sales people selling in today’s MR environment. On the surface, we do sometimes lose business on price. In most cases, it’s due to one of 3 reasons: 1. We haven’t shown our client a reason to justify a higher price (what’s the value associated with the higher price tag? Or what’s the differentiator that fits their needs?) 2. We don’t have a strong enough relationship (Do they trust us to take care of them and their needs? Or, are we at the top of their list of vendors?) 3. They are buying on price to put as much money to their bottom line as possible (How is their business doing? Or, are we talking selling at the wrong level?). Points 1 and 2 are within our control and it means we haven’t done a good enough job on either point. I think point 3, however, is one of the most difficult to uncover. Yet, it is one of the most crucial to address. Are you working with the ultimate decision maker, or the person suggesting which vendors might serve their needs (often this is a CYA situation, where they suggest the lowest price bid)? Another scenario is something we may see more of if the US economy continues to slow down. We have a couple of clients who have had a very slow year. They normally buy on quality and value, but due to their situation, they are forced to buy on price since they need that extra margin. They recognize the risk, but it is the position they feel they need to take. I commend my team for uncovering the true reason we were losing business to these long-term, loyal clients. It took hard questions and difficult conversations, which many sales people are unable or unwilling to do. I remember being told once, if you can’t ask the hard questions, you’re in the wrong line of business. I truly believe that to this day.
In the end, it’s pain/resolution selling. What is their pain or their unmet need? If you can provide a solution others can’t, or if your differentiators are of value to them, then you don’t have to discount to make the sell. Getting the first project is the challenge, thus the motivation Lance mentioned. As long as you are true to your word and your team backs up what you say, you can move to that top of their list and “earn” more of their business without being the discount provider. Just be ready to adapt to their changing needs.
April 4th, 2008 at 2:00 pm
Tammie,
Thanks for your comments. Yes I have been involved in a reverse auction. For those of you who haven’t a client will post certain specs on their site and allow potential bidders access with passwords to bid on the project. The catch is the bid starts at the highest - in this case lets say $50,000 and goes LOWER with each and every bid. The company I was bidding for came in second and we were glad we didn’t win the project. In the end we couldn’t believe how low the other company went and actually couldn’t believe how low we were prepared to go as well. The process wasn’t fun at all but it did get the juices flowing. You tend to get caught up in the excitement of it all.
I hope I never need to participate in another one!
Merrill
April 7th, 2008 at 9:52 am
Great conversation Merrill. As you know, I am in the insurance business with Allstate and I believe that customer service and a personal relationship are a valuable part of my offerings to you and others. Many of the “discount” insurers offer only a 1-800 number and you never speak to the same person twice. Also, you talk to a call center you are graded on how quickly they can get you off of the phone (45 seconds) and they are unable to look at your “big picture” and welfare. If your insurance planning is done correctly, a cave man really can’t do it.
People don’t buy the cheapest cars or cheapest houses available and I wonder why so many people want to insure them with the cheapest “discount” companies. Insurance is not a commodity if you care about service, trust, and a personal relationship with the people who protect your most valuable assets.
We offer many discounts based upon your individual circumstances, not discounts to steal market share and then increase your rates later. One “discount’ company can save you money in just 15 minutes because they do no underwriting until your next renewal, at which time you may see a substantially different policy.
You have started and great discussion, and I truly enjoy our relationship.
Will