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Watermelons and brands

I remember reading a story a long time ago about a farmer and his watermelon farm.

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He discovered that everyday 2 kids from the neighbourhood would steal a few watermelons. Try as he may, he was unable to get them to stop.

So one day he had an idea.

He called the kids over and told them he’d pay them 50 cents for every watermelon they brought to him, from his own farm. The kids were thrilled. Not only were they ‘stealing’ the watermelons, they were getting paid too.

After a week, the farmer called them and said ‘you guys are doing so well, I am going to give you 75 cents per watermelon each’.

A week later it went up to a dollar.

The kids were over the moon.

A week later the farmer called them and said ‘boys, I am sorry but my business is not doing too well so I cannot afford to pay you any more. Feel free to do the job for free’.

The kids were disgusted and just stopped taking any more watermelons.

Farmer’s objectives achieved!!

Reason I mention this story here is that ever so often we see brands rush into cutting prices or a running a promotion to meet a short term challenge. While that is achieved, it then sets a new expectation for the consumer. It is incredibly hard, if not impossible to get them back to where they were.

Typical examples are the year end sales of retail stores. While there’s no doubt that the the big stores see an uptake in their sales, as well as ability, to clear old inventory, I am pretty sure that there are numerous stores that see sales only at the promotion time. Consumers are smart. They figure out rather soon that if they wait they can get what they want at a low price. If a brand is in this space, it needs to recognize that the only relationship it has with its customers is one based on price. So if someone else comes along with a lower price, then even the year end sale is not going to help.

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We saw this in the PC industry where companies were rushing to cut prices and be the cheapest. Pretty soon consumers figured that if they waited a little longer they’d get a good deal. I see the same in the telecom industry now.

When times are tough there’s huge pressure on the marketing folks to keep the bottom line flat, if not moving north. When advertising budgets are also cut, the only element in the mix available to play with, tends to be price. Resist that temptation. Think value, than price.

And it’s not limited to prices. Think twice before launching a loyalty program or even a newsletter. Once expectations are set then disappointment follows if you stop.

Quite like the kids who stopped taking the watermelons, customers may think it’s just not worth the effort, though they were doing it for free in the first place!

 

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