Setting the right prices for your audience and revenue goals is important when taking a product to market. The following questions will help you clarify your pricing model.

To develop your pricing model, consider:

• What is the value you’re offering to your target customers?
• Are there existing price expectations?
• How do you price your product relative to your competitors?
• Is there a way to create a competitive advantage with your pricing model?

Channel economics is important to consider. For example, most airlines, like JetBlue, charge a $25 booking fee when you book a flight over the phone while charging no fees for online booking. There is little variable cost for web transactions, but call center representatives are expensive.

Your goal might be to develop a revenue model based on anticipated market penetration, average transaction size, number of transactions, and so on.

Consider:

• What are your primary goals for market share penetration?
• What are your estimated margins over the next one-, two-, and three-year horizon, factoring in startup and ongoing expenses?
• What are the human resources requirements for the first year of execution?

To help mitigate risk, it is advisable to identify the economic, competitive, and internal risks associated with executing this strategy. Outline the biggest risks that may affect your ability to reach your goals and develop strategies to address how to overcome them.

Choosing the correct channels can help your organization expand its offerings reach and revenue. You might include your retail store, Internet, a customer service call center, face-to-face salesperson, a trade show, a seminar, or a direct partner. Having a strong foundation in your channels can give your marketing an edge.

Amazon.com’s primary channel is its website. Walmart’s primary channel is its retail chain. BWM’s primary channel is its dealerships. AT&T’s channels include its authorized dealers (partners), independent retail stores, and website.

Your goal isn’t just to identify your channels but to ensure that each channel is as seamlessly integrated with each other as possible.

Customers should have a consistent brand experience no matter what channel or touch point through which they interact with you.

The key questions in your channel analysis are:

• Where do you reach your target customers?
• Where do your target customers buy?
• Where will you promote your products?
• What is the right distribution model?
• How do you develop the right distribution channels?
• Does the channel fit your offering?
• How does your offering fit with your target markets and channels?
• How would customers desire to interact with you?
• What level of interaction do your target customers require?
• Can you create a competitive advantage?

You want to make sure your offering fits your channel. For example, it is difficult to sell complex services or certain high-priced products over the web.

When our clients want to build best-in-class plans they bring together their smartest folks and the relevant information. These questions are perfect to discuss offsite with your leadership team and relevant data. Try setting aside time for your leadership team to discuss and prioritize your channel strategies for 2022 and beyond.

Understanding your product’s key features and benefits is the first step in defining your product’s unique value proposition. You must understand exactly how your product connects with your customers: the context of their use, the solutions it solves, and the benefits they derive.

Here are some key questions to bring clarity to your offering:

• What needs or tensions do your target customers need solved?
• Which features in your offering best address these needs?
• How will customers use it?
• What are important attributes or benefits of your offering?
• How is your offering differentiated in the marketplace?

To help determine the product’s unique value proposition, put yourself in your target customer’s perspective when you think about presenting your company’s offering. Consider:

• What do you want your customers to think?
• What do you want them to feel?
• What do you want them to believe?
• What do you want them to remember?

The better insights you have about your customers, the more effective you can be at defining your offering. This means you need to get to know your customers, to obsess about your customers.

Talk to them, listen to them, and get to know them. Defining your offering will also help you create more effective marketing messages.

I was having a conversation with my good friend and colleague Marcus Thornton, Chief Marketing Officer of Scheels, about the challenges Netflix is facing. So it’s fair to say Netflix is not having the best time ever right now. Instead of achieving 2 million more subscribers, they lost 200,000. The stock price is the lowest it’s been in five years. Employee morale is reportedly through the floor. The world is watching to see if the streaming giant has merely stumbled or if this is the beginning of a fall.

We begin with Netflix occupying a reasonably strong position – both Loved and Trusted by the public. Think about the whole Netflix and Chill phenomenon. Here we have a case of a brand being explicitly called out as integral to having a good time with your favorite person. There’s a serious amount of love going on.

But something happened. The relationship that was so strong has started to sour. Why? Let’s look at some choices Netflix has made and how they have contributed to the change in the way people feel about the brand.

Love Doesn’t Mean Giving Someone Everything They Want: You Have to Do More Than That.

Have you noticed how Netflix went from having everything you could ever want to watch to having nothing you’re excited about seeing? This is, we believe, directly attributable to the strength of the recommendation algorithms Netflix uses.

At first glance, the logic is sound. Someone likes a particular program and serves them up more content of that type. But – as you’ve undoubtedly experienced – it doesn’t take very long for all of your recommendations to look alike. The algorithms don’t stray too far from the tried and true. It just serves up more of what you’ve already enjoyed.

What’s missing from this experience? Delight. Discovery. The experience of finding something fresh and unexpected that you didn’t know you would like something people love. Netflix’s vast library undoubtedly contains many hidden gems people would happily pay to keep watching – if they ever saw it in the first place. If only there were a way to introduce serendipity into the algorithm, Netflix would be well on the way to getting some of that love back.

And Let’s Be Real: It’s Always About the Money, Honey

Netflix raised its prices steadily over the course of the pandemic. While price hikes are never welcome, doing so when their customer base was already feeling trapped by COVID restrictions was an interesting choice. There was much new financial stress introduced into people’s lives during the pandemic. Adding to this burden at this time was a choice Netflix made that negatively impacted the amount of love their customers feel toward the brand.

In much the same vein, the reports that Netflix is now open to advertising have created delight among advertising agencies – and absolutely nobody else. Customers on the fence about the value of their Netflix membership are not going to be persuaded to stay by adding commercials to the viewing experience.

The third leg of this tripod of terrible is the crackdown on password sharing. Does password sharing cost Netflix lots of money? Absolutely. Do they have the right to limit the delivery of their service to people who pay for it? No doubt. Is the ideal time to address this issue during a period where membership numbers are dropping fast and your employees have just lost tons of money as the value of their options plummeted? Perhaps not. Certainly not if Netflix asks the question, “Will this move make our customers love us  more?”

The Route to Screen Needs to Change – Considering a Post-Binge Netflix

Live by the sword, die by the sword is wisdom that applies in many situations, but in this case, let’s look at it in terms of content creation. Netflix has produced some amazing original content, using a model that involves hiring well-known stars and providing generous budgets. These shows have dropped a series at a time, keeping with the love people have for binge-watching.

This all bears re-examining, given the pandemic and the much more competitive environment the streaming industry has become. Netflix’s studio arm just isn’t as strong as Disney or Paramount, which have decades of experience in fundamentals-based storytelling. Star power can not be purchased in sufficient quantities to guarantee great content. That being said, Netflix should get some credit for bringing in stars from around the world to keep things going. Case in point, Squid Games, the survival drama that introduced Americans to top Korean actors. 

Additionally, a lot of Netflix’s original content is highly derivative of content that has already performed well for Netflix or another studio. It will be difficult at a time when the most comfortable response to tension is to pursue whatever appears to be the safest course, but in terms of content creation, it may be time to give the muse even more freedom. If there was ever a time Netflix needed to be more creative, it’s now. 

Forcing creativity is hard. Thinking strategically about the content release is much easier. Just because a show can be binged doesn’t mean it should be binged. Subscriber retention becomes easier when viewers need to wait to see what happens next. Love requires growth. While the binge-centric model of dropping entire seasons at once may be what’s known and familiar, it could be time for Netflix to explore what might work better. 

What Did I Miss?

Obviously, this is a big story with many different angles to consider. What do you think? What has Netflix done that’s reduced how much their customers love and trust them? What moves would you recommend to get Netflix back on a more positive trajectory? I’m very eager to hear your thoughts.

Management guru Peter Drucker reminds us, “The purpose of business is to create a customer.”

The driving force behind this step is developing customer intelligence. You want to become masterful at generating actionable consumer insights through web surveys, focus groups, one-on-one in-depth interviews, in-store interactions, and more.

Here’s a list of questions that require thoughtful deliberation:

• Who is your business especially for? Who are your Brand Lovers? That is, who will be your most profitable customers?
• What human needs are you trying to satisfy in your target customers?
• What internal tensions are you attempting to resolve?
• What problems are you trying to solve?
• What is the ideal experience you’re trying to create for your target customers?
• What are the emotions you want your Brand Lovers to experience when they interact with you?

Your goal is to understand who your customers are, how they behave, and what they experience. The better consumer insights you have, the better chances you have for executing an effective branding strategy.

Every company wants to be in a position where its customers love and trust them. That’s where profits are high and loyalty is strong – critical considerations for the long-term health of the business.

But sometimes, companies make choices that diminish the relationship they have with their customers. Why would any brand willingly take steps that make their customers love them less?

Trouble Down on the Farm

We could ask John Deere – or, to be fair, any of the other major manufacturers of commercial farming equipment. These highly trusted brands damaged relationships with farmers – notoriously loyal to their tractor brand – by barring owners from repairing their equipment. 

This decision imposed high costs on farmers, especially those operating at a considerable distance from an authorized repair service. The revenue realized from repairs represented a minuscule percentage, and when weighed against the damage to the brand’s goodwill amongst its small pool of target customers, hardly worth it.

So why was this decision made? 

To Feel Less Fear, We Sacrifice Love

Businesses are led by rational people who strive to make intelligent decisions. Farming equipment manufacturers have legitimate concerns about their proprietary technology being stolen and replicated by competitors. 

They also know their customers have relatively few options. There are only so many top-tier brands in this space. 

To address the fears of industrial espionage, the decision was made that there’d be less love in the customer-brand relationship. People stay married even when they don’t like each other very much because each party somehow gets their needs met. 

Until, Of Course, We Wind Up In Court

Dysfunctional marriages end when one party takes the issue to court. While there’s no direct equivalent here, farming equipment manufacturers have found their fear-based response – some would call this their Shadow – checked in the courts. 

The Right to Repair movement has steadily gained traction, culminating in a presidential executive order in 2021. The changes allowing farmers to fix their own equipment haven’t made it far enough into the field yet to track the impact on how the brand is trusted and loved – but we will know before too many harvests.

What do you think will happen? I am interested in hearing your thoughts.