The key point to realise is that pricing is all based on the classic supply and demand curve. This has two huge impacts:

1. Pricing needs to take into account both supply (competitors) and demand (consumers)

Supply & Demand Meet at Your Price

Spend some time doing research on your competitors. Get their rate cards, not just word of mouth evidence. Your sales people will often be given rate cards by prospective customers, there is no vendor loyalty when a customer is negotiating hard and you should benefit from that where you can.  If it is a new product and you don’t think you have competitors, think again. You actually need a competitor. Humans decision making is an extremely relative process, so it is important to establish in the consumers mind who your competitors are and why they should change their mind. Take this TIVO example. There were no competitors when TIVO came on the market. The closest two existing products were a $100 VCR and a $1000+ computer. No prizes for guessing which device they compared themselves to.

Sometimes it takes a bit of trickery to associate your new product with the desired pricing benchmark. The most infamous case is cited in the book Predictably Irrational. James Assael was the “Product Manager” for Black Pearls, a product were not only completely unknown, but also proved unwanted. So what to do? 

 James Assael could have dropped the black pearls altogether or sold them at a low price to a discount store. He could have tried to push them to consumers by bundling them together with a few white pearls. But instead Assael waited a year … and then brought them to an old friend, Harry Winston, the legendary gemstone dealer. Winston agreed to put them in the window of his store on Fifth Avenue, with an outrageously high price tag attached. Assael, meanwhile, commissioned a full-page advertisement that ran in the glossiest of magazines. There, a string of Tahitian black pearls glowed, set among a spray of diamonds, rubies, and emeralds.

“The pearls, which had shortly before been the private business of a cluster of black-lipped oysters, hanging on a rope in the Polynesian sea, were soon parading through Manhattan on the arched necks of the city’s most prosperous divas. Assael had taken something of dubious worth and made it fabulously fine.”

Today this happens all the time. Apple introduced the iPhone at $599, then only 2 months after launch they cut the price by a massive $200 to $399. They set their price benchmark, and then slash the price to rapidly accelerate sales volumes with a heavily “discounted” offering. This brings me to my second point.

2. Pricing is not a straight line, linear pricing models do not work with scale

iPhone Price Cut! (?)

Apple also slashed  the iPhone price after only 2 months to drive those critical initial sales volumes as early as possible. As your production scales your costs are exponentially falling, especially when a product is being brought to market for the first time. This also reinforces why cost plus pricing is an impossible task, to be accurate your price would need to be different for each individual unit you sell. 

This scaling effect will also cause problems on the demand side. Put simply, cost plus pricing will cause you to over-price your product when there is a weak market and will cause you to under-price your product when there is a strong market. Again this is due to the curved nature of the demand curve, a straight line simply doesn’t fit.

Prices represent single points on a graph, so how do you create points that form a curve? You need an end-to-end product portfolio.

Conclusion: Plan an end-to-end Product Portfolio

The first key is to segment your target markets. You then need to set a goal for what you would like to achieve in that market (low end market share, diversify customer profile, leverage brand etc.) and scope a product to suit both. If you understand your target market you are understanding the demand curve, by figuring out what you have to offer you can determine the supply side of the curve. Add-ons are a great example of being able to target different markets without straying too far from your core focus.

How many add-ons should you have? The paradox of choice suggests that 3 to 6 choices is about the right number, otherwise the customer starts to get overwhelmed with the sheer number of comparison decisions being made.

37Signals Basecamp Account Choices

You can make things even easier for the customer. 37Signals recently blogged how a simple (and not so subtle) change of their account selection screen to promote a particular product from their range greatly helped people make a quick no-fuss decision.  Even the order of the pricing can have a big effect, so don’t start thinking that once you have a price that you are finished!

In the end your rate card need to be treated just like your product itself, you need to keep testing it against the market and making sure you are still fitting the curve. Simple delivery and accounting practices help here, so don’t overcomplicate things.

MasterChef

This website content is what keeps people engaged. Full show episodes stream very quickly from the site not long after screening, letting you catch up if you have missed an episode or just feed your addiction. Every recipe on the show is uploaded and available for those at home to have a crack, and beautiful images are cycled past the viewer. The taunt of “Can you master this MasterClass dish?” next to a picture of a beautiful coffee eclair is a great teaser to engage those at home.

The engaged community that has been built can be confirmed on Twitter. There doesn’t seem to actually be an official MasterChef twitter account, but that hasn’t stopped loyal fans creating unoffical ones and swamping Twitter with comments about how hungry they are, which recipes they love and who they want to get kicked off. The episode finished over an hour ago, but tweets are still coming in faster than one per minute. I really hope someone is monitoring this community really closely, what a great way to get feedback on the franchise directly from your customers.

Even if they are not monitoring the Twitter community, they will at least be monitoring their public forums. Yet another nod to the importance of communities in building a loyal following behind a brand. Over 30,000 posts proves that people are enjoying it, and breaking down the forums by participant gives a great selection criteria for the next season’s contestants (rumoured to be celebrities). Finally, they also have a Digg-like rating system on each recipe, so again the community can feel engaged and contribute back to itself.

How do you then cash in on this community? The product integration with Coles is subtle yet very effective. Recipes have a cost from Coles listed below them, for example this tasty soup is a mere $3.50 per serve. The PDF that you print to take to the shops of course has a Coles logo in the top right corner, as well as any notes about whether Coles stocks the item or not. They could have even taken this to the nth degree by having “MasterChef Prefilled Shopping Carts” from Coles Online, what armchair chef doesn’t want the ingredients delivered straight to their house? Even better, you could pre-empt the episode and deliver the Mystery Box challenge ingredients on the night of the Mystery Box episode! Now that would be challenging our engaged community.

The only thing that Channel 10 have done wrong, is screen Biggest Loser USA directly after MasterChef on a Sunday night. Then again, for some reason Biggest Loser makes me hungry too…

Flow chart of the Domain Expiry Process

As you can see it takes almost 3 months from when a domain expires to when it is finally available for public re-registration by a different owner. You can track the progress of a domain name towards expiry by using a whois tool.

Once it is available you can register it through any domain name reseller, or if you are really keen (like I was) you can use a domain name backorder tool which will automatically buy the domain name as soon after it ‘drops’ as it can. I have used the Godaddy domain backorder tool twice, and have been successful twice so I strongly recommend it. I still think however that the biggest risk is the current registrant renewing some time before the final deletion phase, which of course is unfortunately completely out of your control.

So as you might have guessed, as of this week I have secured scottsavage.com! It expired on the 24th of March, so that illustrates just how slow the process is. The next question is whether I migrate my blog to that domain or not, and what effect this will have on my SEO… hmmm… too scared to do this until I do some more research…

1) Export the certificate from the original server:

Export-ExchangeCertificate -Thumbprint 5113ae0233a72fccb75b1d0198628675333d010e -BinaryEncoded:$true -Path c:\certificates\export.pfx -Password:(Get-Credential).password

http://technet.microsoft.com/en-us/library/aa996305.aspx

2) Import the certificate into the new server:

Import-ExchangeCertificate -Path c:\certificates\export.pfx -Password:(Get-Credential).password

http://technet.microsoft.com/en-us/library/bb124424.aspx

3) Enable the new certificate:

Enable-ExchangeCertificate -Thumbprint 5113ae0233a72fccb75b1d0198628675333d010e -Services “POP, IMAP”

 http://technet.microsoft.com/en-us/library/aa997231.aspx

Done!

The Xero Dashboard

When you first login you are greeted by a welcome message. This isn’t particularly unique, but it has nice touches. A warm dialog, pre-loaded sample data and a link to view the sample data straight away. They even have a different demo company set up for each country they operate in, taking into account local accounting rules etc. But that’s not all! Once you load the Demo Company data you can either take a tour, or tackle one of the top 10 tasks that people complete in Xero.

Getting Started Alert

I think this shows a good level of hand-holding, but also of understanding and targetting your customers.

Another nice usability touch is the auto-logout function. Users generally hate the auto-logout 99% of the time, but it does save their bacon that final 1%. To make it as unbtrusive as possible Xero use a lightboxed login box when your 30 minutes is up (and it is good they actually display the limit here too). This makes logging back in a breeze, and teasing the user with all their content subtly appearing under the lightbox makes them feel that it isn’t a big process to dive back into the software again.

Lightbox style Auto-Logout

Reports are another area where usability is always difficult, in this case navigating to the reports that you use most regularly. Xero allows the user to simply click the star next to the report, and that report will then appear in the higher level Reports dropdown. You never have to see the full list of reports again!

Simple report navigation

It’s pretty minor, but it is a solution I never thought of to a problem I have faced for a while.

Finally one last idea that looks simple, but is actually very effective. The action button that performs more than one action:

Consolidated Action Buttons

I like this because it keeps action buttons to a minimum, allowing them to be placed more consistently and concisely on a screen. It also forces you to make sure the actions on a page are related and required.

Other nice elements include inline help content throughout, consistent positioning and colouring of action buttons, good usage of white space around tabs and tables, the ability to save drafts or ‘publish’ data entry and the use of simple language (”Money coming in” rather than “Accounts Receivable”).

Well done Xero, you are now my usability reference whenever I get stuck!

%windir%\system32\inetsrv\appcmd.exe set config -section:system.webServer/httpErrors -errorMode:Detailed

All fixed! If you want to change it back when you put the server into production then change the errorMode to “DetailedLocalOnly”.

My achievement this weekend was this fine looking garden bed! It consists of seven original river red gum railway sleepers, cut to size and propped up on bricks and pavers where necessary. I also had to move the rest of the dirt, probably about a ton in all. We had to get a trailer down the side path, the sleepers weighed over a ton in total so I didn’t want to carry them any further than necessary. Two tons in all, not a bad effort for a Sunday! Tomorrow I need to get some sand to lay under the pavers behind the bed, and some potting mix to combine with the organic mix. Yet more money sunk into the Bunnings empire, but it will be worth it when the first vegetables come out of the ground.

Steve Ballmer

Sometimes people ask me, why do I like Microsoft so much? Most people think it is because of Steve Ballmer, but that is only part of the reason. Really I have loved Microsoft since early in my university days. I even have some content dedicated to myself on the Microsoft.com domain! Wow what a fanboi.

In fact I don’t love Microsoft, I just respect them. Look at the number of markets they are in. Look at how fiercely they fight in those markets. You fear Google will outsmart you if they enter your market, but you fear Microsoft will destroy you by any means necessary. Are they overly ruthless? Even unethical?

Personally I don’t think so, I think they are not afraid of competing and competing hard. Their haters might say their staff are “injected with blue blood”, but wouldn’t you like your company culture to be that strong? Wouldn’t you like to get market dominance, even if it means trench fighting your competitors? What’s so wrong with wanting to be the best? Surely this isn’t just my ego talking.

Today we added 4 new white iceberg roses across the front of the verandah. They were on sale from Flower Power, 25% off. They are ok to plant outside of winter because they were potted, but we can’t move the other ones until July when they are dormant. We also put some lavender plants across the front of that garden bed, so hopefully they spread over the bed and the chip bark keeps the weeds at bay. The pile of soil is getting much smaller now. On the upcoming long weekend I will be doing some paving and putting in a vegetable patch!

Social networks have two strong points, they are full of customers that are linked by relationships. These are the first two letters of CRM! The multi-billion dollar question is how can you manage them without destroying them or being seen as an evil spy.

Social CRM Feedback Loop

The first step towards Social CRM is using social networks as a feedback loop for your customer relations programs. Who better to learn from than your customers themselves? It’s the perfect way to refine your customer relations processes and add another source of feedback and innovation into your company.

The next stage is to develop relationships with your customers. From a business perspective I would assume that this is due to repeat business delivering higher margins, mostly because it doesn’t require expensive mass marketing or other customer acquisition. Businesses justify it to consumers by saying it gives the customer an opportunity to dictate and receive a personalised product.

I like idealistic goals, I think when you are talking about customers it is good to at least aim towards being noble. The question is, how many businesses intentions are simply to maintain the margins of their mass market product?

As with everything in life there will be a balancing point, somewhere in the feedback gathering process I think the social networks will reject further interference. That balancing point is what Facebook and others are thinking day and night about, and the point they have crossed at times with projects such as Facebook Beacon. If a social network hits that point perfectly there is definitely big money at stake, but until then companies need to monitor the social networks in their backyard and just listen. There are plenty of companies that struggle to do that internally, let alone through fast moving external networks.