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Small Business Revitalization Blog

Small Business Coaching: Revive Your Profits, Revitalise Your Perspectives, Reinvigorate Your People

The Mysteries of (Not) Delivering Value

WARNING:  I'm having a rant today... that's what happens when I put on my 'customer' cap instead of my coaching cap... luckily dear readers, it doesn't happen too often!  There's some valuable lessons in here for us all :)

In conversation with a real estate agent he mentioned they charge $990 + GST to upload a property for sale to 14 websites and put a sign out the front.  This was their cheapest advertising package for selling a home.  

I have an extensive marketing background and a pretty good working knowledge of marketing on the internet.  When I expressed my astonishment at the lack of value, all the fellow could say in response was “I’m the principal, this is our cheapest advertising package”.  It seems his job title was supposed to make this lack of value acceptable?    

He then proceeded to stutter and stammer that writing the copy takes him 2 – 3 hours… I know amazing copywriters who could get it sorted in less than an hour for a grand investment of around $80.  So what exactly are his clients paying for?  Someone to sell their home, or an incredibly expensive copywriter??

Big hint to business owners – you should never be doing work that you could outsource for way less than what you could be earning. You need to spend your time doing what you are best at!  If this guy spent those 2 – 3 hours getting new listings or selling properties his business would be infinitely more profitable.  

 Then there is the question of the 14 websites – at roughly 10 minutes each for uploading pictures and copy that’s just over 2 hours for an admin person – say $40/hr.  Of course, this also assumes it is of value to use those 14 sites.  Most real estate traffic goes through just a couple of main sites – those 14 sites are really awesome for his search engine optimization though!  And how wonderful that his clients pay for him to be “#1 on” as he proudly informed me.  Sounds very impressive… unless you understand what it really means!

Unfortunately, your brand being #1 won’t sell my house.  Most people search by suburb not agent.  Do you not understand your business or do you think your customers are stupid?  Either way that’s not a great value proposition for building a strong business in an industry that is facing tough times.

And lastly there’s the sign for about $150… In total, even my best estimates for marketing costs don’t get much past $350 if the agent is operating efficiently!  So at $990+ that is some profit margin.  Given the extortionate price of housing in our fair country, real estate agents also receive a very generous commission on sales as well.  I know a lot of business owners who would love margins like that!

Now at this point some of you are going ‘what’s wrong with that?’  Isn’t the point of business to make money?  Yes!  Absolutely!  But not in a way that offers no value to your customers or pretty much assumes they are stupid.  The playing field is levelling AND becoming more transparent.  Your business practices need to evolve!

When both you and the customer are satisfied with the deal you will build relationships that will create referrals, repeat business and ultimately business growth – you’ll be irresistible and desirable and you won’t need to charge for something that should be included in the service!  Imagine if that agent had said “we have a basic marketing package that is included free if we sell your house.”  That would have been much more attractive to a prospective seller than what he actually said: “If the client doesn’t pay for marketing up front the price for this service goes up to $1290 + GST.” WOW!  Knock me out… not even banks are getting interest rates like that!  I’m surprised he’s not receiving daily takeover bids!

The reality is if you are not delivering genuine value which is valued by your customers, you’re going to find you are facing more and more resistance.  The era of greed is good is over.  People are saving and considering their purchases much more carefully than ever before.

By the end of the conversation the real estate agent was half-heartedly suggesting he could negotiate on the marketing costs.  Unfortunately, from a client perspective, the preceding conversation had already cost him the listing. He failed to see that selling is no longer about money – it is all about value.  I am unclear as to whether this agent just doesn't get it or his BS sales pitch works on enough people to get by.  What you need to understand is that if you come across customers who see through your BS sales pitch, you look stupid and you are damaging the reputation of your business.

Most of us are no longer interested in working with people who either don’t know what they are doing or think its fine to overcharge.  We, as customers, have choice.  More and more business owners are creating true value for their clients.  Those businesses are building a solid platform for growth.  And therein lie the lessons for us all.

The New Energies of Business are here.  It is just not good business to overcharge your customers.  It’s time to start thinking about where you are not providing value in your business?  Where you are not efficient and need to find more effective approaches?  Where you are not valuing your customers? And where is what you are offering not even relevant to the value they are looking for?  

What can you change? Where there is a lack of value there is always a way to take advantage of that in the market. Look at where customers are pushing back about price and develop value propositions that create new paradigms and standards in your industry.  When you take a leadership position in creating and providing value, your competition becomes irrelevant!  (And if you don’t know what your customers are saying about your pricing, it’s time to get amongst it and talk to them!)

If you are going to have a successful business as we move forward into the new energies, now is the time to put your new platforms in place. 

Would you like to join us at our regular New Energies of Business events?  On August 29 at Peregian Beach we'll be discussing how to create value, how the energy of contribution plays out in business and how loving your work creates profits... if you can't be there you can order the videos.  Our presenters and facilitators are experienced business people who are already living the new energies and know what it takes to transform business.  How does it get better than that? 

What are you seeing with your business and the value it offers?  What value have you experienced in other businesses lately?  Comment below!!

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Common Small Business Pricing Mistakes

New business owners often get stuck when it comes to setting pricing. Pricing is determined by factors such as positioning, competition, market demand and, surprisingly, how you value yourself and the services and products that you offer!

Have you ever found yourself pricing a product or service in your business based on what you would pay in your current financial circumstances?  Did you stop to think about whether your personal perspectives are in any way a good match for your ideal customer?

Pricing is a choice.  But rarely do business owners exercise that choice with awareness of the potentials created by different price points.  Let’s consider a brief case study…

Erin is a natural health practitioner who specializes in a couple of healing modalities.  She is making $60 an hour and sees clients for 20 hours a week on average.  This equates to $1200 a week – not quite enough to put her into GST territory, but getting close.  By the time you take out taxes and costs of running the business (eg marketing, hiring space, training etc), Erin brings home closer to $30 a session - $600 a week is not a lot to live on!

So, let’s have a look at the common small business traps Erin has fallen into: She is doing what she loves and is great at, but is not reaping the financial rewards – she needs to charge what she is worth.
  • She is swapping time for hours – there is no leverage in her business – if she doesn’t work, nor does the business
  • She has not differentiated her service sufficiently so that clients will pay a premium.
  • She doesn’t believe people will pay more than she is charging – but she hasn’t tested a higher pricepoint.
  • She doesn’t like asking for money for helping people - her beliefs are in conflict with her purse!
Have you ever fallen into any of these traps?  What choices did you make to improve your financial position?  Share your story below – just click the Comment link.

Need inspiration for making more money in your business?  Book your place for the April 19 2010 Playshop:  ‘Show Me The Money’ – you’ll discover more about money and your business than you thought possible!!

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Want to achieve more? Get your objectives clear!

marketing objectives, targets, goals; how to set a marketing budget
I come from a family packed full of entrepreneurs and small business owners. Just lately I've been to quite a few family functions and have been loving talking to people about their various businesses. 

What's interesting is how often people expect a simple perfect answer when they haven't actually told me what they really want to achieve!  To be successful in any area of your business decision-making, you need to start with your objectives and goals!
For example, I am commonly asked about how to set a marketing budget: "Do you set the marketing budget as a percentage of sales or are there better options?"  My usual response is "It depends, what are you trying to achieve?" 

There are some broad rules of thumb around percentage of turnover for most industries, but if you really want to set a marketing budget that is appropriate for your business you need to ask yourself the following:
  • What are the specific business objectives that my marketing budget is supporting?
  • What marketing strategies do I need to use to achieve these business objectives effectively?
  • How much will effective implementation of these marketing strategies cost?
  • Are there other hidden costs involved?  (e.g. lots of time or resources, or compromises on gross profit if pricing strategies are a part of the solution?)
  • Can my business afford this marketing strategy?  If not, what are my alternatives?
When you ask questions like these, you are setting your marketing budget strategically, rather than operationally.  You are seeing this budget as an investment which will bring a return to your business... just make sure you measure the results of your efforts so that you know exactly which 20% of your marketing budget is creating the 80% of the results!!!

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Pricing strategies: 5 alternatives to discounting…

Want to stop discounting?  Start implementing these strategies...

    1. Differentiate your products by promoting benefits rather than features.
    2. Add value eg put together a package deal which gives you a higher average dollar sale, but offers value to your customers.
    3. Decrease the value given if you need to decrease the price (ie don’t discount your services, offer the client less) – otherwise you’ll become known for discounting and your clients will continue to ask, even when the recession is over!
    4. Using guarantees or other approaches which take the risk out of the purchase for the buyer.
    5. Offer a free gift with purchase (low cost to you, high value to your customer). 
What is your biggest challenge around pricing as a small business owner? Share it in the comments section below. If you need to share more than just a comment, call the Revitalization Experts!

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How to maximize your pricing strategies in a downturn…

Recession pricing can be quite challenging when all about you are losing their head and discounting like crazy.  Want to avoid discounting?  Think on this…

Pricing is the most common element to be adjusted in the marketing mix during recessions. Why? Because on the surface the price is what potential customers are responding to. However, research into consumer behavior trends has shown that changing other areas of the marketing mix (ie product, promotion or placement/distribution) can be much more effective!

Your pricing strategy impacts your long-term positioning and image. Becoming known as a discounter during the recession does not position you for a strong come-back when the economy starts to recover. Here’s three things to try instead of discounting your prices:

1. Understand your client! If a client asks for a discount, delve deep into what they are really trying to achieve. Instead of offering a flat discount, you could add additional value for the same price, decrease the product/service offer to more closely meet their needs (ie align your offer with their preferred price). Alternatively use a differentiation strategy: if you are the expert and they really need you – stand firm on your pricing. As Warren Buffett remarked:  "Price is what you pay, value is what you get." Know the difference and communicate it to your clients once you know what they really want from you!!

2. Innovate… If you only offer a ‘first class’ price, introduce a business class and economy class version of your service or product. Do whatever it takes to get prospects on side and the money in your pocket instead of your competitors. Sometimes, instead of upselling, you may need to ‘downsell’ to get the sale. Remember, all value is relative! Create value at multiple levels – redesign your offer to suit the market’s current needs. (I’ve just done this – very soon you’ll be able to purchase business coaching in one-off 15 minute packages – much more affordable but still with the same high quality!!)

3. Avoid profit wars. Getting into a bidding war with a competitor is a sure-fire way to lose your business if it happens regularly. Put a limit on how many times you will re-quote. Put a value on whether business with little or no margin is of any benefit to you in reality (mostly it’s not). Be willing to say no! This is tough to do in tough times, but unprofitable business deals will drive you out of business faster than a lack of business will – never make a loss upfront unless you have a strong backend or strategy for achieving repeat sales at a profit!

What is your biggest challenge around pricing? Share it in the comments section below. If you need to discuss more than just a comment, call the Revitalization Experts for help!

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Do your pricing strategies maximize your profits?

Maybe you’ve never considered how your pricing strategies can maximize your profits.  This is the first of a series of blog posts on using pricing strategically to maximize your marketing results. 

So, we’ll start with some basics – here’s seven pricing options you can consider when initially setting your prices.

 1. Competitive pricing – where you study competitors pricing and align your pricing around your competitors price, depending on how you position your products and services.

2. Cost plus mark-up – Instead of considering competitive pricing, review your own cost structures – if you are more efficient than a competitor you may be able to price lower and offer products of similar quality, or you may be able to enjoy higher profit margins! Be careful to ensure that your pricing is in line with customer expectations or you may not find yourself in a competitive position.

3. Loss Leader – a common marketing strategy where a desirable item is sold at or below cost to attract new / more customers. Combine with an up-selling or cross-selling strategy to achieve profits short term.

4. Overstock pricing – Excess inventory can be sold at a strong discount to avoid storing or discarding it. Useful when you need to minimize losses. Inventory management is a higher priority than profit if you are using this strategy. Overstocks can also be used as a loss leader.

5. Bundling and quantity discounts - Reward customers for bulk purchases by offering quantity discounts or bundling complementary products. Bundle overstocks with popular items to avoid overstock sales. Bundle a new product with established products to build awareness. This is a great value-add strategy.

6. Membership, loyalty programs or trade discounting – Knowing what an A+ customer looks like for your business can help you segment and attract business from profitable customer segments by offering special prices. You can use selective discounting, percentage off savings or other rewards to keep these clients loyal.

7. Versioning – This strategy is very useful for services and technical products. The same basic product or service is sold in a number of versions. This is where you see free trials or basic versions available very cheaply. Consider adding upgrades, additional services or risk management type products (eg warranties, insurance etc) to your base product.

There are many more pricing options to consider, however these are good basics to consider when deciding how to price your products and services. Next post we’ll consider how to maximize pricing during a recession.

What is your biggest challenge around pricing as a small business owner? Share it in the comments section below. If you need to share more than just a comment, call the Revitalization Experts!

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