…what do you do next?

I’ve recently begun working with a gentleman who has reached the pinnacle of his profession and finds it unfulfilling. He still enjoys his work; it’s the market he’s serving that has lost its appeal. What do you do in situations like this? 

The obvious answer is find a new market, but how do you do that? Often, as a result of your success, you’ll have had opportunities to dabble in other markets. Look at those to see whether or not you enjoyed the experience. If so, ask yourself these questions:

• Which of these experiences did I enjoy the most?
• What made the experience so much fun?
• What was it that attracted these customers to me?
• What value did they see?
• How much are they willing to pay for that value?
• Is it more than I’m currently making?

Let’s see how each of these questions can help you formulate an effective growth strategy.

What do I enjoy most?

Your greatest value will always be in what you enjoy the most. You’ll invest more time and energy in improving your offerings when you’re having fun. Both you and your customers will benefit from aligning the market to your passion and strengths.

What made the experience so much fun?

Having a clear understanding of when and with whom you had the most fun will give you valuable insights into the values and characteristics you want in your ideal customer. Being able to assess prospects in this way assures you and your customers higher levels of success.

What attracted these customers to me?

When you discover what it was that attracted these ideal customers to you, you can craft marketing messages to attract more customers just like them.

What value did they see?  How much are they willing to pay?

Regardless of how much your customers may enjoy doing business with you as a person, they’re not going to remain customers unless you’re meeting their value needs. Knowing what they value allows you to quantify and communicate that value in ways to attract more customers like them. Both are key elements to getting premium prices.

Is it more than I’m currently making?

I can’t tell you how often I’ve seen businesses taking on new markets that offer lower margins than they’re currently getting. Why? They see huge revenue potential  What these business owners/leaders don’t see is the magnitude of infrastructure investment they have to make to serve this high volume, low margin market.

It’s counter-intuitive, but finding a niche and making it a life-time endeavor is unrealistic. Markets evolve, sometimes in ways that we don’t enjoy. At other times, as in my client’s case, you evolve beyond the interests of the market you serve. Either way you need to find a new market. One that’s fun, exciting and pays even better than the one you’re leaving.

If you want to be the Nordstrom of your industry or if you catch yourself thinking “I’m tired of working my tail off without making any money,” call Dale at 314-707-3771.

Pricing for Profit is available at Borders.com, Amazon.com and BarnesandNoble.com.

Outgrown Your Market? is a post from: Pricing For Profit Book | pricing strategy | branding | value based pricing | value pricing | private equity |

…you have to do well.

I recently had the good fortune to speak to a group of entrepreneurs affiliated with the Center for the Advancement of African-American Business. A number of the members had created 501(c)(3) not-for-profit organizations in addition to their for-profit businesses. Why this dual arrangement? They wanted to increase the number and quality of opportunities within their communities.

These laudable goals were hampered, however, by poor pricing models. Many of these business owners, in an attempt to help the disadvantaged in their communities, priced their offerings so low that they are barely making ends meet. This scenario isn’t limited to the African-American community. I’ve seen it played out time and again in a wide array of ethnic and religious groups of all sizes and geographic location.

The old adage that you can’t take care of others unless you’ve taken care of yourself is so true, as these social entrepreneurs were discovering.

It’s counter-intuitive, but your ability to lead others to higher levels of accomplishment requires you to demonstrate the ability to achieve great things yourself. In business, that means creating and growing a profitable business.

The keys to success for social entrepreneurs are:

In the for-profit business:

• Identify your ideal customers – those who value what you offer enough to pay for that value.
• Price in accordance with the value you provide.
• Communicate that value in your marketing messages so that you attract those who are willing to pay your price.
• Quantify and communicate your value in the sales call so that buyers can make an informed decision.
• Indicate in your marketing materials that a percentage of your profit dollars are going to your not-for-profit entity and the mission of that entity.
• Highlight one or two success stories of your not-for-profit organization.

In the not-for-profit organization:

• Don’t assume that because someone is less well off than you (your definition) that they want their lives to change. Many of the people on lower socioeconomic scales are quite happy with their lives.
• Require those seeking assistance from your not-for-profit are willing to contribute time, talent or other resources to help others while gaining the assistance they need. If they’re not willing to commit to some form of exchange, they really don’t value the assistance you’re offering.
• Use your success and the success of those who’ve received assistance to expand the resources of your not-for-profit so that it’s not completely reliant on your for-profit business.

I admire these social entrepreneurs. I hope these tips will help them and the communities they serve enjoy greater success.

If you’d like to become the Nordstrom of your market or you find yourself saying “I’m tired of working my tail off and not making any money”, call Dale at 314-707-3771.

Pricing for Profit is available at Borders.com, Amazon.com and BarnesandNoble.com.

Pricing for Social Entrepreneurs is a post from: Pricing For Profit Book | pricing strategy | branding | value based pricing | value pricing | private equity |

How to price innovation.

On September 1, 2010 Bloomberg BusinessWeek reported Panasonic’s claim that Samsung started a price war for 3-D TVs. The authors, Mariko Yasu and Adam Le, go on to tell us that Samsung began offering the sets in March and garnered 88.3% of the market by the end of August. Since March both Sony and Panasonic have entered the market.

Given these facts what would you have done if you were running Samsung? I’d have done exactly what they’re doing, lowering the price. Yes, I know that sounds strange coming from me, the leading advocate of higher prices. But, as I’ve said before, this is a situation that begs lowering prices. Why?

Samsung was the first to market. They had no competition, which allowed them to charge a premium price. The price premium provides a large ROI on both their innovation and marketing dollars. As soon as their competitors enter the market with a competing product, they lower the price to prevent those competitors from enjoying similar returns.

The financial gains they earn while being the sole provider of 3-D TVs allow them to continue to innovate and be first to market, which enables them to maintain a commanding lead over their competitors for decades. Who wouldn’t embrace a strategy that enables them to accomplish so much so quickly.

It’s counter-intuitive, but lowering prices just as your competitors come out with a competing offering doesn’t cost you money. It solidifies your competitive advantage and, often, your market share. The latter is especially true if you have the next generation of innovation ready to launch.

If I were Samsung and being accused of starting a price war, what would I do? I’d smile all the way to the bank.

If you’d like to become the Nordstrom of your market or you find yourself saying “I’m tired of working my tail off and not making any money”, call Dale at 314-707-3771.

Pricing for Profit is available at Borders.com, Amazon.com and BarnesandNoble.com.

Samsung Gets It Right! is a post from: Pricing For Profit Book | pricing strategy | branding | value based pricing | value pricing | private equity |

…what language are you using?

There are basically two types of language we use – logic and emotion. Our natural tendency is to view logic as the more effective approach to decision making. Why? Because emotions tend to feel chaotic, reactionary and, therefore, limiting in their ability to produce effective results.

These beliefs form our desire to be viewed as logical human beings. Yet studies have shown that logic alone is often barren; it produces little, if any, fruit. I find this in my work with clients. It’s actually quite easy for me to get logical acceptance. But it isn’t until I get emotional acceptance that things really begin to happen.

When my clients feel the emotions associated with what they truly want out of life that their excitement transforms into action and action into results. So what’s my point?

When creating marketing materials use the language of emotion. Paint pictures that allow potential buyers to experience the joy, pride, convenience or quality you provide. Here are two examples of how language can make a difference.

The first came from a meeting with a mergers and acquisitions consultant who showed me his marketing materials which defined his ideal customer by demographics. I asked him “If you were a potential customer and your read this profile, what would make you want to do business with this company? Why would you choose this company over another who serves the same demographic?”

He didn’t have an answer. Why? Because their was no emotional trigger that caused him to say “That’s it!  That’s what I want.”

In a similar vein one of my clients and I were working on her tag line. We were considering two words “phenomenal” and “amazing” in conjunction with the word “result.” She had her heart set on the word, phenomenal. I asked her “What do you feel when you hear that word?” She hesitated, then said I get the sense of bigness. Then I asked what she felt when she heard the word, amazing. She instantly said “A smile came to my face!”

Why the difference in reactions? Phenomenal is a logical term; it denotes quantifiability. Amazing, however, is an emotional term. Each of us knows what it feels like to be amazed. It triggers memories of amazement and the joy we felt when we were amazed. It’s that joy that we want over and over again. We don’t get the same impact with the term, phenomenal.

It’s counter-intuitive, but using the language of logic is counter-productive in generating sales. Yet it’s the language we most often employ. Retrain your mind to use the language of emotion and you’ll generate more sales at higher prices.

If you’d like to become the Nordstrom of your market or you find yourself saying “I’m tired of working my tail off and not making any money”, call Dale at 314-707-3771.

Pricing for Profit is available at Borders.com, Amazon.comand BarnesandNoble.com.

Language That Sells is a post from: Pricing For Profit Book | pricing strategy | branding | value based pricing | value pricing | private equity |

…and someone is being trained.

I often tell my clients that in every human interaction one person is training another how to behave. The question is do you want to be the trainer or the trainee? They, all, want to be the trainer. How do you accomplish that?

By being clear about:

• What your company offers – image, innovation or time savings.
• Who values it enough to pay premium prices to get it.
• What is and is not a reasonable extension of your offerings.

Let’s say that you love throwing amazing parties on an affordable budget. Think Martha Stewart. Your company offers image without the hefty price tag. You accomplish this through a series of how-to classes, videos and books. Your market is do-it-yourselfers who want to throw elegant parties without hiring a caterer or party planner. Their satisfaction comes as much from the the creative aspects of their preparations as the amazed looks they get from their guests.

Now imagine that you’re approached by a very wealthy family that’s willing to pay you a huge sum of money to put together a party for them. Are you going to do it? Let’s face it, there are a lot of compelling reasons to do so:

• The money’s great.
• You have the opportunity to enter a new market.

If you’re successful (and you know you will be), you’ll take your business to a new level.

So what’s the downside? You’re on the threshold of confusing the market. You’re about to start down a path that will leave buyers questioning whether you’re an educator or an event planner. These are two dramatically different businesses serving different markets and requiring different marketing messages. Try to do both and you’ll excel at neither.

The same would be true if you were approached by someone who wanted you to discount your materials because they ‘couldn’t afford them.’ In essence what these potential buyers are saying is that what you’re offering really isn’t that valuable to them. If you lower your price, you’ve just taught them that your offerings don’t really possess the value you claimed and you’ll invite more of these buyers to the table.

It’s counter-intuitive, but allowing buyers to lure you into providing products or services that are outside your normal offerings trains them that you’ll do anything to make a buck. It also creates confusion about what business you’re in. Which, in turn, makes it more difficult to attract the customers who will pay premium prices for your offerings.

Conversely, saying “No” to requests that don’t fit your business strategy trains the market to make a conscious choice – to choose or not choose your offerings with either choice being all right with you. Now you’re sending messages of:

• Success – you don’t need their business to be successful.
• Confidence – you’re very good at what you do.
• Purpose – you have a mission and won’t be distracted from it.
• Care – you want buyers to make informed decisions.

These are powerful messages that attract buyers who value what you have to offer.  Learn to say “No” to tantalizing temptations that don’t fit your business strategy and you will, indeed, be the trainer.

If you’d like to become the Nordstrom of your market or you find yourself saying “I’m tired of working my tail off and not making any money”, call Dale at 314-707-3771.

Pricing for Profit is available at Borders.com, Amazon.com and BarnesandNoble.com.

In Every Sale… is a post from: Pricing For Profit Book | pricing strategy | branding | value based pricing | value pricing | private equity |

SWOT (strengths, weaknesses, opportunities and threats) analysis is used in a variety of ways for a variety of purposes. Everything from strategy development to customer service enhancements to productivity improvement. Given it’s versatility, is it an effective tool for setting prices? Let’s look at each of the components.

Strengths
It would seem that knowing your strengths would be critical to effectively establishing price. After all, how do you know what your competitive advantage is if you don’t do a strengths analysis? Right?

That’s not been my experience. Most companies, when analyzing strengths do so from the perspective of what they believe the customer wants. Indeed, the ‘strengths’ they identify were often created in response to a competitor having made ‘improvements’ in their offerings. Yet neither they, nor their competitors, asked their customers whether they valued the enhancement.

A much more effective way to determine your offerings’ strength is to ascertain which of your customers are paying the highest prices for what you offer. Then asking them what they value most about your offerings. While you’re there, you might want to ask them what you could do to help them serve their customers better. Identifying your customers’ customers needs is a great way to gain a long-term advantage.

Weaknesses
In my experience identifying an offerings’ weaknesses creates only one result – lower prices for you. It’s human nature to place greater emphasis on our shortcomings than on our strengths. The unfortunate result is that we don’t charge for the value we provide.

How do we counteract this natural tendency? First, stop looking at weaknesses as failures. The reality is that perfection is not humanly possible. If you accept that premise, you know that your offerings will always possess some weakness, but so will your competitors‘ offerings. Focus on the value that your customers see, the value you identified in your discussions with them.

Next realize that, unless that weakness is resulting in a growing number of customer complaints or costing you sales, it’s likely that it’s an aspect of your offering that your customers don’t care about. If that’s true, then it doesn’t make sense to invest resources to remove that weakness?

Opportunities
I’m a strong advocate of remaining open to all possibilities. I’m equally strong in my conviction that analyzing opportunities to make sure that they make sense is essential. Over the years I’ve met a lot of people who are easily distracted by any shiny object that appears on the horizon with the unfortunate consequence that they don’t accomplish anywhere near their potential.

Here are a few questions to help you determine whether or not an opportunity makes sense for you and your company.

• Is this something I’m passionate about?
• Can I see myself working tirelessly to make this opportunity a reality?
• Does this opportunity fit our strengths as defined by those who pay us the most for our offerings?

Is this something that our best customers, those who value what we do the most, want?

These simple questions can help you quickly and effectively determine whether what you’re seeing is really an opportunity for you.

Threats
Unfortunately too many business owners/leaders look at their competitors as possible threats. The reality is that if you’re effectively helping your customers serve their customers, you don’t have any competitors. Looking at others in your industry as competitors simply clouds the issues and distracts you from your primary mission – finding new and exciting ways to serve those who value what you have to offer.

Often the greatest threats come, not from within your industry, but businesses outside your industry that are serving the same market you serve. Monitor the spending habits of your market to see where they’re shifting their spending. It’ll give you a sense for the value they perceive and what kind of value you need to provide in order for them to remain loyal customers and for you to maintain or enhance your profit margins.

It’s counter-intuitive, but there are many more pitfalls than advantages to using SWOT analysis in setting prices. Use the alternatives I’ve suggested and you’ll enjoy greater customer loyalty, higher prices, higher margins and a stronger bottom line.

Pricing for Profit is available at Borders.com, Amazon.com and BarnesandNoble.com.

SWOT Pricing is a post from: Pricing For Profit Book | pricing strategy | branding | value based pricing | value pricing | private equity |

…quoting Dr. Phil, ”How’s that workin’ for ya?”

“I can’t raise prices, the only thing that buyers care about is the price.” That’s the refrain I hear from audience after audience of business leaders today.

Is that really true? Do customers only care about price? Yes, it’s true – because we’ve trained them to focus on price. That happened well before the economy tanked. So let’s not blame the economy for a monster of our own creation.

The reality is that the vast majority of buyers are value buyers. The problem is that we’re not educating them about the value we provide or we’re not really providing the value they desire. Either way we’re causing them become more price conscious.

The typical retort I get is “In this economy buyers are deciding only on price.” Why might that be? Could it be that the vast majority of business owners/CEOs have resorted to heavy discounts to salvage market share? If so, what better question to ask than Dr. Phil’s “How’s that workin’ for ya?”

Not well at all. Most business owners/CEOs report declining sales despite heavy discounting. They see their markets shrinking and they’re afraid to charge higher prices for fear of losing even more sales. What these business leaders fail to realize is that buyers become more value conscious, not more price conscious, in a down economy. What that means is that we, as sellers, have to become even better at communicating value than we were in better times. Here’s an example to illustrate my point.

A steel fabricator for the construction industry said that the discounting had become so severe that some jobs were going for single digit profit margins. I asked him the following questions:

“When your customers choose a low-price competitor, are the materials they get within specifications?” “No,” he answered.

“When the materials are out of spec what are the implications?” “Delays, additional overtime costs, the temptation to make it work.”

“Do those delays cost your customers additional money?” “Yes,” he replied.

“What about the customer’s relationship with his buyer. Do these problems have the potential to create friction with his customer?” “Of course,” he replied.

“In an economy like this, how costly would it be to lose future business from that customer?”

You get the point. A few simple questions can help the buyer see the value of a higher upfront price over the costs, or more importantly, loss of future revenues.

It’s counter-intuitive, but when all of your competitors are discounting heavily in failed attempts to gain business you can distinguish yourself by selling value. Buyers will appreciate the fact that your helping them make an informed decision. They’ll value you even more highly when you show them how to do the same with their customers.

Customers Only Care About Price is a post from: Pricing For Profit Book | pricing strategy | branding | value based pricing | value pricing | private equity |

I’m Worth It! is a post from: Pricing For Profit Book | pricing strategy | branding | value based pricing | value pricing | private equity |

Does your pricing enhance or diminish your buyer’s experience?

Has this ever happened to you? You’ve found a stain on your favorite dress; the one that has people using words like “drop-dead gorgeous” when describing how you look. Or, for men, it’s the power suit you wear whenever you’re getting ready to close a big sale. Either way, you’re at risk of losing the image that’s so vital to you.

As you’re bemoaning your loss, you hear an ad that claims that it’s stain remover:

• Removes stains that other stain removers can’t get out
• Is gentle on all fabrics, so much so that it doesn’t shorten the garment’s life
• Is green – it produces no toxic waste

You’ve heard all of this before and always been disappointed to find that the claims were unfounded. Still, if you don’t do something you’re not going to be able to wear your outfit again.

You do a little research and find that the claims made about this new stain remover have been substantiated by independent testing labs with stellar reputations for fair and honest appraisal of the products it tests. Maybe there’s hope yet!

Off to the store you go, thrilled by the possibility of saving your favorite outfit. You find the stain remover on the shelf and, much to your surprise, find that it’s actually cheaper than the competing brands. Quickly, what are you thinking?

Does the Hallelujah chorus come to mind? Or are you wondering whether the product is as good as touted? Is this another example of advertising hype? But wait, the testing labs all supported the product’s claims! Hmm, I wonder if the testing labs are as independent as I thought?

These are the kinds of doubts that we experience every time there is a disconnect between the marketing message we’re hearing and the price we’re seeing. In essence, when your price doesn’t support your marketing claims, you’re asking the buyer to choose which to believe – the marketing message or the price. When faced with this choice, which do you believe?

Typically we, as buyers, believe the price. Why? Because anyone can claim anything. We learn that at an early age and our skepticism grows as we grow older. That’s why we’re skeptical of advertising claims and more trusting of the price we’re seeing.

Let’s continue with our example. Despite the doubts you’re experiencing you decide to buy the stain remover. Why? You don’t have a choice. You know that the other products you’ve tried don’t work. This is your one shot at salvaging the look you treasure.

You’re earlier excitement has turned to doubt and anxiety. Yet you return home with the stain remover and, after several tests on old clothes, you apply it to your favorite outfit. It works! You breathe a sigh of relief and thank the powers above that it worked. Gee, wouldn’t it have been nice if the manufacturer had actually gotten the credit?

Seriously, is this the kind of experience you want your customers to have – one that’s plagued by doubt, fear and anxiety? Is this the kind of experience that’s going to keep them coming back again and again? Will it make them want to sing your praises? Or will their stories of you be littered with pain and anguish?

Here’s another classic example. You walk into an auto dealer’s showroom and find just the right car. As you were making your decision the salesperson touted the classic look, sporty feel and luxurious comfort – not to mention the incredibly great mileage the car gets. You sit down to discuss price. You tender an offer. Of course it’s unacceptable. He takes it to the sales manager and returns with a counter-offer. On and on the process goes until you finally settle on a price.

What’s the one question on your mind as you leave the showroom? “I wonder if I got a good deal?” Why are you wondering that? Because the car didn’t change, but the price did. Again, we have an example of price and sales pitch not meshing.

So what’s the message here? If you want loyal customers, make sure that your price supports your marketing and sales claims. Customer loyalty hinges on a number of factors. Customers must feel good about their purchase. Feeling good means feeling confident about the choice they made. Confidence in their choices comes from knowing that they made an informed decision. Where did that knowledge come from? To a great degree, it stems from the fact that the price matched the marketing claims.

This concept works regardless of the level of quality or service the buyer desires. If you’re looking for disposable plates for a child’s birthday party, a one-time-use product for people who could car less about aesthetics, you may go to one of the dollar stores. The price matches the quality. You know that you’re not getting much quality, but you’re paying an extremely low price as well.

On the flip side of the coin, if you’re looking for a high quality item with image enhancement capabilities, the price better reflect both or you’re likely to pass on the item. Why? If the situation calls for high quality and that quality is going to reflect on you, you don’t want any doubts about the purchase. You’ll go to an alternative that has a more congruent marketing/price message.

Stop confusing the market! Make sure that your pricing supports your marketing claims. You’ll enjoy greater revenues, higher margins and greater customer loyalty.

If  you want to become the Nordstrom of your industry or if you catch yourself thinking “I’m tired of working my tail off and not making more money,” call Dale at 314-707-3771.

Are You Confusing the Market? is a post from: Pricing For Profit Book | pricing strategy | branding | value based pricing | value pricing | private equity |

In one of my earlier blogs I dealt with the folly of discounting during peak selling season. I guess it was inevitable that I was asked “What about the off season? Is it all right to discount then? Here are the thoughts that came to mind when I heard this question:

• Does everyone buy during the peak season?
• If not, then why do you want to discount?
• If you discount during the off season, how will your customers react?
• What messages are you sending to the market?
• Does this strategy really solve the problem you’re facing?

Let’s address each of these questions in order.

Does everyone buy during peak season?
Of course not. People buy when it suits their needs, not because it’s your peak selling season.

If not, then why do you want to discount?
Certainly the off-season buyers are getting as much value as the peak season buyers, so why discount? Ostensibly to generate cash during slow times, right? Let’s see how that plays with customers.

How will your customers react?
You don’t need to trust me on this. What would YOU do if you could suddenly save 10%, 15%, 20% or more during the off season? You’d wait until the off season to make your purchase.

If you want a sense for how well this strategy works take a look at the automotive industry. Whenever they experienced a sales slowdown the car companies offered a rebate, then 0% financing, then a rebate and 0% financing, then employee pricing, on and on and on until they trained us to wait for a deal before buying. If you’re looking for a reason for the huge losses they’ve suffered in recent years, you just found it.

What messages are you sending to the market?
First, you’re telling them that you’re hungry for business. As a buyer, and we’re all buyers, does that inspire confidence in you? Do you want to do business with a company that’s struggling? Are you concerned about service after the sale?

Second, if sellers can discount heavily during the off-season, provide the same quality and service and still make money, they must have been price gouging during peak season. None of us enjoys feeling that we’ve been duped.

Third, if sellers weren’t engaged in price gouging, how can they remain profitable at these discounts? The only answer is that they’re cutting corners – using lower quality materials or eliminating some of the service they normally provide. If that’s the case then are you really saving money by buying in the off season?

Does this strategy really solve the problem you’re facing?
Based on the answers above, no. It doesn’t solve the problem. It’s counter-intuitive, but this strategy is likely to exacerbate your cash flow problem in the long run as you shift sales from one period to another while giving up margin. So what’s the solution?

Learn to manage your cash flow so that you can use the slow periods to discover new ways to serve your clients – ways that will allow you to gain higher prices and margins. Or enter a counter-cyclical line of business – one that offers comparable or better margins than your existing line. Either strategy will help you avoid the problems associated with off-season discounting while positioning you for a bright and profitable future.

To discover how you can break the bonds of industry pricing call Dale at 314-707-3771.

Discounting In Off Season? is a post from: Pricing For Profit Book | pricing strategy | branding | value based pricing | value pricing | private equity |