B2B International
B2B International

May 29, 2009

In his latest Thursday Night Insight, Matthew Harrison reflects on what lessons we can take from the latest scandal that’s plastered across all the British newspapers.

Despite working in the US, I do like to keep in touch with events in England – my home country – on at least a weekly basis.  Most weekends I will spend an hour or two on the Internet looking through the newspapers and marvelling at the content.  I read a couple of weeks ago how sun-soaked Britain – at a balmy 62 degrees Fahrenheit – would be ‘warmer than Tel Aviv’ later that week.  I was informed a week later that Neanderthal men – rather than being wiped out by disease or developing over time into human beings – were in fact eaten by the French.  And only yesterday I learned that a 73-year-old pensioner who performed a daring break-dance routine on Britain’s Got Talent has been claiming for disability benefit.

Whilst the ludicrous content of these stories provided the reader with plenty of entertainment, their impact pales into insignificance against what is regarded to be the ‘biggest political scandal in decades’, namely the Daily Telegraph’s exposure of British politicians’ expense claims.  The details of these expense claims have caused widespread offence and outrage at a time of economic hardship for the country.  Some of the claims, it has to be said, were jaw-dropping, including an ornamental floating duck house (£2,000), moat-cleaning at a politician’s sumptuous country mansion (another £2,000), 2 pornographic films (£12), multiple toilet seat replacements and a £1,800 limousine ride to a football match.  Other politicians have used public money to furnish their family homes or indulge in tax-free property speculation.

As I laugh and wince at the tales of extravagance and anger currently filling the UK newspapers, it seems to me that marketers can learn a number of things:

The importance of (authentic) story-telling

Successful marketers depend on telling an appealing story that can be defended as authentic.  When a story is exposed as unauthentic, trust in the supplier evaporates, and the costs in terms of damage to reputation and lack of repeat sales usually far outweigh any sales made through ‘mis-selling’.  The double-glazing salesman who sells the promise of a warm, dry home will not stay in business long if his windows let in the wind, rain and next door’s dog.   The same goes for the restaurant that promises Michelin Star standard food that turns out to taste like a Dunlop tennis shoe.  MPs, who ‘sell’ amongst other things financial responsibility and moral leadership when they are elected, kill their hopes of ever ‘selling’ their candidacy to the public again when they are exposed as frauds.

The importance of transparent pricing

At B2B International, we are frequently faced with questions such as the following:

  • When we enter a new market, should we price low in order to gain market share (penetration pricing) before increasing prices over time?  Or should we begin as we mean to go on, with high prices to reflect a high quality offering (premium pricing)?
  • Should we offer an all-inclusive price, providing the customer with simplicity, or should we allow the customer to spend as much or as little as he/she wants, by providing a series of pricing options?
  • How should we price to different segments?

The answers to these questions vary hugely according to the market we are studying, the client we are working for, and a host of other factors.  However, there is one factor that is universal to all of the pricing work that we do: Above all, customers want to know how much they are paying, and what they are paying for.  In other words, they want transparency.

A key reason for the negative public reaction to the politicians is not the total price taxpayers are paying for the politicians; rather it is that they are paying 20% or so more than they were told.  People feel betrayed by this unexpected price supplement, just as they would with a product or service that did not meet their expectations.

In business, also, a breach of trust can be fatal.  I was recently furious when my bank charged me $15 for a new check-book.  Not because $15 is a lot of money, not even because I don’t think my bank should charge me for allowing me to spend my own money.  I was furious because the bank had consistently told me that my account was free and never mentioned that there would be a charge for new check-books.    I felt cheated, and my trust in the bank evaporated to such an extent that I have now opened an account with a different bank.

Problem-solving can turn a negative into a positive

A constant feature of the customer satisfaction studies carried out by B2B International is that satisfaction tends to be driven not by the product per se, but by the extended offer – the services that surround the product.  This often means that a company can gain market share not by increasing product quality (so long as quality meets a certain minimum standard) but rather by responding efficiently and effectively when quality problems do occur.  Whilst a number of MPs have sealed their own fates by blaming their extravagances on the rules they were working to or denying that they have done anything wrong, others have defended or even improved their reputations by apologising profusely and promising to reform the flawed expenses system.

Indeed, just as many of our clients in industries as diverse as telecoms, education and industrial equipment have provoked significant increases in client satisfaction not through product innovation, but rather through improved aftersales and problem resolution, perhaps there can be a happy ending to the long-running expenses story.