May 24, 2013 / 5:00 am
Owning a business is a daily battle. Customers reduce everything to the most easily comparable factors – apples to apples – and dollars per unit. Business owners must constantly strive to create differences between their business and Billy’s bakery across the street in order to justify the sales decision.
A successful business strives to steer away from selling on price alone. After all, there is always someone with a lower price – a big box store, a back yard mechanic or a tailgate renovator. The successful sales strategy is to make the product or service so highly desirable, nutritious, refreshing, sexy and so distinctive that the neighbours will be “oohing” and “aahing”.
In the 1970’s when Ford Motor Company was having huge quality problems in its Lincoln models, the company brass instructed the sales people to phone and ask customers about the performance of their new Lincolns. This created a torrent of warranty claims from all dealerships across the country – except for one. At that dealership the sales staff phoned to ask “How do the Neighbours like the new Car?” This time the response was totally upbeat because the sales manager tapped into the reason that people bought the cars in the first place- vanity and one-upmanship.
If your business wants to be successful, then price needs to become the second and poor cousin to why the customer wants to buy. Value is what most customers want. Value is not buying the cheapest item that will not last the summer; nor is it necessarily buying the model with all the bells and whistles.
In your store or sales presentation, value should be offered first and price last. You alone can prevent the customer from taking the easy route and making a comparison on price only.
How will you describe where the value is? What makes your product especially good and a benefit to all who buy it? Is it healthful? Will it save time and money? Will it reduce pain and anxiety? Will wearing that suit make you look like a million dollars? Will all the women want you?
If you are selling something where everyone knows the price, like crude copper, say; what is the value proposition in dealing with your company? Is it the payment terms? Free delivery? Just in Time delivery? Have you got the sexiest sales staff?
However, if you are unconvinced and, if you truly believe that your business can only compete on price alone, consider this. There is a product made from two commodities - water and flour - both of which are sold worldwide on price alone. In turn, this mixture of flour and water should be the perfect commodity product. Right?
Well, this dried paste of flour and water has over one thousand different market niches and price points. And the manufacturers have done this not by changing the use of this food product or even its flavour. The Italians have altered only one variable for this product - the shape of the food!!?? It’s brilliant! It’s pasta.
May 10, 2013 / 5:00 am
Are you STUBBORNLY OPERATING A LOSING BUSINESS?
Head in the SAND???
Some entrepreneurs are very stubborn and like ostriches they stick their heads in the sand when things go wrong.
A good illustration is a couple who owned a manufacturing business during the good years in 2003-7. When the economy turned down in 2008 their business slowed. Many competitors left town but the couple continued to believe that the upturn must be just around the corner.
They did not realize that this business climate is the new normal. The last great worldwide depression took a decade and a World War to turn around.
As a result, they did not cut operating costs and the profitability of their business gradually eroded into a deeper gorge of debt until it became a losing operation. Rent got behind, the suppliers were not paid and equipment leases fell into arrears.
When the bailiffs arrived at the door, the husband finally asked for advice from Floodlight. By the time we arrived, the business was living hand to mouth, the marriage was coming apart and the family home was on the point of being lost.
Six months beforehand the warning signs were urgently flashing red!!!
- The owner was spending time not selling but instead collecting money and cutting last minute cheques to suppliers. Sales were still trending downward.
- Phone calls from potential customers went unanswered because the call might have been a creditor.
- The worst days of the month were the 15th and 30th because payroll was due.
- Machinery was broken, vehicles were well past their service due dates and there was no money to pay for the work.
- The company desperately wanted a big order to get them out of trouble but if the order appeared suddenly on the desk, the company could afford not to buy materials.
- The owner’s credit cards were approaching the maximum and the company bumped the limit on the operating line every week.
- The bank was asking for frequent financial updates which took time away from selling.
- Liabilities climbed each month and assets eroded away, but no one knew because the financials were months behind.
In our experience at Floodlight we run into many entrepreneurs who feel they are alone. A manufacturer certainly cannot ask for help from another manufacturer who would know the answers. And asking for help from a family member or close friend takes a lot of inner strength and admission of failure.
Business help books are about the big boys’ ( GE and DuPont) best practices. A quick review on the internet will call up hundreds if not thousands articles that help… a bit- but with no integrated approach.
The purpose of this article is to encourage business owners to take action.
- If you see yourself in our example, call in the cavalry sooner than later and ask for help.
- It is less painful and cheaper to get help early on at the first sign of a speed bump instead of the hiding your head in huge chasm like the Grand Canyon.
- But please do something – even an ostrich has defied evolution and found a way to survive and so can you.
You just need to ask for help from a qualified source like a Business Coach or specialized Business consultant!!!
Apr 26, 2013 / 5:00 am
“How much?” is every customer’s question. A good answer from a knowledgeable salesperson will result in a sale. A bad answer typically means the customer will re-pocket his wallet and walk to the competition.
What is a bad answer? Blurting out the dollars and cents, of course, with no embellishment, no attempt to offer value and no attempt frame this as a good deal. Good and well trained sales people find a way to create a vivid picture of value in their client’s brain before talking about price.
Step One: Train the staff to deal with sticker shock. Remember that a shocked response to your price is sometimes merely a buyer’s strategy to get a discount.
Step Two: Frame your price. Sometimes sticker shock reflects ignorance of the market conditions. If your competitor is within a few pennies of your pricing, your customer will appreciate knowing that you are competitive.
Step Three: Get value on the table before you talk about price. Build a detailed picture of the value that is offered by your product or service. Once the value side of the ledger is built up in the mind of the customer then the price on the other side of the ledger seems less important. Keeping the price to the end means keeping profit margins.
Step Four: Paint a vivid picture. Many years ago, a 300 pound Maytag sales trainer quietly positioned a tiny stepladder to the side of the heavy duty washing machine he was illustrating. He explained how special the steel in springs was and bored us with the technical details until all our eyes were rolling back into our heads. This huge man casually stepped up and into the machine through its open lid. “This is heavy duty”, he announced, while standing inside the washing machine with outspread arms and a gigantic smile on his face. That image has never left my memory.
Step Five: Get your customer to open first; telling you what price they thought they might pay. Most retailers and contractors will have a range of prices for similar goods that coincide with features and extras. No point in wasting time trying to sell a $30,000 boat to a man with a dinghy budget! Get him to the dingy aisle as soon as possible.
Step Six: Sandwich your price between the benefits you have already listed. This heavy duty washing machine with super thick springs will save you water and time by handling those really big loads. And at $799, it is a real bargain because of the 2 year warranty on parts and labour.
Step Seven: Try to create a pyramid of cost penalties for not buying. This is a one day sale. This is the last of our inventory until July. The next models from the manufacturer have a shorter warranty and are not available in this colour.
My final word on staff price training is to ingrain your staff with the idea that price is an indicator of value by itself. Low price signals a CHEAP product. Do you want to sell Cheap Products? Or would you rather be known for high quality products and service? After all, would a diamond ring be THE symbol of undying love and commitment if it was priced at $4.95?
Apr 12, 2013 / 5:00 am
The most rapid industrialization the planet has ever seen is reaching maturity. For a couple of decades now North American business people have been terrorized by cheap Chinese made goods that have clobbered profits and margins. These goods were remarkably cheaper than ones made here and customers found them irresistible.
But together with the low price came shoddy workmanship. The goods did not last or they presented a hazard of some note to us (think of the ground melamine added to milk products) or to the workers and environment in China. Not to worry; this is a familiar pattern. Japan, Germany, the US and Britain went through the same sequence as they industrialized.
All of that is about to end as labour costs have soared in China. Little by little, Chinese companies are investing in capital equipment (machinery) to produce goods faster with less labour and to a standard acceptable in its Western markets.
Interestingly, European manufacturers have already responded to this by finding producers closer to home where the wages are low (but not as low as Chinese); where the goods meet excellent engineering standards and are only days away instead of weeks. Porsche, Audi and BMW produce auto parts in Bosnia for a fraction of the price that they would cost in Germany and are paying 50% more in wages than the Bosnian average.
The past twenty years have seen a revolution in how we look at prices for goods and services, driven by Chinese goods and Indian services. There will always be a place for cheap and cheerful. But quality has poked in its long nose (think of how Toyota and Honda capsized the US market by offering cars that did not fall apart after a couple of years).
Then another disrupter walked boldly onto the stage – instant gratification. Immediate gratification has been with us for many years, but what has been missing was the ability to deliver instantly. Since the 1970’s we have paid attention to our supply lines, cultivating long term relationships with our suppliers that gave us Just in Time delivery. We have come to depend upon firm delivery dates of quality goods.
But recently a new and disruptive technology has emerged – 3D printers. With a 3D printer, anyone can print a race car part in hours. Don’t laugh it is already happening!
3D printers will first disrupt small volume producers. Then they will disrupt almost any business that is focused on an old model of doing business – masses of identical goods produced cheaply and delivered in six weeks. Our customers are looking for customization, delivery now of a quality product in a colour of their choosing. Will you win? Are you still fighting yesterday's battles?
Read more Build your Business articles
- Charge more, sell more Mar 29
- Dynamic driving: dynamic pricing Mar 15
- The 3 keys to get your price Feb 15
- What is a business turnaround? Feb 1
- Borrow money & build your business Jan 18
- Biting off more than you can chew Jan 4
- Business tips from 'A Christmas Carol' Dec 21
- It's lonely at the top Dec 7
- Growth and succession planning Nov 23
- Head in the sand? Nov 8
- Mission impossible Oct 26
- What is your big business decision? Oct 11
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