A thorn in your side…

…or an opportunity for higher prices?

Break the bonds of industry pricing!

Get compensated well for the value you provide.

“Why can’t they just…?”  For the umpteenth time a customer has:

• Waited to the last minute to order.
• Failed to provide specifications on time.
• Returned your product.
• Refused to pay for services rendered.

Regardless of what they’re doing, your customers are driving you nuts and costing you a lot of money.  You can turn those annoying behaviors into gold.  Just remember this little tidbit of wisdom – we live in a reciprocal world.

In other words if I treat you well, you’ll treat me well. If I frustrate you, you’ll find a way to balance the scales. With that in mind, if we list the ways that our customers annoy us, then ask ourselves “What am I doing to contribute to this problem?”  We always do.  We’ll discover some simple, inexpensive, easy-to-implement solutions that will eliminate the frustration for both parties.  When you do that your customers enjoy a richer, more satisfying experience and you get to charge a premium.

Please don’t tell me that you can’t raise prices because your competitors won’t raise theirs.  Most businesses within an industry operate according to industry practices.  If the source of frustration is one of your industry’s practices, and it often is, your competitors’ customers are experiencing the same frustrations your customers were before you made the change.

Now you not only have the opportunity to raise prices, you have a competitive advantage to offer the market. Repeat this process regularly and you’ll maintain competitive advantage for years to come.

It’s counter-intuitive, but one of the ways to get premium prices is to spend time with your most annoying customers.  If that doesn’t sound like very pleasant advice, let’s look at the alternatives.  You can continue to live with the pain and suffering of low prices or you can fire the customer and not only lose those revenues and profits, but the price premiums you could have earned as well.

Having said that, if a customer still isn’t happy after you’ve made changes that have delighted the majority of your customers, by all means refer them to your competitors.  Some people you just can’t please.

Command the price you want – you’re worth it!

For more information on how you can command higher prices for your products and services, please post your questions or comments below, or send me an email at dale@furtwengler.com or call me at 314-707-3771.

ATTRACT opportunities instead of pursuing.  Visit The Invaluable Leader at www.furtwengler.com/theinvaluableleader/.

You can get my book, Pricing for Profit, by clicking on the book cover or by ordering online from Borders.com, BarnesandNoble.com and Amazon.com.

Enjoy!

Is raising prices in a down economy inappropriate?

One reader thinks so.

Break the bonds of industry pricing!

Get compensated well for the value you provide.

I had the good fortune to be interviewed for an extensive article for a local business publication.  During the interview the reporter said “One of my readers thinks that it’s inappropriate of you to recommend that businesses raise prices in a down economy.”

What do you think?  Am I being inappropriate?  Am I adding to the financial problems the unemployed are experiencing?  Or am I trying to speed the recovery?

Here’s my take on the current economic conditions. We’ve been in a discount economy for roughly three decades.  Consumers have been trained to expect low prices or free for most of their wants and needs.  This discount economy has wrung most of the profits out of the system for large companies and small.  Without profits companies don’t have the financial wherewithal to hire more employees.  The longer it takes for these companies to generate profits and cash reserves, the longer the unemployment will continue.

It’s counter-intuitive, but higher prices help companies ascertain who really values their offerings and who doesn’t.  It helps them restructure their businesses to meet the desires of this narrower customer base and get fair compensation for providing the value their customers desire.  The profits they generate can then be used to invest in new, exciting ways to serve their customers – ways that the customers value – or in geographic expansion.

Either activity, new offerings or geographic expansion, will require additional employees.  The majority of the investment in either activity will be in people.  The more quickly companies can work their way through this process:

• Getting higher prices and profits for their offerings.
• Restructuring their businesses to serve their value-minded buyers.
• Building cash reserves from profits.
• Funding new product/service launches/geographic expansion.

The more quickly we’ll see employment return.

Command the price you want – you’re worth it!

For more information on how you can command higher prices for your products and services, please post your questions or comments below, or send me an email at dale@furtwengler.com or call me at 314-707-3771.

ATTRACT opportunities instead of pursuing.  Visit The Invaluable Leader at www.furtwengler.com/theinvaluableleader/.

You can get my book, Pricing for Profit, by clicking on the book cover or by ordering online from Borders.com, BarnesandNoble.com and Amazon.com.

Enjoy!

Break the bonds of industry pricing!

Get compensated well for the value you provide.

Then raise your prices…

…to reflect your value.

One of the key reasons why buyers resist paying for the value we provide is that they don’t have an effective way to determine value.  As we’ve discussed previously, when your product/service claims aren’t supported by a price that reflects that value the buyer gets confused. Confusion often translates into “No Sale.”

Recently I was asked, in an interview, to respond to the following comment:

“In my industry, raising prices is like shooting yourself in the foot. A lot of people are willing to do things for free and most of the companies that would hire me care more about quantity rather than quality. So, they take the free option until it burns out and then get a new one.”

Before I share my response, I encourage you to take a moment to consider what your answer would be.  After all, you’ve been reading these blogs for awhile now and you may even have read my book, Pricing for Profit. How would you help this individual?

Here’s how I responded.  In every human interaction one person is training another how to behave.  In this particular instance the seller (indeed, the industry) has trained potential buyers that their offerings have no value.  How?  By “continuously doing things for free.”

In addition, this individual has trained buyers that her offering isn’t any better than anyone else’s.  By failing to stand firm on her pricing she in essence has told the market that, despite her claims of a superior offering, her claims are not really true.

Indeed, I can’t help but wonder whether this service provider or her contemporaries really have demonstrable results to which they can point to substantiate their value claims.  If they do, then it should be relatively easy to demonstrate value.  If not, then they need to reevaluate what they’re doing so that the can build a results resume for the future.

Finally, if this person is truly in a business that people don’t value, shouldn’t she consider a different line of business?  If I were still trying to sell movies in VHS format today, at some point I’d have to accept the reality that there just isn’t a market any longer and move onto to something that buyers want.

It’s counter-intuitive, but raising prices, or at least holding firm on your prices, will increase demand from people who truly value what you offer.  You may not have as many customers as your competitors, but you’ll enjoy greater profits without working nearly as hard as they are.

Next week I’ll respond to a comment that it’s inappropriate of me to recommend higher prices when so many people are out of work.  In the meantime, command the price you want – you’re worth it.

For more information on how you can command higher prices for your products and services, please post your questions or comments below, or send me an email at dale@furtwengler.com or call me at 314-707-3771.

ATTRACT opportunities instead of pursuing.  Visit The Invaluable Leader at www.furtwengler.com/theinvaluableleader/.

You can get my book, Pricing for Profit, by clicking on the book cover or by ordering online from Borders.com, BarnesandNoble.com and Amazon.com.  Enjoy!

Break the bonds of industry pricing!

Get compensated well for the value you provide.

In every human interaction one person is training another how to behave.

How are you training your customers?

To get a sense for what your customers are experiencing I’m going to ask you to switch hats and view the following from the buyer’s perspective.  You’ve reached an agreement with the seller on what you want.  The only thing left is determining the price.

The seller states his price.  You counter with a lower offer.  He comes down a little. You press further.  He drops his price some more.  What’s your inclination at this point?  To try for another concession?  Of course it is.  As the buyer you don’t know where the bottom is and you won’t discover it without trying repeatedly for greater concessions.

Scenario number two – again you’ve reached agreement with the seller on what you want.  The seller states his price.  You counter with a lower offer.  He tells you the price is firm, but that there are other, less expensive options available to you depending on what you’re willing to forego in the option you’ve chosen.  What are you going to do now?  Are you going to push for the price concession again?  You might; just to see whether or not the seller is serious.

Let’s assume that you offer a price somewhere between what he’s asking and your earlier counter offer.  Again, the seller states that the price is firm, but you have options.  What’s going through your mind now?

In all likelihood your mind shifts gears and you begin evaluating the various options and price points available to see which best fits your needs.

In the first scenario, the seller trained you that it’s okay to ask for price concessions – that he wasn’t really serious about the price he was asking.  He trained you to continue to seek price concessions.

The second scenario was completely different.  The seller trained you to make a choice between what you said you wanted and what you’re willing to pay.  He trained you to make an informed decision.

It’s counter-intuitive, but with every transaction you’re training your customers how to behave.  If you don’t like the way your customers are treating you, retrain them. Let them know that your new your pricing policy is designed to help them make an informed decision and enhance their satisfaction.  Tell them that you don’t want to waste their time with needless negotiations and a nagging doubt about whether or not they got a fair deal.  Tell them that you’ve set your prices based on the value they get and be prepared to substantiate that value, then hold firmly to your price.  Your customers will have a more enjoyable buying experience and you’ll enjoy higher prices and profit margins.

Next week we’ll discuss how to use higher prices to increase demand.

For more information on how you can command higher prices for your products and services, please post your questions or comments below, send Dale an email @ dale@furtwengler.com or call him at 314-707-3771.

ATTRACT opportunities instead of pursuing.  Visit The Invaluable Leader at www.furtwengler.com/theinvaluableleader/.

Break the bonds of industry pricing!

Get compensated well for the value you provide.

The financial press focuses heavily on market share?

Is that the an appropriate measure?

When we see headlines stating that a company lost market share, we assume it’s a bad thing. Why? Because that’s what the financial press has led us to believe. They speak of market share as if all customers are created equal.

You need only look at the range of profit margins you experience from your customers to know that isn’t true. So how should you view market share?

It’s counter-intuitive, but the market you want to measure is the one in which your customers are paying the highest premiums.  Unless you have 70% share of this market or more, you’ve still got plenty of opportunity left.

Many companies make the mistake of trying to increase “market share”, their customer base, by attracting the next tier of customer – those that don’t value their offerings as highly as the first tier.  Consequently these companies have to lower prices to attract these customers and they do.

Unfortunately existing customers (those paying the premium) want the same discounts. Now these companies are giving up revenues and profit margins from their ideal market in hopes that the new revenues will more than offset the discount losses.  Even if their able to replace the revenues, they’re making larger investments and working much harder to make less money per transaction.  Is there an alternative?

Again, it’s counter-intuitive but if you can develop an offering in which that second-tier customer is interested, even if it’s at a lower price point, you can develop a new market to serve with price points and profit margins equal to those of your first-tier customers.  Indeed, for this new market, they will become first-tier customers.  Now you can measure your share of this market separately from your original market.

Don’t be fooled by the financial press’s cavalier attitude toward market share.  Identify your markets carefully, measure your market share, then look for ways to increase your market share through creative new ways to serve those customers – ways that don’t involve lower prices on existing offerings.

In next week’s post we’ll explore what you’re doing and how it’s affecting your customers’ behavior in a post entitled Training Your Customers.

For more information on how you can command higher prices for your products and services, please post your questions or comments below, send Dale an email @ dale@furtwengler.com or call him at 314-707-3771.

ATTRACT opportunities instead of pursuing.  Visit The Invaluable Leader at www.furtwengler.com/theinvaluableleader/.

Break the bonds of industry pricing!

Get compensated well for the value you provide.

Many of us fear saying “No” to a potential customer…

…yet it can be one of the most effective tools for building rapport.

When you’re approached by someone interested in your offerings how do you react?  Do you go into your sales mode?  Do you get a queasy feeling in your gut and a nagging voice in your head saying “Don’t blow it!”  Or do you begin listening to see whether this prospect is a good fit for your business?

Unfortunately too many of us experience the fear I just described and we begin selling to people who aren’t a good fit for what we’re offering.  How can you avoid this mistake?

1. Remember that your greatest profit margins come from your ideal customers.
2. Whenever you stray from that path it adds dramatically to your infrastructure costs.
3. You risk your reputation by selling something to someone whose needs would better be served elsewhere.

These are compelling reasons for saying “No” to prospects who don’t fit your ideal-customer profile.  How can you say “No” and enhance your reputation in the marketplace?  Simply say to the prospect “We’re not the right solution for you.  You’re looking for … and we provide ….  Here’s the name of someone who will meet your needs.”

It’s counter-intuitive, but you will create a lasting memory with this prospect as someone of incredible integrity who genuinely cares about him/her.  This memory will create additional referrals down the road as the individual to whom you said “No” relates the story of your ethical business practices.

The key lies in the language I provided above – “We’re not the right solution for you.”  This language removes all the judgment that could so easily creep into the conversation.  By saying that “we’re not right for you,” you acknowledge the validity of the buyer’s choice without denigrating it.  It’s you who is not the good fit, not them.  The final step of referring them to a better fit seals their perception of you as an incredibly ethical and caring business person.

Buyers want this kind of integrity and concern for their welfare and they’ll pay premium prices to get it.  It’s another way to assure that you’re getting compensated well for the value you provide.

Next week we’ll discuss The Market Share Myth.  In the meantime, command the price you want – you’re worth it.

For more information on how you can command higher prices for your products and services, please post your questions or comments below, send Dale an email at dale@furtwengler.com or call him at 314-707-3771.

ATTRACT opportunities instead of pursuing them using counter-intuitive thinking.  Visit www.furtwengler.com/theinvaluableleader/.

What impact do sales quotas have on pricing?

Is that the result you really want?

You know that value buyers are willing to pay higher prices to get value.

The question is “How much more?”

Break the bonds of industry pricing!

Get compensated well for the value you provide.

If you were able to get 5% more than you’re currently getting for your offering, what would that do for your bottom line?  How about 10%?  25%?

I’m sure some of you are feeling your throat constrict and your chest tighten as you contemplate charging 25% more for your offerings.  The reality is that these are modest percentages in light of the premiums buyers pay for what they truly want.  How much will they pay?

Regardless of what benefits your offering possesses – quality, dependability, convenience, image, innovation, knowledgeable salespeople, etc., you’re basically selling one of three things, image, innovation or time- savings.  What kind of premium does each command?  Let’s take a look.

If image is your value proposition, how much is a buyer willing to pay for that image?  Let’s compare the Chevy Aveo sedan which retails about $12,500 and the Mercedes smallest S-class sedan which rings the register at $90,000+.  The Mercedes is more than 7 times as much as the Aveo.  That’s on a big ticket item; a sweater at Nordstrom’s will cost you about 12 times as much as at WalMart.

How much will innovation buyers pay?  Both VCRs and DVDs give us a clear picture of the innovation pricing cycle.  Early adopters paid about $1,200 for the early players (not recorders, just players).  Dependability buyers got into the market when a player/recorder was about $400, a third of what the early adopters paid for less capability.  The late adopters paid between $85 and $100 dollars, a twelfth or less than the early adopters.

Time-savings premiums depend on whether you’re selling retail or business to business.  Retail buyers use time savings for recreation and it’s not unusual for them to spend 3 times or more of their hourly compensation on recreation.

Business customers, at least the more savvy business people, look at time savings as a way to increase revenues without adding resources.  The gross profit from these additional sales falls directly to the bottom line because the most significant overhead cost, labor, is being held constant.  This additional revenue generating capability has 2 to 3 times more value than the cost savings associated with not having to add staff.

Those modest increases suggested in the first paragraph don’t seem so outlandish now, do they?

It’s counter-intuitive, but you also limit your investment when you’re able to command these higher premiums.  Using the Nordstrom/WalMart sweater example above, WalMart needs 12 times as many customers to generate the same sales volume as Nordstrom.  That means that WalMart needs more facilities, more distribution centers, larger staffs and greater inventories than Nordstrom.  The same is true any time you sell value over low price.

Don’t hesitate to charge a premium price for value – the buying public is willing to pay.

Next week we’ll discuss the impact of sales quotas on pricing.  In the meantime, command the price you want – you’re worth it.

For more information on how you can command higher prices for your products and services, please post your questions or comments below, send Dale an email @ dale@furtwengler.com or call him at 314-707-3771.

ATTRACT opportunities instead of pursuing them, visit The Invaluable Leader at www.furtwengler.com/theinvaluableleader/.

Can you use pricing to create name awareness?

You can, but it may not be how you want to be known.

Break the bonds of industry pricing!

Get compensated well for the value you provide.

One of the more common reasons I hear for using a low-price strategy is that “we don’t have the name awareness the big boys have.”  Typically this reasoning is used by organizations in their first three years of existence or by established companies entering a new market.  Is it sound reasoning?

Here’s the approach I used with a homebuilder who was using low prices to create name awareness.  First, let me give you a little background information.  This homebuilder was adamant, and rightfully so, that his quality was better than the big boys.

I asked him whether he advertised in the real estate section of the newspaper.  He did.  Then I asked him to envision that he and two well-known, well-respected builders had subdivisions in the same area with the same style homes of comparable size and amenities.  Finally, I asked him to envision that his and his two competitors’ ads appeared side by side and his price was 10% lower than his competitors (it was).

My question to him was “If you were the buyer and saw these ads, what would you think about your homes?”  He said, “I think we were taking short cuts to keep costs down – that our quality was inferior.”  Indeed, the message this homebuilder was sending was exactly the opposite of what he believed.

It’s counter-intuitive, but name awareness should be created by your marketing efforts and supported by your pricing.  Whether you’re touting high quality, quick delivery, innovative ideas, image or productivity make sure that your price supports your marketing claims.

Incongruity between your marketing claims and your price leaves buyers in a quandary.  Do they believe your marketing claims or the price?  Which would you believe?  Given our natural skepticism toward what others tell us, especially if they’re trying to sell us something, we’re going to believe the price.

This homebuilder was struggling to generate sales and profits because he was sending conflicting messages to the market.  Are you?  If not, congratulations!  You’re ahead of many businesses out there.  If you are, now you have a more effective approach to employ.

Tune in next week when I give you a sense for the pricing premiums available to you.  In the meantime, command the price you want – you’re worth it.

For more information on how you can command higher prices for your products and services, please post your questions or comments below, send Dale an email @ dale@furtwengler.com or call him at 314-707-3771.

To see how counter-intuitive thinking can be applied to other business issues, visit Dale’s blog, The Invaluable Leader at www.furtwengler.com/theinvaluableleader/.

Break the bonds of industry pricing!
Get compensated well for the value you provide.

The Grinch and Me

‘Twas the night before Christmas
The store had just closed
I tallied the receipts
Adding to my woes

The Grinch had stolen Christmas
Before my eyes, without even a hint
He’d stolen my profits
Leaving my pockets with lint

In an economy blue
Battling high unemployment and costly fuel
The Grinch was heartless and cruel
He made me lower prices to get sales – even a few

I lowered prices to all
Yet sales and profits continued to fall
So did my holiday cheer
The Grinch had stolen Christmas again this year

Weary and disheartened I drifted into sleep
A welcome respite, a bit of relief
A way to deal with the season’s defeat
Alas, it was a mistaken belief

In my dream the Grinch lowered prices
He lowered them early
He lowered them often
Yet buyers’ resolve did not soften

I saw the Grinch smile
He thought with guile
“I know this won’t work!”
He cut prices and continued to smirk

A voice cried out
“Low prices won’t get people to buy!
Of this there can be no doubt.”
Wasting money makes buyers cry or at least pout

People buy what they want
Price doesn’t matter if they really care
The Grinch knew this, yet continued to taunt
As he pressed me to lower my fare

Wait, what do I see?
The picture becomes clearer
As the Grinch comes nearer
The Grinch is me

It’s counter-intuitive, but “I have to lower my prices to remain competitive” is as much an excuse as “The dog ate my homework.”

In every human interaction one person is training the other how to behave. When you lower your prices to remain competitive you train your competitors to take the lead. You, in essence, tell them that you’ll follow their lead regardless of what they do.

Similarly, you train your customers to wait for a deal. That’s one of the reasons why Chrysler and GM are in such trouble. They trained us to wait for a rebate. Then they added 0% financing. Finally, they gave us employee pricing. Now, unless we get a rebate plus 0% financing plus employee pricing, we feel that we’re being gouged.

Let’s be honest with ourselves. Between relinquishing industry leadership to competitors and training customers to wait for a deal, we’ve sentenced ourselves to a life of hard work with little compensation.

If that’s the life you really want, go for it. If not, if you’re truly tired of trading dollars, hold your prices and focus your attention on marketing. Look for ways to distinguish yourself that are fun and exciting for you and your customers.

I’m sure that some of you are thinking “If only I had the budget for that kind of marketing.” The reality is that, given your current strategy, you’ll never have the budget. Start small! Fun and exciting doesn’t have to be costly. If you don’t have the skill to pull off a fun party, contact a party planner and have them create something that fits a modest budget.

If you’re still skeptical, do the math. Many of you are offering 20% to 50% discounts. How much additional profit would you gain if you stopped offering those discounts. It’s simple math 20% or 50% times your current revenues. Now ask that party planner how much it would cost to create something fun and exciting. It’s been my experience that the additional profits gained by eliminating discounts returns at least ten times the party cost.

Stop being the Grinch that steals your holiday season. Hold your prices. Then find new and exciting ways to attract your ideal customers.

Next week I’m going to focus on the impact price has on name awareness.  In the meantime, command the price you want – you’re worth it.

For more information on how you can command higher prices for your products and services, please post your questions or comments below, send Dale an email @ dale@furtwengler.com or call him at 314-707-3771.

To see how counter-intuitive thinking can be applied to other business issues, visit Dale’s blog, The Invaluable Leader at www.furtwengler.com/theinvaluableleader/.