In this presentation called, "What Color is Your Button?", e4e partner Kara Gamber discusses how to choose colors that appeal to your audience and best represent your industry.
In this presentation called, "3 Keys to Unlock Hidden Business Value," e4e partner Cynthia Correll explains some exercises business owners can use to discover their own competitive advantages. She also shows how we can best communicate those advantages and clearly explain our business's value during the sales process.
In this presentation called, "The Contracts Guy Blog: A Professional (& Personal) Journey," e4e partner Brian Rogers explains how he started his own blog to promote his business. He offers tips on creating and managing a blog, describes how it's helped his business and gives examples from his own collection of posts.
In this presentation called "The Price Is Right! The Best Service for the Most Money," e4e partner Thad James explains the importance of understanding the prices you charge and communicating the reason behind those prices to your customers. He discusses communicating value instead of features, addressing clients' pain points and increasing customer loyalty.
We are inundated with social media. If you want to get noticed,
you must impress your market with targeted, meaningful messages.
Social media expert Karen Fox shares a compelling opening story by helping the audience members see the importance of recognizing your target market and their unique characteristics and how you can reach them effectively. She offers the following important tips:
- Take time to know your buyers – their age, challenges, code language, and needs, where they are located, etc.
- Keep your content current and fresh
- Ensure your prospects can subscribe to your site and services
- Use short videos to reach your market
- Don’t assume everyone is your target market; rather speak to the 20% is good
- Images matter to your marketing efforts and are are the primary influence for your products or services
- Follow-up with sound and proven processes
- Listen and pay attention to who is responding and writing so you are engaging with them
- Do not allow your postings to become a source of conflict or debate
- Make sure you are focused on the customer needs not your own
- Track and test what works through review of your analytics and let them inform your next decisions
- Create repeatable, sustainable processes
- Get the support you need
- Get your branding out on a regular basis so that when I need your services, I remember you as top-of-mind
Social media is no longer an option for businesses because it plays a major role in shaping the business reputation and perceptions about credibility. If you don’t think you have time to implement a social media strategy, outsource this very important business strategy to Karen Fox at Karen@karentheconnector.com or check out her website www.karentheconnector.com
You are not selling products and services. You are selling the positive benefits and the emotions people want in life.
Marketing expert Tom Ruwitch opens his presentation by asking about and teaching the audience about the necessity of having a swipe file. He shares an ad he deems brilliant and how the dissection of this ad can help anyone in business. He engages the audience in reviewing what they answer to the question, "What do you sell?" to help each understand that we are not selling products or services. We are selling benefits and the positive outcomes that garner those benefits.He asserts that what separates you from your competition is how you position what you sell. He uses a sample ad to decipher the benefits the ad provides. They include:
- Increased positive emotional experiences like adventure, romance and excitement
- Avoidance of negative experiences such as judgment, rejection and humiliation
- A happy ending to a fairy tale story of overcoming
After you have effectively communicated the above, a great ad requires the following to come next in this order:
- Why do I choose and buy this?
- What are the products or services you provide?
- How do you do this?
- Proof of effectiveness
- Offer risk mitigation such as offer a guarantee
- Focusing on why, your prospects will then hear the follow-up information on how you accomplish delivery of your products and services.
- Sharing benefits eliminates resistance, defensiveness and separation because it paints a happy ending and increases positive feelings; features are more likely to be resisted
Tom Ruwitch meticulously un-bundles the ways to create a similarly brilliant ad for each person in the audience so they can no longer use drab, mechanical descriptions to help people to buy from them.
For support in defining your content marketing plans and sustainable systems within them, contact expert Tom Ruwich at MarketVolt by phone 314-993-3732 ext 18, by email at email@example.com or visit his website www.marketvolt.com
Social media is no longer an option for your business. It plays a major role in shaping your reputation and perceptions about your credibility. Luckily our e4e experts Karen Fox and Will Hanke bring you four powerful apps to ensure you grow a strong social media presence.
Do Google Adwords deserve a place in your marketing arsenal? With 6 billion internet searches per day, this powerful tool may provide you unparalleled reach.
With humor and distinction, marketing expert Adam Kreitman brings the topic of Adwords out from under the radar. In his presentation he provides eleven sound reasons for considering Adwords in your overall marketing strategic plan. The reasons include:
- You have unparalleled reach. With six billion internet searches per day, including fast-growing YouTube site and ability to purchase ads on display networks to collectively reach 90% of internet users worldwide
- You are virtually guaranteed a nearly instant page 1 ranking
- You reach highly motivated, target prospects
- You only pay for clicks and website visits
- You dominate search results. 97% of Google Ads are number 1
- You have tremendous control and flexibility. You are able to manage keywords, a budget, CPC, geo-targeting, time and dates, destination URL and what bidding strategy you use.
- You receive excellent data and reporting. You track the ROI
- You are forced to get your act together. You quickly understand the significance of your marketing and traffic, what’s working and what’s not.
- You have a highly effective keyword research and market research tool.
- You can still win no matter the size of your organization.
- You can afford to use Adwords, even as a small business.
Adam Kreitman makes a compelling case for exploring and using Adwords for your business. He says it’s not a solution for all businesses but for many, it can be a game-changer. The bottom line however, is that when you attract all the new attention and interest from this strategy, you must make sure to have robust conversion strategies to manage the next step in the sales cycle.
For help with all your online marketing needs and questions, contact Adam Kreitman at Words that Click at firstname.lastname@example.org
In order to get the maximum coverage possible on the internet, a thorough understanding of the latest effective SEO practices in 2015 is essential
Website marketing and SEO expert Will Hanke follows the latest trends in marketing your business on the internet and how to avoid the pitfalls inherent in outdated SEO habits from the past. In this video presentation, he covers the following:
- Why to stop using SEO shortcuts such as keyword stuffing, mass submissions on directories, and creating excessive and fluffy press releases
- Provide frequent, quality written and video content
- Make sure all your links are working correctly
- Have a mobile friendly website
- Learn how and implement a strategy to be social media friendly
- Use trust symbols on your site to reassure prospects and clients your site is safe and credible
- Get satisfied clients to do reviews on your business on your website and on other sites
Will Hanke offers tips for creating a robust website that is effective in attracting and converting customers. Will Hanke is Owner of Where Is My Business and can be reached at email@example.com
So you've decided to start a graphic design project. Great! But how do you get from your initial idea to a finished, printed product?
So you've decided to start a graphic design project. Great! But how do you get from your initial idea to a finished, printed product? If you decide to forgo the recommendation of seeking professional graphic design help, you are probably in the market for some software. It doesn't matter if you are trying to create a logo, banner, sign, or brochure, it can be difficult getting from the project's conception to the final product if you lack the proper tools.
SEO and website development expert Will Hanke speaks from experience and provides valuable information outlining today’s hottest graphic design programs, some known and some more obscure.
Adobe Creative Suite is probably the most known graphic design package, and it contains a lot of different software programs including InDesign, Illustrator, and Photoshop. If you buy the entire suite, it will set you back a pretty penny. You do, however, have the option of buying individual components of the package. The following are some of the more popular components to help you with your project.
Adobe InDesign is great for making flyers and posters. It even has tools to help guide you in making your own brochure. The tools allow you to do a little bit of image editing, and help you layout your brochure and put text on top of an image.
Adobe Illustrator, on the other hand, is simply a program allowing you to create or edit your own image files. It is essentially a blank canvas and provides you with tools to sketch, paint, erase, and scale a picture. If you are a talented digital artist, then this is a must have for your graphic design projects.
Lastly, I imagine everyone knows about Photoshop. The popularity of this program is so immense it has become a verb in the English language! Still, this photo manipulation software is considered an industry standard by many, and can help you touch up photos before you send them to be printed.
Corel is a software company and a competitor to Adobe products. Corel Draw even has handy brochure templates, and can really save you time. Some people prefer Adobe over Corel or vice versa, but the important thing to remember about Corel products is they are comparable software products and provide almost the exact same features at a fraction of the price.
GIMP, or GNU Image Manipulation Program, is part of the open source GNU project and a great piece of software. Software under the GNU license is free to use, copy, distribute and you could even change the source code. It's incredible because it competes with top image manipulation and graphic design programs, yet is still completely free! However, unless you already know how to use similar tools, you are going to need to learn a lot before you can use this program very well. Its learning curve is relatively steep.
These known and not-so-well known programs are great aids for many graphic design projects. Fair warning: they have a tough learning curve to them and some have a hefty price tag, so if you feel uncomfortable or overwhelmed creating your own logo or design, seek the help of acustom printing company. On the other hand, if you absolutely need to do the design portion yourself, these programs will aid you in making your idea a reality!
SEO expert Will Hanke is a Jack-of-all-trades and understands a spectrum of tools available to do a variety of tasks, including those related to graphic design. He informs readers by describing the relative strengths and weaknesses of each product outlined. For SEO and website development tips, subscribe to his newsletter or check out his blog.
Imagine two companies. One touts results customers can expect and charges premium prices; the other touts low prices. Which one wins?
The two companies are Verizon and Sprint. Verizon’s premium prices allowed it to build one of the broadest, most reliable networks in telecommunications history. In addition to its customer-centric network, Verizon continues to show solid growth in revenues, profits, cash flow and shareholder value.
Contrast that with Sprint, which, despite rising revenues, has seen its net loss almost double in the past four years, its debt increased by 20% and its cash from operations dropped by 40%. Other than spikes in stock price associated with potential mergers, Sprint’s shareholders have seen little, if any, growth in the stock’s value.
Troubling times in the kingdom
What’s troubling to me is that:
- Over the years I’ve offered countless examples of companies who enjoy great success with premium price strategies.
- It takes me less than 5 minutes to identify and compare results of Verizon and Sprint or the myriad other companies I’ve cited in my blog posts.
Yet business ‘leaders’ continue to pursue low-price strategies.
Behaviors that fly in the face of evidence to the contrary beg the questions:
- Are they simply not paying attention to what’s going on in the business world?
- Are they so lost in the microcosm of their industry they can’t see what’s working for others?
- Is their intellectual arrogance so great they won’t consider alternatives?
- Is their fear so great they’re hobbled by it?
- Do they perceive it to be easier to compete on price than to find new, exciting ways to serve their customers?
- Do they view others’ success as something unavailable to them?
Whatever the rationale, effects are devastating. Not just for the company itself, but for the economy as a whole. I’ve gone into greater detail about this in my white paper, Low Price Strategies Subvert Growth and Employment , but for now it’s sufficient to know low-price strategies being employed today are based more on cost shifting, than innovation.
When a large organization declares it is going to pay its vendors in 120 days, it shifted its financing costs to vendors who have a more difficult time obtaining financing and, consequently, will pay higher prices for that financing. This results in a less efficient use of resources in the economy and hampers economic growth, which limits employment.
Stop ignoring evidence. Reposition your offerings for premium prices and you too, can enjoy the success of companies like Verizon. If you’re not sure how to go about it, give me a call and, together, we’ll make it happen.
Dale Furtwengler is author of the internationally acclaimed book, Pricing for Profit. His company, Furtwengler & Associates, Inc., helps companies get higher prices regardless of what their competitors or the economy are doing. For more pricing/branding/marketing/sales tips visit his website, PricingForProfitBook.com.
Learn how and why specialized experts and business owners create habits to nurture and expand relationships with their existing customers.
Serving customers and setting an intention to create a satisfying experience with them engenders ongoing loyalty and often-extraordinary results. Being grateful and mindful about your customers and attentive to their needs, translates into strong relationships that are mutually positive and supportive. Some likely results: your customers develop business for you. They like you, they trust you, they continue to buy from you and they refer others to you. Most important of all, developing caring habits that keep them happy ultimately make you happy too. Benefit from the experience of our experts who offer you a range of ideas to try out for your benefit and those you serve.
From our Experts:
I like to EMAIL out new and interesting trends I feel would benefit some of my current and past clients. This is a very positive way to help them and help me keep in touch with them. I think they really appreciate the way I send them specific information tidbits they can use in their business.
I send an email every week with a productivity tip of the week that brings value and is quick and easy to read. I get a lot of positive feedback.
I like to give more than my customers are expecting. When opportunities arise to support them in unconventional ways they don’t anticipate, more than a working relationship develops. We also become friends.
Many years ago I had a colleague who said, "Do the best you can and do a little bit more.”
My goal in working with my clients is to make them feel special...like they are my only client in the world. I also want them to trust me deeply.
Doing what I say I'm going to do, when I say I'm going to do it, is important to me. They don't care what I know unless they know that I care.
These are just a few of the partner responses.
For further information, support and advice from thirty experts on this topic and many others, become a member of the e4e community by visiting our website at www.e4ecommunity.com
If you feel tempted to drive one of your competitors out of the market using low prices, you’ll quickly discover you’re the loser.
In a June 3, 2011 article in Booz & Co.’s strategy + business entitled A Sweet Victory, Reed Holden and Mark Burton highlight Hershey’s victory over Nestle in the Krackel vs. Crunch war.
Using an aggressive pricing strategy, “...a 30 percent trade discount on Krackel where other brands hovered in the 5 to 10 percent range,” Hershey drove Nestle from the vending machine market “...boosting the brand’s [Krackel’s] revenue by an incremental $25 million.”
Let me see if I have this right. Hershey is shifting production capacity to produce an additional $25 million dollars of candy bars at a margin that’s 20% to 25% lower than the industry average and they think they won. It’s 8:30 on a Friday morning and I feel like I need a drink already.
The thing that amazes me about strategies like this is they always focus on the additional revenues generated, not the profits. In other words, they’re looking at market share instead of profitability. I guess if that’s your measure of success, you did win.
But for those of us who measure success in terms of profits generated, Nestle is the hands down winner in this one. I’m sure Nestle didn’t sit around bemoaning this loss. It merely shifted its resources to markets and products that produce higher margins. The best and brightest simply don’t play the fool’s game of following a ‘competitor’ down a path of rapidly decreasing prices.
So what’s the message here? If you feel an inclination to drive one of your competitors out of the market using low prices, do the math and you’ll quickly discover who the loser will really be. And it won’t be your competitor.
Dale Furtwengler is the author of the internationally acclaimed book, Pricing for Profit. His company, Furtwengler & Associates, Inc., helps companies get higher prices regardless of what their competitors or the economy are doing. For more pricing/branding/marketing/sales tips visit his website, PricingForProfitBook.com.
Higher prices affirm customers’ beliefs in value and attract even more buyers. This approach works for any business, of any size, in any industry.
A November 2, 2011 Barron’s article reports that Kraft Foods’ third quarter net revenues grew 11.5% in part due to a 7% price increase.
That means Kraft’s revenues grew a whopping 64% more than the price increase. For many business leaders this seems impossible. After all, conventional wisdom says buyers tend to find alternatives when prices go up, right? In reality customers have greater confidence in a product or service when its price reflects the value they’ll receive.
What does this mean for you? That you too can enjoy the results Kraft experienced. Here are the keys:
- A reputation for quality.
- Knowing who values that quality.
- Pricing that reflects high value.
Let’s continue with the Kraft example to see how these apply.
Kraft has a reputation for quality that’s spanned more than a century. The good news is you don’t have to be around that long to develop a reputation for quality. But consistent delivery of quality, however you and your customers define it, is essential to having revenues that grow faster than your price increases.
Knowing Your Customer
Kraft knows its customers have discerning tastes and are willing to pay a premium to get that taste. Their customers also value consistency in the product. In addition, their customers have an intuitive sense Kraft has their best interests at heart - that Kraft wouldn’t take risks in the manufacturing of their products that might cause the consumer problems.
Kraft’s premium pricing adds further assurance of the quality, consistency and concern for their customers. Higher prices affirm customers’ beliefs and attract even more buyers to Kraft’s products. That’s how Kraft can enjoy 11.5% revenue growth with a 7% price increase.
As you can see, there’s nothing magical about what Kraft has done. This approach works for any business, of any size, in any industry. It’s up to you to employ these keys so you too can enjoy a similar level of success.
Dale Furtwengler is the author of the internationally acclaimed book, Pricing for Profit. His company, Furtwengler & Associates, Inc., helps companies get higher prices regardless of what their competitors or the economy are doing. For more pricing/branding/marketing/sales tips visit his website, PricingForProfitBook.com
Pricing expert Dale Furtwengler offers insights and strategies based on real-world case studies, demonstrating pricing models that have bombed or show consistent benefit.
Some days, despite your best intentions, you fumble the ball. Such was the case at the Retail Customer Experience Executive Summit when I was asked, “Who [among retailers] does a good job of pricing?” My response was “most companies.” What I should have said was ‘most companies initially.’
Most companies have a pretty good sense where they fit on the spectrum versus competitors. Using the image spectrum:
- Walmart is the low-price provider.
- Target is viewed as more hip and can command higher prices to reflect that image.
- JCPenney used to be (who knows where they’re headed today) known for dependable, but not readily recognizable brands and their pricing was 3 to 5 times the Walmart alternative.
- Macy’s carried very recognizable brands, with strong image appeal and able to command prices 6 to 8 times the Walmart alternative.
- Nordstrom is the most upscale of these five companies and commands premiums of 12 to 14 times the Walmart alternative.
Using image as the focal point for each of these companies, their initial price positioning makes a lot of sense. Unfortunately it’s all down hill from there.
The first mistake they make is to price ‘competitively’. That typically means at, or below, industry pricing for their segment of the spectrum. They choose to price this way despite the fact they claim to offer ‘more’ or ‘better’ of whatever they deem their value to be.
The second mistake most retailers, indeed companies in every industry, make stems from the extremely poor job they do communicating value. You don’t have to trust me on this. All you have to do is look at the ads the companies cited above offer, then answer this question “Does the ad emphasize their position on the image scale?”
Of course not. With the possible exception of Nordstrom, most ads are about their latest sale. If their marketing messages did a better job of helping their customers experience their stores without being there, they’d be able to command higher prices than is typical for the area of the spectrum they occupy.
The third mistake is sales these retailers regularly offer. Fluctuating prices confuse consumers about the real image value of their offerings. These sales take many forms including discounts, rewards programs, coupons and loyalty programs, to name a few.
These sales muddy the water for customers. The concept of value, whether that value is image, innovation or time-savings get lost in the myriad of sales offered. In the process we train customers to wait until we offer a discount to buy.
That means the customer is postponing the satisfaction of owning your products/services. For you it means lower profit margins and additional marketing costs to acquire enough new customers to not only replace those lost profits, but to grow them.
Now back to the original question, “Who [among retailers] does a good job of pricing?” Companies I think do a good job are:
They repeatedly raised their prices throughout the recession and experienced sales growth in excess of the price increase.
The only criticism I have of Panera’s pricing is their rewards program. Reward programs are effectively discounts. Rewards programs do not increase my desire for their offerings. I’m not going to visit any more frequently or buy larger quantities because of the reward. That means that they’re offering me a discount to buy what I’d have bought at a higher price. Rewards programs increase retailers costs in two ways – establishing and maintaining the reward program and providing a discount to customers who are willing to pay higher prices. Ouch!
The key word with Apple is consistency. They consistently charge premium prices on all new offerings and tend to hold those premiums throughout the product life cycle.
The one faux pas I recall was reducing the price of the original iPhone by $100 within 60 days of its release. The hue and cry of the early adopters resulted in a refund of roughly $100 million to those early customers. That’s what happens when you move away from your value proposition in an attempt to garner market share which is what I believe the motivation was for the price reduction.
Apple may be on the verge of making another pricing mistake. Rumor has it that they’re coming out with a new tablet to compete with Google’s Nexus 7. If they do, it’ll be interesting to see how they launch that offering. If they offer a better product and price it accordingly, the market will continue to view them as an industry leader who is entitled to premium prices.
If, however, they price the new tablet to compete with the Nexus 7, they’ll appear to have relinquished their industry lead and be reduced to ‘commonplace’ in the eyes of the consumer.
I don’t recall Kraft having raised prices during the recession, but as soon as it appeared the recovery was under way they immediately began raising prices and continue to do so with some frequency. Like Panera, they’ve experienced sales growth in excess of their price increases. Indeed, their sales growth was 50% higher than their price increase in the 3rd quarter of 2011. The keys to these companies’ success in pricing are:
- Consistency in their customers’ experience.
- Charging prices that reflect that consistency and support their value claims.
- Raising prices in good times and bad, further reinforcing the perception of value in their customers’ minds.
- Continuously finding new ways to serve their customers in ways those customers want to be served.
- Initiating change in their markets instead of mimicking others changes.
The pricing mistakes that companies like these are most likely to make are:
- Focusing on market share growth instead of customers’ needs/interests.
- Discounting in any form (sales, rewards programs, loyalty programs) confuses the customer. It’s hard to tell what something is really worth when the price fluctuates for no apparent reason. Can anyone tell me what a gallon of gasoline is worth?
- Failing to raise prices in good times and bad.
- Losing sight of who its ideal customer is. Think JCPenney.
Basically, any company that:
- Charges a premium to the market.
- Continues to raise prices regardless of what the economy is doing.
- Stays focused on its ideal customer.
- Avoids the temptation to discount, reward their customers or create loyalty in ways other than providing superior experiences.
…is doing a good job of pricing.
For those at the summit, my apologies for the fumble. Hopefully I’ve recovered the ball with this post.
Do you have a clear brand promise? Find out by using my confidential Brand Promise Self-Assessment.
Are you getting compensated well for the value you provide? Use my confidential Pricing Self-Assessment to evaluate your company’s pricing.
Are your marketing messages attracting the right customers? If you’re getting primarily price buyers you may want to use my confidential Marketing Self-Assessment to discover why.
Is your sales force putting pressure on you to lower prices? Our confidential Sales Self-Assessment can show you why. Check out Dale’s latest ebook, Brand Promise: What Do YOUR Customers Expect? You have a brand. The question is “Is it the one you want?”
If you’d like to increase your prices, profits and customer base, call Dale at 314-707-3771.
Sellers are giving discounts to customers who would have bought anyway - at full price. Unfortunately, this does not hit home until it’s too late.
A lesson from Panera Bread Co.
In my February 28, 2011 post, Buying Customer Loyalty, I railed against reward programs. One restaurant chain, Panera Bread, has proven my point via the type of rewards it offers. Yes, I have a Panera card. I’m not above taking discounts offered even though I don’t advocate discounting to my clients.
In the earlier post I stated the customers’ need/desire for offerings don’t increase just because they’re receiving a reward. What does that mean for sellers? They’re giving discounts to customers who would have bought anyway - at full price. Unfortunately this reality does not hit home until the reward program is already in place.
What I have noticed recently with the Panera program is the rewards offered are not what I typically purchase. Based on the rewards offered, Panera is encouraging me to try new things or to visit at times I don’t normally visit. That’s not a reward, that’s a marketing strategy.
While I don’t have a problem with marketing strategies that encourage buyers to try new things or to return more frequently, I resent a ‘reward’ program that tries to accomplish the same goal. Maybe I’m too stringent in my definition of reward, but to me it’s something that has value to the recipient. When that ‘reward’ places the welfare of the presenter over the recipient, it loses the right to be called a reward.
The question is “How do you offset the revenue losses your reward program created while maintaining credibility with your customers?” Keep your marketing efforts and reward programs separate. It’s all right to announce new offerings, encourage customers to visit at times they typically don’t, to explore alternative uses of your offerings in your marketing materials, in any media you choose, just not in the rewards program.
Converting a reward program to a marketing program is a violation of your customers’ trust. Losing their trust is one of the quickest ways to drive your customers to your competitors. If you have fallen victim to the temptation of reward programs, don’t compound the problem by converting it to a marketing program.
Dale Furtwengler is the author of the internationally acclaimed Pricing for Profit. His company, Furtwengler & Associates, Inc., helps companies get higher prices regardless of what their competitors or the economy are doing. For more pricing/branding/marketing/sales tips visit his website, PricingForProfitBook.com
Expert promoter and master at connecting, Karen Hoffman shares her tips for how to ensure the connections you make with others count.
Expert promoter and master at connecting, Karen Hoffman shares her tips for how to ensure the connections you make with others count. Her advice includes:
- Focus conversations on how you will work together
- Make your connections relational, not just transactional
- Go deeper with fewer people vs. skim the surface with many
- Stay open-minded, open-hearted and suspend judgments
- Find and focus on people you know, like and trust
Karen Hoffman is founder of City of Experts and Gateway to Dreams, organizations designed to connect and promote people so they can live their dreams and provide their valuable services to the world. Call her today at 314.503.6376 or Karen@cityofexperts.com
Companies whose primary goal is to pursue market share, often don’t fair well. Why? Their focus is on their goals, not their customers’ interests.
A September 11, 2013 Reuters article, iPhone 5c: Apple picks profit over market share yet again, provides an opportunity to make a distinction between market share, pricing and profit strategies.
In the Reuters article, we’re finally seeing the financial press acknowledge there is a trade-off between profit and market share. Generally the financial press is critical of companies that lose market share:
- Without defining the market.
- Without determining the bottom line impact of the ‘lost‘ market share.
- While implying that profits are going to decline due to that loss.
Yet, as we saw in my September 10, 2013 blog Market Share vs. Profitability, many companies experience greater profits when they shrink their revenues. Why? Because they’ve rid themselves of customers who don’t value what they offer. Consequently, they’ve eliminated low-margin, high cost business (price buyers are always demanding more without being willing to pay extra to get it).
With this background, let’s explore the distinctions between strategies that focus on market share, pricing and profitability.
Companies whose primary goal is to pursue market share, often don’t fair well. Why? Their focus is on their goals, not their customers’ interests. Indeed, my eldest nephew who is a certified financial analyst says, “Whenever I hear a company has decided to go after market share, I send a ‘sell’ recommendation because, within 18 to 24 months, that company will be in trouble.”
A clear example of that is Toyota. Without a doubt, Toyota had the premier reputation for quality in the mid-price automotive market. Shortly after announcing they intended to be the #1 automaker, they had a recall that cost them conservatively $1 billion dollars.
The reasons a market-share strategy fails are:
- The companies don’t define the market; they assume all buyers are potential customers.
- They often discount heavily to get customers who don’t value what they offer and lose margin on the customers who do.
- They significantly grow their infrastructures to accommodate the additional, albeit unsustainable, demand.
- They put their goals ahead of their customers’ interests antagonizing customers in the process.
Other than that, it’s a perfectly fine strategy.
There are basically two pricing strategies - a low-price strategy and a value-based strategy. Which works better? Let’s look at actual results from well-known, well-respected companies.
From 2009-2012 Apple tallied an impressive 44.3% compound growth rate (CGR) in revenues and improved operating margins by 14.5%. During that same time, Walmart’s revenues grew by 3.5% (CGR) and lost .5% in margin and Amazon gained 26.3% (CGR) in revenues but gave up 33.3% of its operating margin to do so. Which of those experiences would you prefer?
Here’s your mental exercise for the day. Is a low-price strategy also a market-share strategy?
Not necessarily. Toyota decided to go after market share, but chose not to change its pricing to do so. When Walmart decided to go after Target’s customers, they knew they’d have to do something different to garner that market. The fact that their attempt wasn’t successful doesn’t alter the fact they had an awareness of the need to do something different.
While many would say profits are the reason companies are in business, the reality is profits are a byproduct of enhancing customers’ lives. Any company focused on profits inevitably makes decisions placing the company’s interests ahead of its customers’ welfare and then lose those profits. In this regard market share and profit strategies are similar.
So where does that leave us? What are we to take away from this discussion? The lesson is that none of the three - market share, pricing or profitability - are good ‘strategies’. Your strategy needs to be ‘enriching the lives of others.’
If your product or service makes someone’s life easier, or fun, exciting, safer or better in any way, you’ll enjoy great success when you build a value-based pricing approach into that strategy.
Adopt a market-share or low-price strategy and you’ll shift your focus from your customers to your company and suffer dire consequences. So when developing a strategy for your business:
- Focus on how you’re going to enrich the lives of your customers.
- Price to reflect that enrichment.
- Enjoy your well-deserved success.
Dale Furtwengler is the author of the internationally-acclaimed Pricing for Profit. His company, Furtwengler & Associates, Inc., helps companies get higher prices regardless of what their competitors or the economy are doing. For more pricing/branding/marketing/sales tips visit his website, PricingForProfitBook.com.
Given the accessibility of information, is it possible to be strategic in your pricing? Or do the ever-shifting sands of your competitors’ prices trap you?
Given the accessibility of pricing information today, is it possible to be strategic in pricing your products and services? Or do the ever-shifting sands of our competitors’ pricing trap us all?
Here’s a quick way to tell whether or not you’re being strategic in your pricing:
- When you create a new offering do you establish one price or a series of prices?
- When you change your prices, is it typically your initiative or a reaction to your competitors’ pricing?
- Do you match your competitors’ pricing?
- Does your product’s/service’s life cycle influence your pricing decisions?
The answers to these questions tell you all you need to know about whether or not you’re using a price strategy or merely reacting to your competitors’ pricing.
One price or series of prices?
If you’re establishing a single price for new offerings, you’re not developing a pricing strategy. Effective price strategies must include a series of prices to reflect:
- Your product’s/service’s life cycle.
- Changing customer tastes.
- Competitor offerings - current and anticipated.
- Value (pricing) by market segment.
- Offerings to companies outside your industry who compete for your market’s dollars.
This is not an all-inclusive list, but it gives you a sense for what’s involved in establishing a pricing strategy. Each of the items on the list indicate why we don't live in a one price fits all world. Here are some examples to illustrate this point.
Early adopters of innovation willingly pay multiples of what the mass market pays. That’s why it’s important to know what price you’ll charge at each phase of your product’s/service’s life cycle as well as how you’ll know when it’s time to change your price.
Similarly, prices can be dramatically different for different market segments. Why? Because the value to each segment can be dramatically different, as can the willingness of each segment to embrace change (new offerings). Some markets are more progressive than others.
When a competitor comes out with a new offering, especially one that appears to be superior to yours, how do you respond? How does that influence your pricing? More importantly, should it?
Many companies ‘improve’ their offerings only to find their customers are unwilling to pay for the improvement. Do you have a mechanism in place to evaluate the value of a competitor's improvement? If not, you’re likely to follow them down the rabbit hole or you'll lower prices when there's no need to do so.
Hopefully these illustrations demonstrate the importance of having a pricing strategy, one that incorporates a series of prices and price change triggers.
Now, let’s contrast this approach to reactionary pricing.
Regardless of whether or not you’ve promulgated a price-matching program, if you regularly raise or lower your prices to reflect your competitors’ price changes, you’re price matching. There's nothing strategic about price matching. You have relinquished control to your competitors.
Yes, I’ve heard business leaders' claims that they need to be competitive, that products eventually become commodities and that buyers are price conscious. Unfortunately the business ‘leaders’ making those claims aren’t defining their terms.
What does it mean to be competitive? When does a product become a commodity? Are buyers really price-conscious? Let's explore each of these questions in more detail.
What does it mean to be competitive? Offering more for the same price as your competitors are getting, is not being competitive, it’s folly. It confuses your customer! Here’s what they’re thinking - “If your product/service is so much better, than why doesn’t it cost more?”
That’s right. Despite all the claims that customers are price-sensitive, this price/value comparison gets made, if not consciously, then subconsciously. It’s intrinsic to the human psyche. Here's a situation that many of us have experienced.
You stop at your favorite ice cream shop and order your usual dessert. The clerk says “That’ll be $3.75.” It’s $.25 more than you have been paying.
Do you hesitate, even if for only a few seconds, before completing the purchase? Of course you do. You’re mind did a quick price/value calculation. If this is really your favorite ice cream, you'll quickly decide you're worth it and treat yourself despite the higher price. We do this all the time.
Because this thought process occurs subconsciously we don't realize we're making these calculations. Nor do our customers.
The moral of the story is to stop listening to the white noise of public opinion and pay attention to what our human nature tells us - to get more, you have to pay more. Then tout your value and price accordingly.
I can’t tell you how often business owners/leaders tell me their offerings have become commodities in the eyes of their buyers. My response is always the same “If that’s really true, if you can’t add any value to that product, why are you still selling it?”
Come on folks, if what you’re offering is so readily available, if it’s of so little value to the customer, if customers view it as a necessary evil instead of something they desire, then why devote time, energy and resources to selling it? Why aren't you shifting your resources to producing and selling what your customers really want?
Conversely, if you are able to add value to the product, then why don’t your customers see that value? Why aren’t they willing to pay more to get that value?
More often than not it’s because you’ve devoted your marketing dollars to touting your low prices instead of the value you’re adding. Shift the focus of your marketing messages and you’ll shift your customers’ focus as well.
Price conscious customers
I’m not going to belabor the point. The reason customers are price conscious is we’ve trained them to be so. The vast majority of our marketing messages focus our customers’ attention on price instead of the value we provide. We’ve trained them to be price conscious, now it’s time to train them to be value oriented.
Is strategic pricing dead?
Almost, though it needn’t be. We have it within our power to become more strategic in our pricing. The knowledge and tools already exist and are readily available; we simply need to employ them.
The choice is basic - either you take control of one of the greatest drivers of your company’s profitability, your pricing, or you allow your competitors to control it. To me, that’s a no-brainer.
Dale Furtwengler is the author of the internationally acclaimed Pricing for Profit. His company, Furtwengler & Associates, Inc., helps companies get higher prices regardless of what their competitors or the economy are doing. For more pricing/branding/marketing/sales tips visit his website, PricingForProfitBook.com.
Discover the magic, gifts, possibilities and positive results hidden within every relationship. If you are like most people, you might not consider the significant and powerful ripple effects of connecting and collaborating well with others.
For example, how would I know that helping a personal and business friend and author with a project, might help me find another piece of my life’s work?
Or that my introduction of two friends would connect one to her current business that she bought from a friend of that friend?
In my hall closet at home, there’s a shiny red metal toolbox outfitted with hammer, level, screwdrivers, etc. I’m not a Handyman, yet it’s invaluable on those occasions when I’m hanging a new picture or the repair guy forgets his pliers. Just as handy is a toolbox of specific items needed for marketing and promoting your business.
With the right tools at your fingertips, you expand your marketing reach while your business takes on a more consistent and professional look. Taking time now to gather key files in a folder labeled Branding Toolbox on your computer, saves you time later when last-minute marketing needs arise.
Within three months I’ve heard two successful business people say:
“No American wants to pay another American a fair price for his products.”
“No one wants to pay you your price, yet they expect you to pay their price.”
Is this a disturbing new trend? If so, what can we do about it?
I believe it is a trend, but one that’s been with us for some time. Indeed for the past 3 decades or more we, as business leaders, have been almost exclusively focused on two things:
Creating Brand Personas can help build a stronger culture and brand for your business. Learn what larger corporations have been doing for quite some time now.
What is a brand persona? A fictional profile of customer types written down in plain English. Why create Brand Personas? They help you understand your customers better. Instead of nameless, faceless, demographic data that makes it harder for you to have empathy, create personas that allow you to understand that pain points of your customers. After all, Branding = Relationship. And you can’t build relationships if all you are basing your marketing on is statistics.
To truly understand your prospects and customers, you need to have a relationship and understand motivations and hardships. Creating Brand Personas can help you create a customer-centric culture and improve your marketing initiatives.
The majority of customers still pay for value when they can see it and quantify it.
In part 1 we dismissed the argument value is ‘vague’ by demonstrating there are only three things any buyer buys - image, innovation or time savings. This realization has the added benefit of removing complexity from the value pricing process. Then we looked at a sample result highlighting the fact that value-pricing results are demonstrable. Now we’re going to discuss two concerns many business leaders express, that value is a moving target and that price pressures prevent consistent use of value pricing.
There is no question value changes over time and that, in todays’ world, change occurs more quickly than ever before. Movement through a product’s life cycle from innovation to mass market, and the to saturation, occur at an ever-increasing pace.
This reality doesn’t alter the fact that early adopters of innovation often pay 3 to 4 times what the mass market pays. It simply means the mass market is going to enter the market earlier than it did previously.
Once we realize basic buying habits haven’t changed, and the only difference is when buyers enter the market, we find value pricing is easier to implement than expected. We have the same pricing triggers that let us know when it’s time to lower our price for the mass market or for the late adopters, assuming we even want to serve that group.
The key is to realize value has always changed over time and the majority of customers still pay for value when they can see it and quantify it. Those are our challenges, to identify what customers value, provide that value, quantify the value for them so they can see it and then communicate that value effectively. When we do this work for them, our customers reward us with premium prices.
Doubt that? Then why do Mercedes buyers pay 7.5 times as much as a Chevy Aveo buyer for a sedan? Why do Nordstrom’s customers pay 12 to 13 times as much for a sweater than a Walmart customer? Buyers continue to demonstrate a willingness to pay premium prices to get what they want, yet we ignore their pleas and focus our attention and theirs on price instead of value. Shame on us.
That brings us to the question of price pressures - from our competitors and customers.
Nothing keeps business leaders up at night as much as the fear of not being ‘competitive.’ That’s why competitors’ pricing and customers’ challenge “...but your price is too high” put so much pressure on them to lower prices.
Fear is an ugly thing. It triggers an emotional reaction. Emotional reactions preclude objective analysis. If it didn’t, then why would we see so many businesses following their competitors down the rabbit hole of reverse auctions? Why do we see earlier and more frequent discounting during peak selling season? Why do we see businesses giving away ‘improvements’ in their offerings instead of charging for them? Why do we see businesses invest heavily in process improvements only to give away the savings in lower prices?
Absent the fear, we’d quickly realize that when we relinquish control over our pricing to our competitors and customers we become one of many providers. We commoditize our offerings, which serves to validate our customers’ limiting perception that what we’re offering is a commodity.
Conversely, when we’re able to look those customers in the eye and say, “This is how we’re better, this is the value you’ll get and this is why our price is...” we establish ourselves as leaders in our industry. And leaders, by virtue of their nature, command respect. When we establish that leadership role, we distinguish ourselves in ways that are attractive to the vast majority of the people in our markets and we do so at higher prices than our competitors get.
The choice is yours, cave to price pressures and commoditize your offerings or distinguish them by demonstrating value and commanding prices commensurate with that value. Choose wisely.
Hopefully I’ve been able to demonstrate that value pricing:
- Isn’t as vague as previously thought
- Isn’t as complex as you imagined
- Can produce measurable results
- Is no more a moving target than it was a century ago
- Is the antidote to pricing pressure from competitors and customers alike
If you’re not using value pricing, you’re not only leaving a lot of money on the table; you’re depriving your customers of the ability to make informed buying decisions. If you truly care about your customers that should be motivation enough.
Even though you may have many customers, you’re only addressing three categories they value: image, innovation and time savings. These categories simplify value pricing.
In Part 1, we addressed the concern that value is vague. We did so by recognizing the fact that even though each of us defines value a little differently, there is a commonality to our humanity allowing us to create categories of buyers based on what they value most - image, innovation or time savings. This week we’re going to address two more concerns - the complexity of value pricing and the ability to produce demonstrable results.
Value pricing is complex
As we saw last week, even though you may be dealing with thousands or hundreds of thousands of customers, you’re only dealing with three categories of value. These categories simplify the identification of market segments and value prices for each of those segments.
I’m sure some of you are thinking, “Dale, you have no idea how many products (SKUs) we sell. It isn’t just the customer that adds complexity, it’s the array of offerings we have.”
No doubt what you say is true. Two questions for you:
Why do you have so many SKUs?
Adapting Pareto’s principle, which 20% of them are producing 80% of your profits?
Regardless of your answers, the solution is to establish a process for identifying your 20% most profitable offerings, identify who’s buying them and eliminate the rest. Not only will you simplify your life, you’ll use your marketing dollars a lot more effectively. You’ll very likely free up a considerable amount of cash as well.
If that strategy is a little frightening to you, then eliminate the 20% least profitable SKUs. From experience I can tell you once you see how little impact it has on your sales and what a dramatic improvement is has on your profits, cash flow and employee productivity, you’ll quickly eliminate the next 20% least profitable until you arrive at my initial suggestion.
Which brings us to the next concern many business leaders have, being able to determine which results can be traced to value pricing and which are related to other operating decisions.
Often business leaders point out margin improvements can be achieved from a variety of operational changes including:
- Productivity improvements
- Sales force compensation arrangements
- More effective marketing
- Improved offerings
Or simply from an improving economy. So the question they ask is “How do we know the margin improvement came from value pricing?
The answer is all of these factors are, or should be, part of your value pricing strategy. You can’t establish an effective pricing policy without evaluating all of the factors that influence value creation. Recently I helped a client improve his margin on one line of business from 24.8% to 41% by streamlining the sales process and eliminating back office processing. We accomplished this without raising prices.
While we were evaluating his value creation process, we were also able to justify a 12.5% price increase by calculating the value of his offering. How? By identifying what he was selling was time savings and using demographics to identify the value buyers in his market were placing on their time.
With the 12.5% price increase, his margins more than doubled from 24.8% to 53.5%. If that isn’t a demonstrable result I don’t know what is.
Next time, we’ll discuss the two remaining reasons business leaders avoid value pricing - the perception that value is a moving target and price pressures.