Carrots and Sticks Manipulation VS Inspiration

There's barely a product or service on the market today that cus tomers can't buy from someone else for about the same price, about the same quality, about the same level of service and about the same features. If you truly have a firstmover's advantage, it's prob ably lost in a matter of months. If you offer something truly novel, someone else will soon come up with something similar and maybe even better.But if you ask most businesses why their customers are their customers, most will tell you it's because of superior quality, features ,price or service. In other words, most companies have no clue why their customers are their customers. This is a fascinating realization. If companies don't know why their customers are their customers, odds are good that they don't know why their employees are their employees either.If most companies don't really know why their customers are their customers or why their employees are their employees, then how do they know how to attract more employees and encourage loyalty among those they already have? The reality is, most businesses today are making decisions based on a set of incomplete or,worse, completely flawed assumptions about what's driving their business.There are only two ways to influence human behavior: you can manipulate it or you can inspire it. When I mention manipulation, this is not necessarily pejorative; it's a very common and fairly benign tactic. In fact, many of us have been doing it since we were young. "I'll be your best friend" is the highly effective negotiating tactic employed by generations of children to obtain something they want from a peer. And as any child who has ever handed over candy hoping for a new best friend will tell you, it works.From business to politics, manipulations run rampant in all forms of sales and marketing. Typical manipulations include: dropping the price, running a promotion; using fear, peer pressure or aspirational messages, and promising innovation to influence behaviorbe it a purchase, a vote or support. When companies or organizations do not have a clear sense of why their customers are their customers, they tend to rely on a disproportionate number of manipulations to get what they need. And for good reason. Manipulations work. Price

Many companies are reluctant to play the price game, but they do so because they know it is effective. So effective, in fact, that the temptation can sometimes be overwhelming. There are few profes- sional services firms that, when faced with an opportunity to land a big piece of business, haven't just dropped their price to make the deal happen. No matter how they rationalized it to themselves or their clients, price is a highly effective manipulation. Drop your prices low enough and people will buy from you. We see it at the end of a retail season when products are "priced to move." Drop the price low enough and the shelves will very quickly clear to make room for the next season's products.

Playing the price game, however, can come at tremendous cost and can create a significant dilemma for the company. For theseller, selling based on price is like heroin. The short-term gain is fantastic, but the more you do it, the harder it becomes to kick the habit. Once buyers get used to paying a lower-than-average price for a product or service, it is very hard to get them to pay more. And the sellers, facing overwhelming pressure to push prices loveer and lower in order to compete, find their margins cut slim- mer and slimmer. This only drives a need to sell more to compen- sate. And the quickest way to do that is price again. And so the downward spiral of price addiction sets in. In the drug world, these addicts are called junkies. In the business world, we call them com- modities. Insurance. Home computers. Mobile phone service. Any number of packaged goods. The list of commodities created by the price game goes on and on. In nearly every circumstance, the com- panies that are forced to treat their products as commodities brought it upon themselves. I cannot debate that dropping the price is not a perfectly legitimate way of driving business; the chal- lenge is staying profitable.

Wal-Mart seems to be an exception to the rule. They have built a phenomenally successful business playing the price game. But it also came at a high cost. Scale helped Wal-Mart avoid the inherent weak- nesses of a price strategy, but the company's obsession with price above all else has left it scandal-ridden and hurt its reputation. And every one of the company's scandals was born from its attempts to keep coats down so it could afford to offer such low prices.

Price always costs something. The question is, how much are you willing to pay for the money you make?

Promotions

General Motors had a bold goal. To lead the American automotive industry in market share.