On Marketing

Chris Anderson, writing in Wired Magazine, reminds us that King Gillette achieved business success in the early 1900s by giving away razors so he could sell razor blades.  He finds many more examples of the “give it away free” marketing approach in today’s electronic marketplace. Chris says:

“It’s now clear that practically everything Web technology touches starts down the path to gratis, at least as far as we consumers are concerned.”

But I don’t think that’s the lesson we should learn from Mr. Gillette. Or (for that matter) the lesson we should learn from the marketing of cell phones, ink jet printers, or iPods.

As you’ve undoubtedly noticed, each of these products consumes something on an ongoing basis. Razors consume blades. Cell phones consume telephone service. Ink jet printers consume ink. iPods consume music licenses. These products are useless without a reliable, convenient and affordable supply of their corresponding consumable.

There is a marketing school of thought that these products should be given away or sold at a loss in order to win the more lucrative consumables revenue. But I think there’s a more important marketing lesson to be learned here.

To begin with, a consumable-oriented product can potentially build much stronger brand loyalty. They tend to be “stickier”. I can buy a new music player, but if it doesn’t play my collection of 500 iTunes songs I’m not likely to purchase it even if it is cooler-looking or cheaper than the current Apple player.

Consumables may not be high-tech, but they represent an important revenue stream. I have spent much more on ink than I paid for my ink jet printer. My daughters have spent far more on iTunes music than the original prices of their iPods. If you don’t include consumables in your marketing plan, you are abandoning that revenue stream to others.

Does that mean you should give away the base product? Not by any means. But you should certainly be considering consumables as you build your product marketing plan.

If you are responsible for marketing a product that needs consumables, you will have extra challenges:

1. First and foremost, recognize that you are dealing with a consumable-based product. The initial vendors of MP3 players didn’t realize that. They thought they were just selling a standalone device. They thought they were riding on the back of an existing music distribution infrastructure: traditional brick-and-mortar CD stores. They expected customers to go to the mall, buy CDs, and rip them to MP3 format. (They were wrong. Now they’re dead.)
2. You are not marketing a product. You are marketing a system. You need to make sure the whole system is clearly apparent to your customers. You can’t market a cell phone without addressing the question of signing up for telephone service. You can’t market iPods without addressing where and how a customer gets music for it.
3. You will need to pay special attention to channels. Your distribution strategy has to accommodate both the initial product and the consumable as a coordinated whole. If these elements come through different channels, you must make sure this is clear to customers. Your channel partners will need to understand the whole distribution strategy and their part in it.
4. Your channels for consumables should be familiar and super-convenient for your customers. Of course, distribution channels should always be convenient - but this is even more important with consumables. I might travel a longer distance or wait for postal delivery for a one-time purchase of a new device, but I don’t want to do this every time I add minutes to my cell phone or buy music for my iPod.
5. The purchase point for the consumable can be different from the fulfillment point. I can buy cell phone recharge cards or iTunes music cards at my local Wal*Mart, but I may have to go to a Verizon or iTunes web site to fulfill my purchase. Whatever the system, it must be simple and clear.
6. Your customers must be convinced that the necessary consumables will continue to be widely available at a fair price. Few customers would buy a printer from a no-name manufacturer with few ink distribution partners.
7. Electronic consumables can create management issues for your customers. If you don’t have an easy-to-use system to deal with them, your customers will get overwhelmed. When I switch cell phones, how do I move my 500-entry contact list? When my iTunes library grows to 500 songs, how do I manage it? What happens with my computer crashes and I can’t retrieve my iTunes library? You need easy answers to these tough questions.

If you do these things well, you will generate brand loyalty stronger than a simple product alone can generate. And you will be participating in (or at least controlling) a larger revenue stream as well.

It all comes down to thinking about your product and its consumables as a single package. It’s pointless to market only half of this package. Your customer needs the whole package, so they need to understand the whole package.

That’s your job as a good marketer.

This entry was posted on Monday, February 23rd, 2009 at 11:16 am and is filed under Theories of marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.