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    Sales Over Scarcity

    December 2nd, 2008

    With Black Friday here and gone I am left with the very simple question the I would think is in the minds of many brand managers, “Do we promote sales over scarcity, and how does that impact the perception of our brand?”

    Clearly on Black Friday there is a scarcity of products.  People are out to get the great deals, though I didn’t think they were all that fantastic.  There is only a certain amount of every product in the store, or at least only a certain amount at that price.  The issue is how this impacts a brand.  If there are limited quantities, people are more apt to think that the item is better.  If there are limited quantities and some are already gone – or in the process of being taken – a consumer is ever more likely to want to buy the product.  Scarcity, or the perceived scarcity, creates a demand for the product.

    Even Lands’ End, the company I work for, has employed this concept in our “On The Counter” area of our website.  There are limited quantities of the items put up each week and then discounted throughout the week even more.  But, when an item is out it is still displayed with a “Sold Out” where the price should be.  It shows that the other items may sell out as well, so get yours now.

    This tactic is a great way to drive sales at all levels, but it does limit sales.  If you are sold out of an item, clearly you cannot sell more of it.  If you create scarcity around a product then you are, by the very nature of scarcity, limiting sales.  It is important to think about that when using a strategy that promotes scarcity over sales.  On the other hand, if you always have something then there is no urgency for the customer to purchase that moment; that is sales over scarcity.

    Think about how your brand is positioned and ask yourself, “Which is the better fit, sales or scarcity?”  The answer may change depending on the time of year, but every time it is changed you are impacting how people view your brand.

    What do you think is better, sales or scarcity?  Let us know in the comments.

    This has been a Thought From The Cake Scraps.

    Virtual Goods And How I Don’t Get Them

    November 4th, 2008

    I may be in the minority or maybe I just don’t have enough money to throw away or maybe I just don’t get it.

    Viximo is a purveyor of virtual goods, more commonly called gifts.  While I would not say that they are common on Facebook, Facebook is the largest platform that they exist on (to my knowledge).  To be fair, while I might not think that they are common, Facebook is counting on it for revenue and not in small amounts.  It is estimated at $30 to $40 Million a year.

    I don’t know how much Viximo is planning to make but when I first read about them over at TechCrunch I knew they would make money.  To be clear, I still don’t get it.  I know they will make money, and lots of it since their cost is fixed and it does not matter how many of a particular gift they sell, but why do people buy?

    The value of something is defined by two things – supply and demand.  There is nothing more to it.  If you had 1 ton of gold and nobody wanted it you may as well have 1 ton of gravel.  In contrast you could have that ton of gravel in a place where no quarry exists and everybody wants it and it could be worth lots.  It is all supply and demand.

    How does this relate to virtual goods?  If someone buys a virtual gift who really owns it?  If Facebook goes under – work with me here – where is your virtual gift?  Gone.  Do a google search on what happens to DRM protected music when the issuer goes under.  The sites going under will actually tell you to burn your songs to a CD and rip them back to your hard drive because you can’t transfer them or have the DRM validated after the site shuts down.  Why risk it?

    I guess my point is that I understand that it can be fun to give a gift, it doesn’t really make sense.  Just e-mail them some clip art.  The only thing that I think makes sense is the free gifts.  The gifts that are sponsored by a company.  If the company takes its time, makes it clever, and makes it interesting then it can be a great marketing tool and a fantastic way to generate some buzz around the brand.  So it makes sense to a company to pay Facebook to offer their ‘gift’ but can someone explain why I should pay for one?

    This has been a Thought From The Cake Scraps.

    No Such Thing As Bad Publicity

    October 31st, 2008

    Despite what you may think about bad publicity it is publicity none the less.  I can’t say that I totally agree that all publicity is good; there can be huge ramifications when something hits the press that is bad for your personal image or brand image.  No question.  That said, some bad publicity can be good because of the old saying: “what doesn’t kill you makes you stronger”.

    Apparently the Republican Party of my state did not get that memo and missed that entire chapter on brand management.  Over the past week or two I have received no less than 8 mailings from them – not all of which were unique – and McCain was mentioned once.  Meanwhile all these mailings had told me how Obama is bad because of such and such and “Obama is not who you think he is” and other similar irrelevant remarks.

    There was not a single thing that told me McCain’s position on anything.  There were more pictures of Obama – in dark colors and whatnot – then of McCain by about 4 to 1 in Obama’s favor AND I could not read an entire sentence without at least seeing Obama’s name at least once.  Who are these people campaigning for anyway?  At least criticize something that matters instead of some relationship that he may have had or political back scratching that has gone on.  Guess what?  I don’t care and from the questions that people were submitting to the debates – and general reading on the internet – nobody else does either.

    Meanwhile, in typical smooth Obama fashion, I got mailings that I could not even tell who they were from on the outside.  It was literally a guide one how to vote.  It told me facts about voting and exactly what I would need to vote and what forms of ID were permissible so make sure I could vote.  The entire outside of the mailing even had my local polling station location printed on the mailing!  The only thing that even told me that it was from Obama is the clever “O” symbol that the campaign uses and a picture of him on the inside.  I can see people keeping that just because it has great information no matter who they are voting for.

    Now ask yourself this: which is more powerful for a brand, something that people will read and throw away – even people who support your brand – or something that people are going to keep around no matter if they like your brand or not?  You’d be crazy not to shoot for that latter.  Apparently we now know the mental state of the people running my state’s campaign for McCain.

    Know that I do not really favor one candidate over another – and suggest you find the party that is right for you even if it isn’t one of the major ones – but that as far as branding and marketing goes it seems like some of McCain’s supporters missed the boat.

    Just like in my previous post I will close with this thought:

    Best of luck to all candidates for President and make sure you vote.

    This has been a Thought From The Cake Scraps.

    Calling Out Seth

    October 29th, 2008

    If you have never had the chance to check out Seth Godin’s blog, you should.  I really enjoy reading it because of the variety of the topics he covers.  They are usually very interesting and definitive.  He tends not to postulate but rather state things as a fact.  It can be refreshing to read something with such a firm and decisive stance.

    All of that said, his most recent post titled How To Lose lacked the quintessential reference that would have given credit where credit is due.  The post is about customers who are looking for something that you don’t have.  Seth has this to say about it:

    Instead of feigning ignorance about the whereabouts of your competitors (you really don’t know where other shoe stores are?) and instead of pretending you don’t have a phone book, what would happen if you actually spent that spare minute being incredibly helpful. “Ask for Jimmy! Tell him Sal sent you…”

    I totally agree with this.  If you don’t have what they are looking for then tell them where they can find the exact product they are looking for first and then suggest that you also have some fine similar products – if in fact you do.

    The reason that I called this post “Calling Out Seth” is because this very principle is illustrated to the extreme in the holiday classic “A Miracle On 34th St”.  In case you don’t remember here is a quick summary from Wikipedia:

    Ignoring instructions to steer parents to goods that Macy’s wants to sell, Kris tells one woman shopper to go to another store, Schoenfeld’s, for a fire engine for her son that Macys doesn’t have. She is so impressed, she tells Julian Shellhammer, head of the toy department, that she will become a loyal Macy’s customer. Kris later informs another mother that Macy’s arch-rival, Gimbles, has better skates for her daughter.

    The store expands on the marketing concept. Anxious to avoid looking greedy by comparison, Gimbels implements the same referral policy throughout its entire chain, forcing Macy’s and other stores to respond in kind. Eventually, Kris accomplishes the impossible: Mr. Macy shakes hands with Mr. Gimbel.

    It is a great concept -if taken to an extreme in the movie – and certainly it can be considered a ‘statesmanly’ thing to do, but not giving credit to such a prominent reference is a small, but important, shortfall of the post.  Moreover, including it would speak so much more directly with the reader because they can instantly relate.

    This has been a Thought From The Cake Scraps.

    What’s In A Name

    October 28th, 2008

    The name that you pick for your product, service, blog, etc. is part of what defines your brand.  If you have read my blog you may remember the post about knowing what you are worth as a brand, but what that post didn’t talk about is the name of the brand.

    The name of your brand is the first thing that people associate with a product.  People don’t usually start talking about a product without saying who makes it.  It is a critical element to the story of the product.  The part that boggles my mind is how odd some names are.  The names defy logic.  Take Cuil for instance.  The first clue is that if I say Cuil – said cool – you probably have no idea how to spell it.  If you have to spell your brand name to people I think you substantially decrease the odds of starting a brand.

    I have to admit that I even broke my own rule in the first edition of this blog by calling it “Thoughts From Thee Cake Scraps”.  There is a reason that I called it “Thee” but it doesn’t matter.  The reality is that when I was telling people about this blog I would have to say “Thee” and make sure that they doubled up on the “e”.  That is no way to tell people about your new product.

    I am sure there are exceptions to this rule, but I am equally sure that many more odd brand names have failed than have made it.  Note that when I say odd I mean how easily you can communicate your brand name.  It doesn’t have to make sense, just make it easy to communicate.

    This has been a Thought From The Cake Scraps.

    One Real Fake Guitar, To Go Please

    October 24th, 2008

    Logitech and Guitar Hero have teamed up to create a $249.99 USD guitar.  Well, actually it is a controller for the PS3 but looks, feels, and sounds like a real guitar.  Except the sounds part.  But it doesn’t click as much as the standard controllers.  That means it is quieter.  Which is basically the same thing as sounding like a real guitar.

    For the record, Musician’s Friend has a nice Acoustic/Electric guitar for just $50 more – and some for even less.

    So what does this new fangled controller get you?  Well I would suggest you try out the official site but I won’t – hence no link – because it has surprisingly little detail given they are trying to sell a controller that costs more than a XBox 360.  Don’t worry though, Daily Tech has it covered:

    Under the fret buttons, Logitech uses the rubber dome technology that makes its line of keyboards so popular and responsive. The rubber dome technology makes the fret buttons quieter, which is a good thing for anyone who has had to cut a night of jamming short because someone was sleeping in the next room and the buttons were too loud.

    In addition to the normal fret buttons, the Logitech controller also features a Touch-Sensitive Neck Slider that allows player to hit notes and score points without needing to strum. No wires will tie players down, the controller uses 2.4GHz technology promising a 30-foot range. The guitar itself is powered by a pair of AA batteries.

    I am not sure how this thing will sell, but given the popularity of the game it is clear that both Logitech and the Guitar Hero franchise know what they are worth and are not afraid to make a really expensive controller to capitalize one it.  I like that (you still won’t see me buying one).

    I guess if you are really into this game this would be a pretty sweet addition to your stage presence.  Just hope you get it as a gift.  I admit, if you don’t look like a tool you would certainly look pretty sweet playing the thing, but only if you are good.  If you are going to own this you have an obligation to the franchise to be really good.  They don’t want a bunch of YouTube videos of people showing of the guitar along with how bad they suck at Guitar Hero.

    What say you?  Is this worth it?  Should people just buy a real guitar instead and learn to play that?

    This has been a Thought From The Cake Scraps.

    eBay Continues Changes

    October 23rd, 2008

    eBay is once again changing the way it does business by adding more restrictions to its sellers.  Remember when eBay added in the features that allowed a buyer to rate a seller on several categories?  Well now eBay is using that as a basis to say if sellers can continue to sell.

    This excerpt from BizWeek illustrates it quite well:

    In a nutshell, eBay wants its sellers to keep a 4.3 or above (out of 5-star) composite average on several metrics on which customers leave feedback. The most controversial is the shipping and handling feedback. A 4 in this metric means “reasonable,” but if a seller starts getting mostly 4s, eventually that will pull her overall rating down below 4.3. If a buyer rates the shipping charges as “neutral” (3) or “unreasonable” (2)—even if that perception is mistaken—the seller’s ratings will plummet and her account can be suspended. Sellers do have 30 days to increase their rating while they’re suspended, but if they’re not selling, it’s obviously tough to get better feedback.

    It is clear that eBay really does not want to be in the auction business anymore.  These new rules make it very difficult for sellers, and exceptionally difficult for low volume sellers, to stay compliant.  All it takes is one or two disgruntled buyers and you are screwed.  I am glad that I got out while things were still not all that bad.

    These sort of changes make me wonder though.  A business always has to be evolving or they risk being left behind.  You have to find new opportunities or niches to fit in to have growth.  But what if you lose your core competency while doing so?  Are you so focused on growth that you would risk the thing that made you great?

    eBay was known as a place for auctions.  That was what they were good at.  As they move toward a model that is now focused on Fixed Prices not auctions, I think they are giving up more than they realize.  It is easy to blame the lower profits on the economy now, but I would think this would be a time for eBay to shine.  People are selling stuff they don’t need and also looking for stuff at a good price.  As eBay continues to make these changes I wonder if the current economic circumstance is clouding eBay’s view of the business model they are chasing after.  Then again, maybe eBay is positioning itself to take on Amazon.  This could get interesting.

    This has been a Thought From The Cake Scraps.

    What Lists Are You On?

    October 21st, 2008

    It doesn’t take very long to find some sort of list on the internet.  In fact, lists are a pretty common thing that people blog about, create sites about and if you are really talented like The Movie Checklists Blog you blog about the list site you are creating.  But I am not talking about those lists.  I am talking about the lists you really care about; the lists that are responsible for all of that junk mail you get.

    There are all sorts of lists and you may be frightened to know about them, but don’t be.  All of them have your name because you said they could – though it may have been unknowingly because you didn’t actually read the agreement you said you read.

    Now there are some general lists such as “Grandparents” or “Self Identified Democrats and Republicans” but they get much more specific than that.  For instance, if you are reading this blog you may be on the “Tech Stock” list that

    … contains individuals who have purchased subscriptions to high-priced investment advisory newsletters that specialize in finding technology stock investment opportunities

    You may still say that that isn’t all that specific and I can see your point of view, but what about a list of “Socially Active Small Business Owners“.  Would “Joe The Plumber” make that list?

    The answer doesn’t really matter and you may still say that that information isn’t all that specific.  Once again, I may agree to an extent, but I think the next list will make you reconsider.  There is a “Pet loving Execs” list described as:

    …business executives who enjoy spending time with their dogs, cats or both while working at home. The average age of prospects is 52, and they earn an average of $79,000 per year.

    There are plenty more lists that you can look at over at DMNews if you are interested.

    Now this post is not meant to be a fire-alarm or get people all up in arms about privacy.  This isn’t meant to rat out companies who may be purchasing these lists.  In all honesty, they are buying the list because they think that they have a product that you want.  Does it mean extra junk mail?  Yes, but if it doesn’t make the company money to mail you they will stop (perhaps excluding credit card offers).  This is part of life.  Always assume that when you give out your information, it has the potential to be given or sold to someone else.

    We live in a world where information is everywhere.  Consumers have more choices because of the internet and specialty companies are trying to find you as much as you are trying to find them.  Competition for business is fierce and companies cannot afford to do the broad mailings nearly as much as they used to.  Why mail people who will probably not have any interest in your company’s product when your company has a limited budget and is also trying to decrease its paper use?

    Each company is just trying to stay relevant to its customers and acquire new ones.  They will do what it takes to get to that point.  They will track you with e-mail and internal campaigns as well as buy lists from various vendors.  If you don’t like it then it may be time for you to start reading all that fine print before you sign.

    This has been a Thought From The Cake Scraps.

    Penny Cave: To Each His Own Gimmick

    October 7th, 2008

    I have previously posted on Swoopo (Pure Profit: A Look At Swoop) and on the types of auctions they have. And as you can probably tell from the title, they are making a ton of money. Well apparently one Swoopo wasn’t enough so enter PennyCave.

    PennyCave operates on the exact same concept as Swoopo. You purchase your bids from PennyCave and then you use the bids on various auctions they have going. But, they can’t outright copy Swoopo so they have their own set of what I call gimmicks to sucker you out of your money. If you don’t have any background on either Swoopo or PennyCave read my post on Swoopo which describes in detail how the sites work.

    Gimmick 1: All Penny Auctions This is the most glaring gimmick that PennyCave has. By having each bid raise the price of the auction by only a single cent it makes the total price look very attractive. Consider seeing something worth $100 going for just $11.53. Then remember that that is 1,153 bids each at around $1. Swoopo has this style of auction but not each and every auction.

    Verdict on Gimmick 1: Fails to help the customer or be less of a scam.

    Gimmick 2: Discount On Bids If you buy bids in bulk you can save money. Since you waste the money anyway I don’t see that as a huge bonus, just a ploy to get you to buy more bids. I am guessing the thinking here is that while it is true that you will pay less for an individual bid, ultimately you will bid more than you would have with a standard cost bid ($1). Therefore, overall you will spend more money because you know your bids were cheaper, but who is going to calculate by how much? This also makes it difficult to see how much you really have into the site in bids because each bid may cost something different if you buy bids at different times.

    Verdict on Gimmick 2: Fails to help the customer or be less of a scam.

    Gimmick 3: Shipping Included This one is pretty self explanatory. In reality it is just another ploy to get you to think that you are not really spending that much. The real trick here is that in your mind you will look at an auction for $4.20 and think it is not so bad because shipping is included. That would be good logic if it didn’t take (at minimum) $315 in bids to get to that price.  And that is using a rate of 75 cents a bid, the lowest possible rate when buying bids and you have to buy $1000 worth of bids to get it.

    Verdict on Gimmick 3: Fails to help the customer or be less of a scam.

    Gimmick 4: ‘Auctions Live’ Time Frame This is another great example of ‘helping the customer’ meanwhile ‘robbing them blind’. By limiting the time the auction is live from 10 AM to 12 AM what looks a perk to you, the bidder, is really a scam by PennyCave to not let the auction end during an off peak time. By having bidding during a time that ‘you won’t miss the end’, guess what, neither will anybody else. That means that you will get to bid against everybody else and drive up the price and waste your precious bids. Time to celebrate this great customer service.

    Verdict on Gimmick 4: Fails to help the customer or be less of a scam.

    Gimmick 5: Fewer Live Auctions Clearly this is to minimize risk. Less live auctions means that more people will be bidding/betting on those auctions. On the plus side, you have less things to lose money on.

    Verdict on Gimmick 5: Helps the customer control betting but ultimately fails to be less of a scam.

    As you can probably tell I am not enamored by this site. It is very easy to get in over your head. Currently it looks like there are actually some good deals in the finished auctions section, but that is because the site is so new. Once more and more people start using the site it is only going to get worse and the deals with it. Just look at eBay and how they are moving from auctions to fixed price. It is not that you can’t get good deals, it is just that it is a lot harder to get the deal for the amount of time you invest.

    The bottom line is to stay away from these sites – so called “entertainment shopping” sites – unless you go into it with a set amount of money that you are willing to lose. If you don’t plan ahead like this you are bound to end up over investing in the auction and come out way behind. Just look at this auction where there is over 900 bids (at almost $1 each) and the thing retails for just $280. Not smart.

    This has been some Thoughts From The Cake Scraps.

    Know What You’re Worth

    October 6th, 2008

    In a recent article by the Wall Street Journal Activision’s CEO, Robert Kotick, hinted that instead of the current structure for the Guitar Hero franchise – where Activision must pay for the use of an artist’s song – the tables should be turned. The idea being that Guitar Hero is such a great channel for distribution of songs that it is actually saving rock ‘n’ roll.

    It is worth noting that Activision – and video games in general – are different from radio in that Activision has a contract with the owners of the song whereas in radio royalties are paid.

    This seems like a classic game of chicken. As you may have guessed, the argument of promotional value is not new to the industry. A band needs to get play time to become famous, though the internet is changing that slightly, and the radio station needs bands to make music otherwise the radio station has nothing to play. They both depend on each other to make money.

    I think that the main difference in Activision’s situation is that they are not worried about bands trying to ‘make it’. They are giving new life to bands that were fizzling out in the next generation. This puts them in the unique position to make this work. The Guitar Hero brand is heavily, though not fully, dependent on good songs. People love the concept of the game and having classic rock songs is just a perk. Therefore, I would argue that while it may be difficult to have the next release of Guitar Hero be a smash hit with no headliners it would not be impossible. They could easily release some sort of “Tomorrow’s Rockers” edition that featured unsigned bands and sell plenty of copies.

    Overall, this is a great move on Activision’s part because they know what their distribution channel is worth. The tricky part is to state your worth and not overstate your worth and be caught with your pants down. I think the music companies are dangerously close to the latter. The resurgence of some of their artists is because of Guitar Hero and more artists want a piece of the action.

    This is why the music companies are in such a tough spot. They want to get paid for the songs, but I’m sure there is pressure from the artists just to get them in the game. They see it as a great avenue to get a new fan base. Now you also have Activision pushing back to the music companies and saying “why should we be paying you for promoting these fizzling bands?”. The music companies are being pressured from both sides and they don’t really have solid ground to stand on.

    This is going to be very interesting to watch. Who’s going to win and who is going to chicken out?  And can you really apply this to your blog writing?

    Thanks for reading the thoughts of The Cake Scraps.