The Dangers of Cost+ Pricing

In the early years of my consulting work I picked up a client that had been losing money for two consecutive years and was experiencing severe cash flow problems. They were using cost plus pricing. What went wrong?

Defining Costs

They didn’t define their production costs well. They had included some of their production costs in the operating expense category, consequently when they added the traditional industry profit margin to their production costs their prices were too low to cover their costs.

Lest you think this an aberration, I’ve worked with hundreds of companies over the years and most don’t know what their costs are. Why? There are a variety of reasons, some:

Don’t have a clear understanding of how to categorize costs.
Allocate overhead costs to production using subjective, irrelevant bases for the allocation.
Use standard costs which typically include ‘cushions’ to protect the production group from being criticized for cost overruns.

Indeed, one VP of production had included a 60% cushion in his standard costs and no one in finance knew it.

Costing Myth

As if those weren’t enough reasons, Eliyahu Goldratt in his famous book, The Goal, shows that traditional cost accounting drives up operating costs rather than reducing them. His book, It’s Not Luck, demonstrated that the same is true for service organizations.

Finally, and most importantly, production costs have nothing to do with the value to the consumer. That’s true whether you’re selling B2B or B2C. Allow me to illustrate this point.

Cost/Value Not Related

Let’s say that I’m a milk producer. I buy milk from farmers, process it and distribute it through grocery stores. Let’s assume that it costs me $1.12 to produce a gallon of milk. Now, let’s look at the various markets available to me as a milk producer.

Young families will typically place great value on milk because it’s essential for the child’s development. The elderly also have a health issue, osteoporosis, that adds value to milk for them.

Many adults, whose children are grown and aren’t yet concerned about osteoporosis, value milk only if they enjoy it’s taste. For the others in this group, milk has little, if any, value.

For people who are lactose intolerant, milk has no value. Indeed, it’s a health risk for them.
As you can see, the fact that it costs me $1.12 to produce a gallon of milk has no relationship to the value customers place on it.

Hopefully this simple example along with the challenges in defining costs outlined above will be enough to dissuade you from cost plus pricing.

Want to move from cost+ pricing to value pricing? You’ll find the tools you need in Dale’s book, Pricing for Profit. Available online atAmazon.com and BarnesandNoble.com

The Wrong Hero

“There are only three things that any of us sells - image, innovation and time-savings.”

Marketing messages must be great stories... about the true hero.

I wish I could remember the source of the following elegant language. The person certainly deserves credit for this incredible bit of wisdom. After reading a marketing piece, he said ‘that’s a great story, but it’s the wrong hero’.

The marketing piece had discussed the company, not its customers. That’s why it was about “the wrong hero.”

If you want your marketing messages to translate into sales at premium prices, tell stories in which customers and prospects can experience the joy of your offerings - even if they haven’t tried them yet.

One of the fascinating aspects of the human mind is that we can experience emotions as vividly today as when we first experienced them. Tie your offerings to an experience that everyone has had that elicits joy.

Remember, there are only three things that any of us sells - image, innovation and time-savings. So when you’re selling image, help them experience the joy of having others admire and emulate them.

With innovation, make the story about the fun and excitement of playing with the latest, greatest toys or our childhood curiosity when everything was fascinating.

For time-savings, the story highlights the joy of spending more time with family and friends, traveling or just kicking back in a hammock on a beautiful spring day. If you’re selling business to business and the time savings translates into greater revenue-generating capabilities, make the story about the joy of growing a successful business - one that’s the envy of their competitors.

It’s counter-intuitive, but the less said about your company and what you do, the greater the likelihood that your marketing messages will bring buyers through the doors. More buyers, mores sales, at your price. Now that’s an experience that’ll bring a smile to your face.

Not sure whether you’re marketing messages are targeting the right hero? Take this free, confidential marketing self-assessment..

What Could be Better Than Gossip?

Initially about 50% of teams discover they aren’t secure enough or capable of
 ceasing to gossip. The reasons: they 
lack trust, skills, confidence, or compassionate understanding.

“Some say our national pastime is baseball. Not me. It's gossip.”
- Erma Bombeck

“The only gossip I'm interested in is things from the Weekly World News - 'Woman's bra bursts, 11 injured,’ that kind of thing.”
- Johnny Depp

Ah… Gossip’s not called “juicy” for nothing!

Most people agree gossip’s not healthy or helpful and that it’s everywhere! It’s in businesses, schools, homes, even churches! There’s good reason for this. And, in order to build trust and teamwork, gossip needs to go. The question is: how and what would allow people to find something more satisfying instead? I’m Judy Ryan, a Human Systems expert and I work with organizations, helping them understand the good reasons people gossip so they can incorporate new strategies to meet needs met by gossip, by substituting more satisfying practices instead.

Our Current Dilemma

When I work within clients sites, initially about 50% of teams discover they aren’t secure enough or capable of
ceasing to gossip. The reasons: they
lack trust, skills, confidence, shame nor a compassionate understanding of why there’s such a pull to gossip.

The Good Reasons We Gossip

That’s when the discussion begins. We talk about gossip, especially the good reasons we engage in it. Some include:

1) To feel empowered. Stress in relationships often triggers feelings of overwhelm and the belief we’re not empowered. To combat this, gossip gives a false sense of power; pseudo-power. Gossip then provides the illusion we’re taking meaningful action when, in fact, we’re avoiding it.

2) To feel lovable. We often have faulty interpretations of negative behavior from others, become triggered by self-doubt and insecurity, and conclude we’re not lovable. Gossip pro- vides temporary relief as we inflate our own virtues and exaggerate the faults of others.

3) To feel contributing. We gossip to compensate for times we’re not giving, doing or saying what would otherwise fulfill us and be aligned with our values, either because we feel too afraid, unclear, unable and unwilling to take action.

4) To feel connected. Especially in the US, many people report they experience inadequate physical and emotional connection. Gossip, unfortunately, is a widely sanctioned way to intensely connect as opposed to more vulnerable expressions of appreciation, encouragement and love often disdained as too mushy or touchy-feely.

5) “Don’t we just need to vent?” Venting can be helpful but not the way it’s normally done. Gossip as venting is just another way to create the feeling of meaningful action. And indiscriminate, unfocused venting hurts: the one giving it, the one receiving it and the one gossiped about.

When venting is handled with an intention to take constructive action and greater personal responsibility, everyone wins, everyone feels empowered and lovable, and you have the satisfaction that comes from creating an intensely positive, powerful connection, which is a fulfilling alternative. So if you find yourself in the habit of gossiping, stop and remember these five good reasons people gossip. If you want, you can then learn how to gracefully shift from gossip into something more constructive.

So in order to shift out of gossip, it’s important to really know, “What could be better than gossip?!” Please read my article entitled, "Imagine a Workplace with NO Gossip" to learn steps for how-to create a workplace with satisfying communications and behaviors that build strong and healthy relationships. If you’d like to experience first-hand helpful conversations and learn to integrate new practices that can drastically reduce and eliminate gossip in your workplace, become an e4e member and call me now to learn more and bring a program on this topic to your workplace! 314.878.9100

Entrepreneurs Should Speak!

One important component an entrepreneur’s marketing plan should include is giving great presentations!

Here’s why:

Delivering superb presentations has the potential to catapult a speaker to Expert status. We perceive really good speakers as experts. Perception is reality, and we like to work with Experts. (This makes sense, doesn’t it?)

Furthermore, the research shows:

Speaking Opportunities are Business Opportunities!”

Business owners who take and make those Speaking Opportunities grow their businesses.

Unfortunately, many entrepreneurs don’t Speak. They don’t for several reasons:

  1. They have a Fear of Public Speaking.
  2. They don’t do a very good job of presenting, and they know it.

Let’s look at each of these reasons for not using speaking as a marketing tool and what can be done to change them.

Speaking Opportunities are Business Opportunities!

 

The Fear of Public Speaking

There are reasons for having a Fear of Public Speaking.

  1. If you don’t know what you’re talking about you should fear speaking!
    • Don’t have a passing knowledge of your subject; be an Expert!
    • Research and study your topic. You’ll never know everything, but your mastery should be better than most people have on the subject.
    • There is a “confidence in your competence” that lowers anxiety.
  2. If you don’t know the structure of a presentation, or how to professionally deliver it.
    • An award-winning, delicious cake has a very specific recipe. If accurately followed, the “baker” will have rave reviews bestowed upon them.
    • If they have little knowledge of baking and merely throw ingredients together and hope for the best, the results will likely be disappointing. Disappointing to the people who expected a delicious dessert, and disappointing to the “baker” who didn’t take time to learn and follow a proven recipe.
    • A professional presentation, like a great cake, has a specific structure. When constructed and delivered like a pro, the results can be spectacular. The audience learns something, and the presenter’s message is received as intended.
    • Structure and Delivery can be learned. The results are worth the commitment, and time needed.
  3. If you haven’t practiced!
    • Do you think any of the athletes who participated in the Olympics just “showed up” at their event? Of course not!
    • Will any of the players who put on helmet, pads, and a uniform in the fall to play professional football merely “show up” at game time? No!
    • How about the next showing of Les Misérables? Do actors, the orchestra, and stage hands notice what time the musical starts and “show up” a few minutes earlier. Absolutely not!
    • All the above require days and days of practice and rehearsal. Why would someone think they could “show up” for an important presentation and “wing it?”
    • Steve Jobs is my presentation hero. He was a master at this and set the standard for delivering exceptional presentations. As good as he was, he still practiced ad nauseam before taking the stage. If he had a new product or service to introduce at an Apple Event, he would practice for weeks! (Weeks is not a misprint.)
  4. You’re very Uncomfortable speaking with audiences.
    • Of course it’s uncomfortable! Think about this:
    • Most our talking is one-on-one.
    • Much of our communication is on the phone, and we don’t see the person we’re talking with.
    • Increasingly our ”conversation” is an email or text message. We don’t “speak” to or see people we are communicating with.
    • It’s understandable that getting in front of ten, twenty, or fifty sets of eyeballs we might feel uncomfortable because we are out of our comfort zone.
    • The uncomfortableness will lessen each time we speak in front of an audience.

You’re a Lousy Presenter

OK, I believe you.

There is something you can do about it!

Developing and delivering great presentations is a skill. Skills are learned.

We weren’t born knowing how to drive a car, use a computer, or any of the many other skills we use daily.

There are plenty of great books on the subject. There are courses that can be taken and clubs, like Toastmasters that can be joined. There are people whose expertise is coaching public speaking and presentation skills.

Important:

A Presentation has Two Components.

  • Content - Your message.
  • Delivery - Presenting your message.

Each of these components is essential for a presentation. Neither can stand on their own.

Take note that Delivery trumps Content.

You may have the most outstanding content on your topic, but if it can’t be presented in a manner that educates, entertains, and explains it well, your audience will never GET IT! GETTING IT! is the goal of all communication; verbal, written, and visual.

Delivery, Content, and the Parts and Elements of each will be the topics of future Posts.

Till then, I hope your next presentation is - NO SWEAT!

In Every Challenge Seek Opportunity

"The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy."

 Martin Luther King Jr. (1929-1968)

I was raised by two hardworking and loving parents who taught me I could be anything I wanted. In 1974, fate led me to the love of my life, Holly. For the next 10 years, everything was picture-perfect. We began a family in 1977, built our dream home in 1978, and by 1985, our family consisted of four boys and a girl. I owned and operated three family restaurants and five muffler shops with my brother. All of my hard work had paid off, and I was living the American dream.

On August 13, 1985, we lost our infant son, which was very difficult, especially for my wife. In 1990, my brother and I had gone our separate ways in the business By 1993, our oldest son began to struggle with drug addiction. The year 1995, our city began a 19-month road project that resulted in our business dropping in half. December 17, 1997, our son Landon was killed in a car accident. In 1998, our oldest son was faced with eight years of prison due to his continued struggle with addiction. In 2000, my father passed before his time, falling victim to surgical mistakes.

"Our American dream was becoming our American nightmare. Why was this happening?"

For years, I struggled not understanding why all the turmoil. My belief I could be anything I wanted and I had control over my life was shattered. I had no control over what was happening. Our American dream had become our American nightmare. Why was this happening?

After a year of struggling with our second son’s death, a friend of mine wrote, “Larry, if Landon could talk to you now, what would he say? He would say,” Dad get your head out of your butt, take care of Mom, my brothers and my sister, and I’ll see you someday.” At that point I had a choice. My faith would either grow or it would go to hell. Luckily for me and my family, my faith grew.

Fast-forward to May 28, 2010—the day I suffered a stroke that paralyzed my left side. I laid in bed thinking, “Why me? What Now?” Through this stroke, I have been blessed with an understanding of patience and persistence. I walk carefully, and currently type with one hand. However, I am working full time, and life is good! I have been blessed to share my story with others, and this is what I believe:

Proverbs 16:9. “We make our plans, but the Lord guides our steps.” With each of these life challenges, I have been given an opportunity. I have been blessed with a wonderful family and love of my wife of 38 years. My three amazing children have all been blessed with their soul mates, and I have 5 wonderful grandchildren.

Life’s challenges have blessed me with an understanding of the importance of faith, family and friends. It is through faith we receive the gift of hope. It’s by faith our challenges can become opportunities. I would add to Dr. King’s quote to say, “The bigger the challenge the bigger the opportunity.”

The changing and growing landscape of SEO

 

A few days ago I received a call from a local divorce attorney that wanted more information on my SEO services. After a few preliminary questions, I realized I was speaking with a receptionist who had been tasked to 'find out more' about SEO. This is definitely not the first time this has happened, and I'm sure it won't be the last.

So if you've been tasked by management to research SEO for your business, here's the full scoop.

SEO isn't a one-time thing. It's an ever growing and changing landscape that involves a lot of factors. If you are looking for a quick fix to get to the top of google, you might as well stop reading here because you won’t find it. There's no such thing, and if any marketing company tells you different, it is lying (and stealing your money).

In short, there are two main parts to SEO.

Onsite SEO

There are a lot of things you can do to your website that can influence the search engines to like you more. These include heading tags, page titles and a variety of other factors. Each one of these items needs to be addressed and fixed when necessary. A high level SEO audit can help you find many of these and, depending on your coding skill level, can be fixed without hiring an SEO guru.

While not a direct SEO factor, your websites usability should be taken into consideration at an early stage. If you can’t easily update your website, or it looks like it was built in the late 80s, it is probably time for a redesign. This can be costly, but if you are serious about SEO, it's not something you should dismiss quickly. I have turned down many good clients because they thought their website (usually one they built themselves) was the best thing since sliced bread. It's not.

Redesigning your website at an early stage in the SEO process is not only a smart investment, it makes your job a lot easier down the road when your SEO starts giving you tasks that need to be completed through the website. Using a user-friendly content management system (CMS) such as WordPress is a good way to go. You'll be glad you did.

A good onsite SEO evaluation should also include a conversation around calls to action. Since the ultimate goal of your SEO campaign is usually more leads (NOT more traffic), you should consider what sort of target audience you are hoping to attract and what sort of actions you want them to take once they visit your website. These are crucial to having a successful online marketing strategy.

Offsite SEO

Here's where SEO gets interesting. Believe it or not, there are a lot of things you can do on other people’s websites that affects your overall rankings. While it would be impossible for me to list them all, I'll try to hit the main ones.

Links

In short, the overall amount of positive links you have leading back to your website influences your overall rankings. I say positive, because there are a lot of easy ways to get links, but they aren't necessarily good links. Heck, I could get you a thousand links tomorrow if you'd like (and some SEO agencies still offer this service) but they'd be useless, if not hurtful for your overall goals.

So what is a good link?

A good link is a link from a similar industry website, blog or social profile. This means if you sell goggles, a link from a site like sears.com would be more desirable than a link from a site like wesellgogglespleasebuyonline.net. The authority and reputation Sears has far outweighs that of the latter.

Unfortunately, getting links from high authority sites isn't always easy. It takes time, it takes a process, and sometimes it just takes cash.

What then is a bad link?

A bad link is a link from a non-related website, a link directory or a site in a 'bad neighborhood' (porn, pharmaceuticals, etc).

Bad links are easy to get. You can use an automated submission tool, or just hire some company in India to do it for you. I wouldn't recommend it, though.

A Natural Link Profile

Up until recently, building links was always a process focused around keywords. Links based on words you use in your industry were worth more than links indicating 'click here' or 'check out this site'. However, a recent update from google called Penguin changed this line of thinking. Search engines are now looking for a good mix of both keyword, brand-related and generic links. When considering hiring an SEO person, make sure they understand the value of this mixture.

Citations

For businesses with real physical addresses, citations can play an important role in your overall search engine rankings. A citation is a mention of your business name, address and phone number on another website. It may or may not contain a link to your website, and that's ok.

Search engines use these mentions as indicators your business is real, so it is important every citation around the Internet has the exact same phone number, address, etc.

Getting started

If you are serious about getting started with SEO, please read my post on different options you have, what steps you need to take, and how to determine a good SEO from a bad one.

Two Files Every Website Should Have

When a search engine 'bot' visits your site for the first time, it looks for two files right off the bat: robots.txt and sitemap.xml. Search engines use these files to learn about your website and can make recommendations on optimizing, modifying, and even fixing your website.

The robots.txt file is like a stop light. It tells bots where they can crawl and where they cannot. Don't want your images included in Google index? This is where you tell them. Don't want them to crawl your admin section? I don't blame you. Block them.

The robots file goes in your root directory, and is a simple text file you can edit with notepad or any text editor. To see if you have one, just visit http://www.yourdomain.com/robots.txt. If nothing is found, you do not have a robots file or you put it in the wrong place.

There are two basic parts to the robots file: the bot specification and permissions for that bot. Only want to block your site from Yahoo!? You can (although I'm not sure why you would).

Lastly, you can add a line to tell search engines where to find your site map file. This is the full URL.

The other file, sitemap.xml, is just what it sounds like. It's a sitemap, or roadmap, of your entire website - complete with links to every page all bundled into one nice little file. To make this file, visit xml-sitemaps.com, put in your website address and it provides back to you a downloadable file for you to put on your website. The only downside to this process is you have to redo it every time your site changes.

If you're using WordPress, it's even simpler. Plugins like Yoast (is Yoast correct?) SEO (which I recommend) and Google XML Sitemaps will create and update your Sitemap file with every change you make.

Lastly, you can add a line to tell search engines where to find your site map file. This is the full URL path, so in most cases it will be

sitemap: http://www.yourdomain.com/sitemap.xml

Having these two files on your website makes it easier for search engines to know what your website is about and will decrease the time it takes to get your new site indexed.

Are you always on the verge of getting ‘caught up’?

Do you ever get the feeling your life is out of control?

The internet has been a game changer in our lives, but is your life better off as a result of the internet? The answer to that question is probably “it all depends.” Being overwhelmed day in and day out can be stressful. We’re literally being bombarded with activities that drain our energy. It’s important to admit we are sabotaging our lives and can make the choice to live healthier and longer lives with less stress.

Did you ever try to catch butterflies when you were a kid? Catching butterflies is not an easy thing to do. At a minimum it’s difficult to catch butterflies without a net. Getting caught up is like catching butterflies. We are often unsuccessful, because we flitter from one task to another. No matter how hard we try, we become overwhelmed with activities and tasks.

NEWS FLASH …..Stop trying to CATCH UP! It’s futile. Now, don’t you feel better? You have actually accomplished something.

You might be asking, “Why is a sales expert writing about time?” What makes me a time management expert? In the selling game ‘time is money.’ Over the years, I have constantly honed my time management skills because there are a jillion time wasters in selling. It’s like skeet shooting. There are always clay pigeons disguised as real priorities everywhere you turn. In selling you can literally waste hours, and even days of time if you don’t develop good time management habits.

It might be easier to wheel you into your local hospital for surgery on your brain but you could settle for a simple paradigm shift to make profound change in your life. Change requires effort and forming new habits on your part, but in the end it’s safer and less costly than brain surgery.

The real culprit in our lives is the…Tyranny of the Urgent*

To illustrate my point, in my last job before starting my own business, I asked one of our people (an up and coming super star). “How do you decide what to work on every day?” His comment was simply, “I work on what comes across my desk.” This thinking is easy but produces mediocre or poor results.

Our lives will always be too full. You may believe there’s a lot more to do than you have time and energy to accomplish. It’s like someone put you on a tread mill and then turned the speed up as fast as the treadmill will go. To be successful you have to discipline yourself to practice making good choices. Decide what’s important, what really makes you happy. When you focus on your relationships with your friends, family, children and colleagues, you bring great joy into your life. Being healthy spiritually, physically, and mentally forms the foundation for all you do. Having worthwhile work is motivating and rewarding. It’s that simple. You then enjoy a place you can call home and transportation to get you around. Everything else is just small stuff.

You will never be satisfied with “stuff”. “Stuff” gives short-term satisfaction but is a fleeting form of gratification…

How you prioritize, what you decide to do every morning when you get up, isn’t going to get any easier. Make the decision right now you are going to take action to make better choices about what’s important in your life before it’s too late. If you don’t value your time, don’t expect others to value it either. Give you and your family the greatest gift of all.

Live a quality life built around things that matter most.

If you’re interested in learning more about the art and science of taking control of your life, sign up for our free membership trial or become an e4e member. Once you sign up, go to my 7 Steps to Sanity in a World Gone Mad in the Articles section of the e4e community.