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Posts Tagged ‘Marketing’

We Pay for Distribution not Goods Themselves

January 5th, 2011 No comments

I was musing again today on the cost of distribution having shopped for a replacement cell phone battery. I found it both online and at the local Best Buy electrical store, but the price disparity was surprising. Online video camera and cell phone batteries quote a list price of $35 to $50 online but are discounted online down to $2.50 to $9.50. This is to accommodate the higher price that local stores want to charge as the recommended price.

Best Buy were of course charging $38 for the same battery that I just ordered one from Amazon for $1.38 and which will be delivered for below $4.50. We can fool ourselves with all the justifications used to explain the premium to us. Brand, Service etc. but in reality it was the availability and convenience at the end of the street that provided justification and the cost of running and stocking that store that needed to be paid for. Manhattan rent and staff to find things for us, as oppose to the online search and automated pick and ship warehouse in a cheap location with cheaper staff.

Twenty years ago I designed under contract a simple single chip circuit which a games vendor sold as a plugin component to a games console. The electronics trader in Hong Kong charged 50c per unit. The Chinese manufacturer probably received around 30c. The games vendor sold the units packaged at around $10 to a US distributor who sold them to Game Stop at below $20 who retailed them at $39.95 to the consumer. One could consider it to be a markup of ridiculous proportions but in reality it is the distribution and productization (Branding, selection, packaging, marketing, advertising, placement)  that is being paid for. I did make a mental note to myself to try to be the middle man next time around! Such a next time alas didn’t occur.

In rearranging my apartment recently I found myself selling books, DVDs and furniture that I had purchased at retail, or auction in the case of the furniture. The reality is that the value of these possessions when redistributed by me is negligible. Even worse the furniture has a negative value if I have to pay for it to be stored or removed as identifying a ready buyer is no mean trick even in a world of online markets. I have given up on letting Craigslist people visit the doorman.

All of these experiences remind me yet again that so much of the value is about where something is and identifying somebody who wants it. It is one thing for the shopper to be able to find the object on Amazon but quite another for the object to find a buyer. That is the side of the equation that most of the sales, advertising, brokers and agents work on. This is also the area that GroupOn attacks — being partly marketing to new customers and partly a method of clearing perishable supply. There is still plenty of money to be made in improving this life-cycle. Distribution to the right buyer, not the product itself, is what we are really buying. The distribution and not the product.

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Why I am still a viral marketing skeptic

August 14th, 2008 No comments

I just read again David Meerman Scott’s free e-book on Viral marketing. This and similar descriptions of the marketing process give one an understanding of how a successful viral marketing campaign, or now social marketing campaign, can be created but we know that most of these campaigns fail. To be fair Scott makes this point. I was also at a live webcast by Mike Volpe of Hubspot where he stated that your staff should be so excited about their product that they can make a viral campaign work for any product. These are all worthwhile presentations but I am still a skeptic about viral marketing of a lot of product lines because it assumes that the purchasing decision makers are also so excited about the purchase that they are connecting with the network mavens. While this is true of Harry Potter fans is it true of electrical component purchasers? People read when they buy a car and even a car wax but not before they stop at a car wash or buy a chamois. People do refer to their networks but only for some unusual purchases. I am convinced that most products and services still need a blend of active outbound promotion as well as influencing the key communicators and their networks. With some products such as hubspot’s products this may be so far to one side that influencing bloggers is all that is needed. What I have no doubt about is that if you are in the words of Mike Volpe, able to identify something in your product which is “exceptional, cool or remarkable” in your business you should be taking your passion for it and sharing that as viral content with social networks.

Thinking about the very average business, such as the five dry cleaners within three blocks of my New York apartment it is clear that they need outbound marketing, printed door hangers, coat hangers and window offers as well as word of mouth and are unlikely to benefit from, let alone survive, by relying upon contacting nearby bloggers.

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