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

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

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.

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

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.

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.

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

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.

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