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Posts Tagged ‘Offer’


Change Your Offer Without Changing Your Product

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Have you been selling a product or service for some time, but think you might need to do something new to keep up with the market? Offer something fresh?

One of the problems with making significant changes to your products or services is that it tends to carry a high level of risk. There is a risk you could alienate your existing prospects. There is always risk in starting over and trying something new and untested, as the untried and untested is more likely to fail.

But what if you could change your product or service without really changing it at all! Here are a few ideas on how to make changes, by changing the pitch, and without going to the effort, or taking the risk of making fundamental changes.

Positioning

One of the great things about direct marketing, of which search marketing is a part, is that we’re not likely to be starting with products and services that have had an awareness and associations built up over many years – like Coca-Cola, for example. We get to modify the position, if we so choose.

Position, in marketing, means perception. Perception in the minds of the prospective customer. We can appeal to perceptions, or shape our product to fit perceptions, depending on what our prospects want.

For example, we could take the same car and market it to two different groups using positioning. To one group, we emphasize safety features above all else. To another group, we emphasize performance. The product doesn’t change, but the positioning does, and thus appeals to different groups of buyers. In reality, a car manufacturer probably wouldn’t do this, at least not in the same market, as it could send confusing messages.

However, on the web, we can often chop and change products, and target different groups, and one doesn’t necessarily need to overlap another.

Vertical Positioning

A vertical is a group of similar businesses and customers that engage in trade based on specific and specialized need. They may be a subset of a larger market. For example, PPC is a vertical within internet marketing, itself a subset of general marketing.

In terms of positioning within vertical markets, imagine you’re a software developer in the search marketing space. If you were talking to a group of manufacturers, and want to talk about what you do in a way that is understandable to this audience, you might talk to them in broad terms about marketing.

If you were talking to a group of marketers you might talk more specifically about search marketing. If you were talking to a room full of search marketers, you might talk more specifically again about the PPC optimization software you’re working on. If you were talking to a room of PPC optimization software developers…..and so on.

They are all part of the same market – and they might all need what you have – but each audience exists in different verticals, and so you change the message to suit. Changing vertical positioning is when you target a different vertical within the same market. An example of this might be a landlord who rents out a house to a single tenant changes to renting it out students on a room by room basis with “shared facilities”. She’s still in the accommodation provision market, the product is the same, but it is pitched to a different niche.

Can you identify different verticals in your market to which you product or service might also appeal? Can you configure your product, without making fundamental changes, so that it appeals to the needs of a different niche within your market?

Positioning In Time

Positioning in time, sometimes described as horizontal positioning in direct marketing circles, refers to the point in time when a person buys something, and positioning the message to appeal to different buyers depending on where they are in the buy-cycle.

For example, if someone is genuinely new to your product, and doesn’t even know they want it, then you could pitch your advertising based on the benefits your product provides. If I wanted to sell, say, a revolutionary new power cell, I wouldn’t talk about specifications to someone unfamiliar with the product, I’d talk about the fact that it replaces the need to be on an electricity grid, so the buyer doesn’t need to pay line charges. I’d emphasize benefits.

If someone is already aware of these new power cells, and knows all the benefits, I would likely emphasize other aspects, such as features and price more than benefits, as the buyer should already understand them.

This type of positioning will be familiar to people who do a lot of PPC. The link text, message and landing page changes to accommodate buyers at different stages in the sales cycle. The product doesn’t change, but the message does.

Isolate

Another way to reposition a product or service is to use an isolation technique. Take a single aspect of the product and make it a major part of the offer. For example, TIME magazine sells subscriptions to a magazine, but their advertising often focuses on the “free” gifts that accompany a subscription. This technique is often used when the main product itself is well known to the audience, and there’s not much new that can be said about it.

Many software companies who formerly sold their software now give their software away as part of a freeware model, but sell software support and maintenance services around it. They isolate an aspect that was always there – service – but now emphasize it, and push the actual product into the background. This tends to happen when the product becomes commodity and there are few ways to differentiate it without making significant changes.

Combine

Think about bundling products or services together to appeal to a different vertical.

For example, there might be a small market for individual electronic components, but a large market for a “phone tapping device”. Something Woz and Steve Jobs built a company on.

Music distribution companies, like Spotify, take individual tunes, bundle them together as a huge library, and sell subscriptions to it, as opposed to selling on a song by song, basis, like iTunes do.

Individual garden plants and potting accessories might not be very interesting, but bundled together as a “kitchen greenhouse” they might appeal to an audience of foodies who don’t necessarily see themselves as gardeners.

Further Reading

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3 Reasons Google Won’t Offer Car Insurance Comparisons in the US Anytime Soon

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The following is a guest column written by Rory Joyce from CoverHound.

Last week Google Advisor made its long-awaited debut in the car insurance vertical — in the UK. Given Google’s 2011 acquisition of BeatThatQuote.com, a UK comparison site, for 37.7 million pounds ($ 61.5 million US), it comes as little surprise that the company chose to enter the UK ahead of other markets. While some might suspect Google’s foray into the UK market is merely a trial balloon, and that an entrance into the US market is inevitable, I certainly wouldn’t hold my breath.

Here are three reasons Google will not be offering an insurance comparison product anytime soon in the US market:

1) High Opportunity Cost

Finance and insurance is the number one revenue – generating advertising vertical for Google, totaling $ 4 billion in 2011. While some of that $ 4 billion is made up of products like health insurance, life insurance and credit cards, the largest segment within the vertical is undoubtedly car insurance. The top 3 advertisers in the vertical as a whole are US carriers — State Farm, Progressive and Geico — spending a combined sum of $ 110 million in 2011.

The keyword landscape for the car insurance vertical is relatively dense. A vast majority of searches occur across 10-20 generic terms (ie – “car insurance,” “auto insurance,” “cheap auto insurance,” “auto insurance quotes,” etc). This is an important point because it helps explain the relatively high market CPC of car insurance keywords versus other verticals. All of the major advertisers are in the auction for a large majority of searches, resulting in higher prices. The top spot for head term searches can reach CPCs well over $ 40. The overall average revenue/click for Google is probably somewhere around $ 30. Having run run similar experiments with carrier click listing ads using SEM traffic, I can confidently assume that the click velocity (clicks per clicker) is around 1.5. So the average revenue per searcher who clicks is probably somewhere around $ 45 for Google.

Now, let’s speculate on Google’s potential revenues from advertisers in a comparison environment. Carriers’ marketing allowable is approximately $ 250 per new policy. When structuring pay-for-performance pricing deep in the funnel (or on a sold-policy basis), carriers are unlikely to stray from those fundamentals. In a fluid marketplace higher in the funnel (i.e.  Adwords PPC), they very often are managing to a marginal cost per policy that far exceeds even $ 500 (see $ 40 CPCs). While it may seem like irrational behavior, there are two reasons they are able to get away with this:

a) They are managing to an overall average cost per policy, meaning all direct response marketing channels benefit from “free,” or unattributable sales. With mega-brands like Geico, this can be a huge factor.

b) There are pressures to meet sales goals at all costs. Google presents the highest intent of any marketing channel available to insurance marketers. If marketers need to move the needle in a hurry, this is where they spend.

Regardless of how Google actually structures the pricing, the conversion point will be much more efficient for the consumer since they will be armed with rates and thus there will be less conversion velocity for Google. The net-net here is a much more efficient marketplace, and one where Google can expect average revenue to be about $ 250 per sold policy.

How does this match up against the $ 45 unit revenue they would significantly cannibalize? The most optimized and competitive carriers can convert as high as 10% of clicks into sales. Since Google would be presenting multiple policies we can expect that in a fully optimized state, they may see 50% higher conversion and thus 15% of clicks into sales. Here is a summary of the math:

With the Advisor product, in an optimized state, Google will make about $ 37.50 ($ 250 x .15) per clicker. Each cannibalized lead will thus cost Google $ 7.50 of unit revenue ($ 45 – $ 37.50). Given the dearth of compelling comparison options in insurance (that can afford AdWords), consumers would definitely be intrigued and so one can assume the penetration/cannibalization would be significant.

Of course there are other impacts to consider: How would this affect competition and average revenue for non-cannibalized clicks? Will responders to Advisor be incremental and therefore have zero opportunity cost?

2) Advisor Has Poor Traction in Other Verticals

Over the past couple of years, Google has rolled out its Advisor product in several verticals including: personal banking, mortgage, and flight search.

We know that at least mortgage didn’t work out very well. Rolled out in early 2011, it was not even a year before Google apparently shut the service down in January of 2012.

I personally don’t have a good grasp on the Mortgage vertical so I had a chat with a high-ranking executive at a leading mortgage site, an active AdWords advertiser. In talking to him it became clear that there were actually quite a bit of similarities between mortgage and insurance as it relates to Google including:

  1. Both industries are highly regulated in the US, at the state level.
  2. Both verticals are competitive and lucrative. CPCs in mortgage can exceed $ 40.
  3. Like insurance, Google tested Advisor in the UK market first.

Hoping he could serve as my crystal ball for insurance, I asked, “So why did Advisor for Mortgage fail?” His response was, “The chief issue was that the opportunity cost was unsustainably high. Google needed to be as or more efficient than direct marketers who had been doing this for years. They underestimated this learning curve and ultimately couldn’t sustain the lost revenue as a result of click cannibalization.”

Google better be sure it has a good understanding of the US insurance market before entering, or else history will repeat itself, which brings me to my next point…

3) They Don’t Yet Have Expertise

Let’s quickly review some key differences between the UK and US insurance markets:

  1. Approximately 80% of car insurance is purchased through comparison sites in the UK vs under 5% in the US.
  2. There is one very business-friendly pricing regulatory body in the UK versus state-level, sometimes aggressive, regulation in the US.
  3. The UK is an efficient market for consumers, the US is not. This means margins are tighter for UK advertisers, as evidenced by the fact that CPCs in the UK are about a third of what they are in the US.

As you can see, these markets are completely different animals. Despite the seemingly low barriers for entry in the UK, Google still felt compelled to acquire BeatThatQuote to better understand the market. Yet, it still took them a year and a half post acquisition before they launched Advisor.

I spoke with an executive at a top-tier UK insurance comparison site earlier this week about Google’s entry. He mentioned that Google wanted to acquire a UK entity primarily for its general knowledge of the market, technology, and infrastructure (API integrations). He said, “Given [Google’s] objectives, it didn’t make sense for them to acquire a top tier site (ie – gocompare, comparethemarket, moneysupermarket, confused) so they acquired BeatThatQuote, which was unknown to most consumers but had the infrastructure in place for Google to test the market effectively.”

It’s very unlikely BeatThatQuote will be of much use for the US market. Google will need to build its product from the ground up. Beyond accruing the knowledge of a very complex, and nuanced market, they will need to acquire or build out the infrastructure. In the US there are no public rate APIs for insurance carriers; very few insurance comparison sites actually publish instant, accurate, real-time rates. Google will need to understand and navigate its way to the rates (though it’s not impossible). It will take some time to get carriers comfortable and then of course build out the technology. Insurance carriers, like most financial service companies, can be painfully slow.

Conclusion

I do believe Google will do something with insurance at some point in the US. Of the various challenges the company currently faces, I believe the high opportunity cost is the toughest to overcome. However, the market will shift. As true insurance comparison options continue to mature, consumers will be searching exclusively for comparison sites (see travel), and carriers will no longer be able to effectively compete at the scale they are now — driving down the market for CPCs and thus lowering the opportunity cost.

This opportunity cost is much lower however for other search engines where average car insurance CPC’s are lower. If I am Microsoft or Yahoo, I am seriously considering using my valuable real estate to promote something worthwhile in insurance. There is currently a big void for consumers as it relates to shopping for insurance. A rival search engine can instantly differentiate themselves from Google overnight in one of the biggest verticals. This may be one of their best opportunities to regain some market share.

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