Free Prize: Guts

Second question for Seth on our Business Blog Book Tour:

Q: You touch on a very important issue related to bringing ideas to fruition, and that’s a sense of confidence to push through a very edgy new idea. I ran into this a few months ago with a telecom client. Customers were frustrated with purchasing a line for $29.99, yet getting their first bill and finding that – with all the fees and surcharges – that line really costs about $45. I proposed that my client do something truly novel in the industry: tell the customer exactly what they’d pay for a line, and educate them on fees and surcharges. Sort of a ‘full disclosure’ way of doing business and building trust that was a complete break from how the industry traditionally operates. Of course, my client shot the idea down immediately: we can’t possibly do that, we get a lot of our revenue from fees and surcharges, our line cost would appear to be higher than our competitors, etc etc. And I wasn’t completely confident enough in the idea to champion it; it was pretty radical, and what if it backfired? My reputation was on the line. Turns out that the FCC is now considering a mandate for full disclosure of fees and surcharges. My client – along with everyone else – will reluctantly be forced to do it, yet if they had done it proactively they would have been viewed as a trustworthy champion of the customer.

Long story short, your book talks about how to sell the idea internally to give people the impression that it’s going to work… but what happens if it doesn’t? If you yourself don’t believe deep down that it’s absolutely going to work, there’s no way you can convince others. Most people know that for every idea that works, there are many more that turn out to be complete flops. So I’m thinking that the root cause of the infrequency of ‘free prize’ innovations isn’t because the idea can’t be sold, it’s more to do with the champion’s fear of failure. Can you expand on this issue and how to deal with it?

A: Great question! Of course you can’t be sure that it’s going to work. But can you be sure that the boring status quo is going to work? The fact is that all the major products and brands and services are under threat today, threat from Walmart, threat from being boring, threats from competition. We don’t spend a lot of time in a cold sweat about all that risk, but it’s real and it’s here and it’s proven.

So, what should you do? You should realize that unless you can stand up and say, “I’ll take responsibility” it’s not going to happen, so don’t even try unless you’re willing to do that.

In the case you gave, I think you could ameliorate your risk by doing it as a test, in a small market. What’s the worst that could have happened?

I would have gone even farther and gone all the way PAST the edge. I would have said it costs $49, then sent them the first month’s bill for $45 with a post-it note that says, “We were wrong. After all taxes, it’s only $45. Sorry, but it’s $4 less than we said it was.” Going to the edges gets talked about.

So going to the edge is putting the phrase "no guts, no glory" to the test!

OK, readers... who has a great example of a gutsy, edgy move that paid off?

Comments

[Andy Chiodo]

Great comments!

My best experience with "telling it all up-front" was with a client in the pharmaceutical business. They had introduced a new product that was HUGELY complex and expensive and were dithering about telling doctors/pharmacists/ consumers "the whole price thing."

Simply put, we convinced them to just tell people that it was so much better than anything on the market (which it was) that it HAD to cost more -- because it worked in 1/4 the time and with no side effects.

Bottom line? It became the brand of choice for consumers within the first four months of introduction.

Ah, the truth shall set you free!

[Matt Chamberlin]

My firm resells niche electronics to value-added resellers (VAR)throughout North America. By simply buying from our company vs. our competition we provide the VARs end user leads for the vertical markets they specialize in.

By spending a couple of bucks on lead development to help our new and old customers, we have received a 300% increase in business with these VARs.

The lead is the free gift.

[Bill Doerr]

A few years ago I advised a client selling toner cartridges to accountants, court reporters, etc. to 'seize the day' and a limited window of opportunity by sending a 'just-before-tax-season' promotion to CPA firms in the area.

Besides a CPA-centric message and copy, we included a 'Tax-Season' Guarantee that if the CPA's laser printer broke for any reason before April 15th, the cartridge firm would provide a loaner within 12 hours AND repair the CPA's printer ... FREE! The only requirement was that the CPA order three cartridges (a no brainer given the imminent tax season usage levels) at a very attractive price. The 'guarantee' was the 'Free Prize'.

To motivate a little extra revenue for the cartridge company, I suggested they include a second offer . . . the special "Pre-Tax Season" pricing would be extended for up to 10 cartridges IF ... they were ordered at the same time as the first three cartridges.

Long story short, we mailed the promotion on a Sunday evening. By Monday noon, we had already generated orders from 9% of the CPA firms and almost 70% ordered at least 5 cartridges. Within the next week, 22% of the CPA's took advantage of the promotional offer.

Postscript:
when the 'regular' companies solicited these CPA firms to reorder in January, they were sorely surprised! And, when they learned that many had pre-purchased enough product to avoid the need to order more -- from anyone -- until June . . . they were well, not too happy with my client. But, the client was dee-lighted with me.

This was an early and memorable example of how 'going beyond safe' is often the best way to generate more sales and far more quickly than less risky (?) methods might provide.

[hugh macleod]

Hmmmm... when I was an unemployed copywriter, on top of my résumé I replaced the word "Résumé" with the word "Autopsy", on the grounds that I didn't want to work for someone who didn't have the same sense of humor as me.

Yep, it paid off. Found the dream job one month later. And they paid my move to Manhattan. Heh.

[Alan Axelrod]

Jennifer:

Example(s) of a "gutsy, edgy move that paid off":

Raising More Money trains and coaches non-profit organizations to implement a system for raising Money from individuals. This system ends the suffering about fundraising and builds passionate lifelong donors. We are committed to sustainable funding for the missions of non-profit organizations.

Originally we charged $5,000 per person to do our workshop. Then we realized that sustainability could only be achieved if our model existed inside an organization at the institutional level. To do this we knew we had to train teams of people from organizations who could collectively support the model. We raised the price of the workshop to $6,000 and required that an organization send a team of six people instead of just one. Business doubled.

This went on for two years. The price of $6,000 did not include a meals and materials fee of about $200/person which varied based upon the venue. People complained about the add-on. We looked cheap given the high price of the workshop. So we raised the price of the workshop to $8,500 and included everything - in essence a 16% additional price increase. As a result we suffer no complaints and our enrollments continue to increase.

[Effern]

My wife loves to tell a story from back in here Software Sales days.

The company she was working for was having trouble selling "maintenance" with the software package they were pushing. She told them that the price was too low, and it was turning customers off, figuring "cheap" maintenance meant "cheap", if not non-existent, support. Not true, she asserted, but the price was the turn-off.

On her next sales call, she told a prospective customer that maintenance costs $1000. They ordered early and often, as did her other customers going forward.

If memory serves me correctly, that was the year she ended up making President's Club (sales of $1M or more).

(Much better story than what came immediately to mind about a company going to the "edge": American Airlines, violating numerous court orders in their drive to bankrupt Legacy Airlines (D Magazine did quite the cover story on it when it was happening). 3 guesses who won. But that's probably not the inspirational story you were looking for.)