Re: Questions about list sponsorships

From: Cliff Kurtzman <cliff_at_tenagra.com>
Date: Wed 26 Apr 2000 15:37:03 -0500

CLIFF KURTZMAN WROTE:
> We run a tennis list with 36,000 subscribers, and we
> charge 4 cents per subscriber for a 35 line ad inserted
> in our newsletter, or 10 cents per subscriber for a
> sponsored dedicated mailing that can be up to 20K in
> length. This would seem to be a real deal, but we have
> few takers for either option as there is little
> activity yet in online advertising by the tennis
> industry.

TO WHICH BRAD JENSEN REPLIED:
> "If they don't buy, the price is too high." You would
> be better off to lower the price to the point where
> people start buying. Then when they get results, you
> can start raising price.
>
> You are saying that the client expectations are
> incorrect. You might as well say that your own
> expectations are incorrect.


I've been thinking about this comment a lot. It seems
very reasonable. It is consistent with what I learned
20 years ago back when I took Econ101 at UCLA. But in
the end, I must disagree based on my experience, at
least in the markets I serve.

My experience is that if people in my target markets
are not buying, then lowering (or raising) the price
makes little difference, within certain bounds. I
can't say that the experiences I describe below apply
to you or anyone else, but I've found this generally
true for the markets I address.

With the tennis list, I am fairly certain that I could
cut the price in half and not see any appreciable
change in demand. To the people looking for a freebie,
it would still be too high. I'd have to bring the price
to around 1/10th the rate I charge now for there to be
an appreciable change in demand, and then I'd have to
drown my subscribers in ads to realize a reasonable
level of revenue. Further, the kind of ads I'd receive
to run at 1/10th my current rate would possibly be ones
that might detract from the kind of relationship I'm
trying to build with my audience.

To the people that have a budget and want to reach my
audience, my initial rate is reasonable, and I'd just
be shooting myself in the foot by cutting my price.
They have few better and cheaper options to reach my
audience. In fact, I recently doubled the price of the
insert ad to 4 cents a subscriber because I felt I
would still get the same activity at double the price,
and advertisers with budget do not seem to be put off
by the price at all. The ones that are looking for
freebies still think we are too expensive, while
industry advertisers trying to reach the online tennis
market have no problem dishing out $1500 to reach
36,000 people through a quality site and brand that has
established a serious dialog with the target audience
over the past six years -- once they make the decision
to spend money on online advertising at all.

Finally, I don't see offering low entry prices an
effective strategy for me. The initial communication
with my audience is the communication that is the most
valuable to my potential advertisers. After that, the
value decreases with each exposure. So I'm generally
not inclined to offer a low price initial exposure. I
could add a very crude analogy here, but I think just
mentioning that one applies gives the picture of what
we'd be doing to ourselves if we took this tact.

I see the same inelastic behavior with Tenagra's
Internet marketing, public relations, and web
development services. Several years ago, we found that
(nearly always) the same potential client that thought
we were too expensive at $120 an hour also thought we
were too expensive at $80 an hour. At one extreme, we
receive a lot of inquiries from many that have no real
budget, and who will scream no matter what price they
are quoted. But for most of those that actually become
clients, a decision to hire our agency is made based on
the client's belief in our ability to make them
successful online, rather than rate differences between
ourselves and others. Once we learned that lesson, we
stopped pricing our services based on local (Houston)
standard rates, and started pricing services closer to
national rates of top agencies. The net effect is that
we've been able to operate mostly the black (virtually
unheard of in this industry). If we had not done that,
we would not be in business today and all our clients
would have suffered in the end. And, to some extent,
the higher rates work to our benefit competitively
because they are consistent with the positioning of our
brand.

As Rob Frankel says "Branding is not about getting your
prospect to choose you over your competition; it's
about getting your prospect to see you as the only
solution." I have found that once I am successful at
achieving this for ourselves (or our clients), there is
great insensitivity as to price, even though demand
levels may vary due to other factors. Cutting my rates
down to bargain basement levels to fill inventory would
only detract from building a quality brand, and it also
might cost us more time and effort to complete the
transaction with the advertiser than the ads are worth.

   --Cliff

Clifford R. Kurtzman, Ph.D.
President and CEO
The Tenagra Corporation Online Adv Disc List
AdBanter.com
http://www.tenagra.com/ http://www.o-a.com http://www.AdBanter.com
281/480-6300




Received on Wed Apr 26 2000 - 15:37:03 CDT