Cigar prices are rising because of social media marketing and seo? I must be joking, right? No, not at all, my friends. Cigars are just one of many categories of consumer products suffering higher prices and lowered standards due to inefficient use of marketing resources. I am using cigars as an extreme example, but you can see it in many industries beyond cigars, too. While you read this, consider how it may fit into your industry as well. You may wonder how in the logic of Murnahan poor marketing decisions can make prices rise, but I will explain.
Online Cigar Stores Are Inefficient
I received a call from an online cigar store owner yesterday after he came to my website while searching for a cigar-related term. It may seem strange, because I am not in the cigar business. I am a marketing guy who just happens to like cigars. It is crazy that I have more people coming to my website searching for cigars than a lot of the companies who actually sell cigars. Then again, I get a lot of car dealers and surgical supply companies here, too.
I liked this guy who called me, and we had a great chat. We talked about his industry challenges, and how it seems that one of the biggest of them is that all the online cigar stores are battling for the best cigar prices. They fight with the cigar makers for the best prices, and then they fight to gain customers with low prices. After all, that is how you sell stuff, right? If you give them free shipping, a free cigar cutter, and lower your prices to the point all the profit is gone, it should be good for business. It seems that as an industry, online cigar stores have this impression that if they slash prices it will make them more appealing and somehow by the grace of cigar smokers it will help more people find them. They will magically find them and buy cheap cigars that leave little or no profit for the cigar store owner. I see this in a lot of different fields, where people make the mistake of giving away all their profit by trying to compete in a price battle rather than using marketing strategy to win the value war.
Oh, but wait! Don’t businesses need profit? This price battle starts to seem like a bad idea once all the profit is gone and competitors keep dropping prices, doesn’t it? After all, unless you actually have the capability to be the biggest cigar company online, you had better start figuring out how to be the best cigar company online first. Wouldn’t it make more sense to try and keep the customer churn rate low and provide better value? Doesn’t social media help to do that by building brand awareness and brand value? Oh yes, it does, but sometimes values like that can elude an entire industry … that is, until somebody steps up and pulls the rug from under them.
Online Cigar Stores Place Price Over Value
Many cigar stores will have a big inventory of cigars that sat on a shelf in a warehouse for a long time, so they offer them at a huge discount. They run a big special on that brand. They are not so concerned with quality as much as they are concerned with moving the product. This happens in many industries, such as consumer electronics, automobiles, real estate, food, clothing, and many more. Moving more product often comes with an urgency. Get it out the door so you can buy more inventory … whatever it takes. So what happens is while the frantic overstocked cigar store is playing this game of catch-up, somebody is selling the new inventory of cigars that actually yield a profit. They often tend to forget that there is also somebody out there who is making a profit. They may even be selling more of the same thing, but selling it for more money because they have proven value, and because more people know and trust their brand.
The reactive seller is an industry follower and not a leader. They are doing business as a reaction instead of a cause. They have not done what it takes to build brand-loyalty, and to develop stable and sustainable marketing numbers. They keep making the mistakes, but they do not learn from them. What they do learn from the mistakes are the wrong lessons, based on the wrong sets of numbers. They watch what everybody else is doing and try to emulate it instead of innovating. They dig their own grave this way, and often call a guy like me once the only question left is “can I afford this?” They end up with such terrible results of chasing their tail that when they actually realize a problem, they are too late to implement a solution. They are not proactive. When they are equipped to make good decisions that will sell more cigars, they do not see a need, and when they see a need, they are no longer equipped.
Online Cigar Stores Know Cigars, Not Marketing
In every business, there is a need for marketing. Better, smarter, faster, more effective marketing is what makes companies successful. Marketing is what puts their products into consumers’ hands. It is what sells cigars, and everything else … even which emergency room people go to when they are hurt or sick. Without a proper market reach, companies fail. The best market reach for companies is online. It is where people are, and you can reach them a whole lot better here than you can with a 30 second television spot; a newspaper advertisement; a Yellow Pages telephone book clip; and whether you like it or not, better than you can reach them with word of mouth alone.
Marketing on the Internet is not based on luck. You do not just put a website out there and hope for the best. Hoping people will find you and buy from your online cigar store is like hoping it will rain Nub cigars. I hope it will rain Nub cigars, too, but I am not going to my bank to deposit them just yet. The fact is that in order to create more business, it requires marketing talent, marketing creativity, and a lot of work.
I should add that the gentleman who telephoned me yesterday found me because of an article I wrote on February 2, 2009 titled “Nub Cigars by Oliva Cigar Company Fall Short” and it discussed the shortcomings of cigar marketing. It has created a lot of traffic to my blog and a few phone calls as a result of cigar related terms such as the list below and this extended list of the top 200 cigar search terms that people used to find my one little blog post. Note that only two of these searches included the words “cheap”, “cost”, or “price”.
It is a sad but funny fact that the biggest concern the caller had is how much it will cost to get the results he wants. At the same time, he did not really even know what results he wanted, or what potential he has. He just knows that he wants to sell more cigars online, and he wants to achieve his unestablished goals cheaper than anybody else. The better questions are in the cost of not doing what it takes to create more business. How many more cigars can you sell if more people know your cigar store exists and have a reason to buy from you instead of the other guys? How much is it worth to have more people coming to you instead of somebody else when they search for things like these:
- nub cigars
- short cigars
- nub cigars for sale
- best short cigars
- nubs cigars
- nub cigars online
- oliva nub cigars
- buy nub cigars
- cigars nub
- company produces cigars
- difference between nub cigars
- marketing cigars
- oliva cigars nub
- where to buy nub cigars
- who makes nub cigars
- nub cigars retailer
- “short cigars”
- #cigars
- a website with guys and cigars?
- best 4 short cigars”
- cheap nub cigars
- cigars
- cigars “social media consultant”
- … more cigar search terms
In the case of my caller, he wanted me to create a plan for him and get back to him with some figures. I know he may not understand this, but without a target, I don’t even load my gun. I need to know what I am aiming at before I just start shooting out proposals. What I sell is not an item on a shelf, but rather the smoke that comes from my brain … not my cigar.
How Does SEO and Social Media Affect Cigar Prices?
There are actually two ways that cigar prices are affected by social media and SEO. First, let us consider what happens when a company is inefficient. They could sell more cigars if they used their marketing dollars more productively. Being productive means doing things that create more sales, generate more profit, and lower their cost with the cigar manufacturer. The second way that cigar prices go up due to social media and SEO is that a cigar store that markets their brand well and generates a loyal customer base can stop fighting price battles and start winning at providing the value that customers are actually asking for. Most of the time when people say they want “cheap cigars”, what they really want is to get their money’s worth … whatever the cost.
I only plan to do business with one online cigar store, and it will not be “cheap”. I don’t offer cheap marketing, because I know the difference of Marketing Cost vs. Marketing Value. As it is, I may have to say “no” to a good number more of them before a light bulb goes on for one of them and they decide to be the next cigar tycoon.