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Hottest Graphic Design Programs

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

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 Software

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

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.

A Tale of Two Pricing Strategies

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.

Why?

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?

Result

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.

Takeaway

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.

And They Think They Won

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.

Revenue Growth is Greater Than Price Increases

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.

Reputation

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.

Pricing

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

Who does a good job pricing?

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:

  1. Walmart is the low-price provider.
  2. Target is viewed as more hip and can command higher prices to reflect that image.
  3. 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.
  4. Macy’s carried very recognizable brands, with strong image appeal and able to command prices 6 to 8 times the Walmart alternative.
  5. 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:

Panera
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!

Apple
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.

Kraft Foods
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:

  1. Consistency in their customers’ experience.
  2. Charging prices that reflect that consistency and support their value claims.
  3. Raising prices in good times and bad, further reinforcing the perception of value in their customers’ minds.
  4. Continuously finding new ways to serve their customers in ways those customers want to be served.
  5. Initiating change in their markets instead of mimicking others changes.

The pricing mistakes that companies like these are most likely to make are:

  1. Focusing on market share growth instead of customers’ needs/interests.
  2. 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?
  3. Failing to raise prices in good times and bad.
  4. Losing sight of who its ideal customer is. Think JCPenney.

Basically, any company that:

  1. Charges a premium to the market.
  2. Continues to raise prices regardless of what the economy is doing.
  3. Stays focused on its ideal customer.
  4. 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.

When Is a Reward NOT a Reward?

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

Are Market Share, Pricing and Profitability ‘Strategies’ Smart?

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:

  1. Without defining the market.
  2. Without determining the bottom line impact of the ‘lost‘ market share.
  3. 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.

Market share
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:

  1. The companies don’t define the market; they assume all buyers are potential customers.
  2. They often discount heavily to get customers who don’t value what they offer and lose margin on the customers who do.
  3. They significantly grow their infrastructures to accommodate the additional, albeit unsustainable, demand.
  4. They put their goals ahead of their customers’ interests antagonizing customers in the process.

Other than that, it’s a perfectly fine strategy.

Pricing
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.

Profitability
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.

Lesson
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:

  1. Focus on how you’re going to enrich the lives of your customers.
  2. Price to reflect that enrichment.
  3. 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.

ChaChing! Using Value Pricing to Grow Sales and Profits – Part 3

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.

Moving target

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.

Price pressures

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.

Lesson

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.

ChaChing! Using Value Pricing to Grow Sales and Profits – Part 2

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.

Demonstrable results

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.

ChaChing! Using Value Pricing to Grow Sales and Profits – Part 1

People value and buy image, innovation and time saving. While value is personal, these common buying criteria enable us to price based on each.

There are only three things any of us buys - image, innovation and time savings. So while value is personal, there is enough commonality to our humanity and enough buying data to allow us to categorize markets, design offerings and price based on the value to each of those market segments.

 

It’s no secret the quickest, easiest and least expensive way to grow your top line, margins, and bottom line is to raise prices. Why, then, are you resisting value pricing?

Is it because:

  • The term ‘value’ is so vague it defies comprehension?
  • Value pricing is complex? Instinctively we know different market segments view value differently.
  • Providing demonstrable results is difficult? It often feels like you’re trying to prove a negative.
  • Value is a moving target? Given how quickly economic conditions and customer interests change as well as how short product life cycles are today, does it even make sense to calculate value and pricing to reflect that value?
  • Senior leaders feel the pricing pressures they’re getting from their competitors and their customers make it nigh on impossible to get premium prices?

Of course there are other reasons. As a senior leader you might be:

  • A price buyer and logically assume everyone else is as well.
  • Volume focused, preferring to own a large share of the market even though a smaller share would be more profitable.
  • Concerned your organization isn’t providing value necessary to warrant higher prices.

If you’re a senior leader and any these last three conditions resonate with you, I’m going to save you a lot of time and energy. STOP READING! The likelihood of you employing value pricing is so small reading the rest of this blog will be a waste of your time.

For the rest of you, we’re going to address each of the concerns highlighted in the opening.

Value is ‘vague’

Value is personal. Each of us determines the value a given product or service has for us and it’s often much different for us than for our family and friends. Naturally the question that comes to mind is “How do I establish value prices when everyone values things differently?”

The answer lies in the commonality of our humanity, which is manifest in our buying behaviors. There are only three things any of us buys - image, innovation and time-savings.

As sellers, any benefit we claim to provide fits into one of these three categories. For example, quality can enhance our customers’ image, save them time by helping them avoid repairs or a combination of the two.

Some of Apple’s customers by iPhones and iPads because they love innovations Apple builds into their products. Others buy because they love the look and feel of those products. Why? Because it enhances their self image.

The good news is that customers who value image are willing to pay as much as those buying innovation. Indeed there is readily available buyer data to show exactly what premiums people are willing to pay, depending upon where they fit on the image, innovation or time-savings spectrum.

So while value is personal, there is enough commonality to our humanity and enough buying data to allow us to categorize markets, design offerings and price based on the value to each of those market segments.

For those of you selling B2B, don’t forget you’re selling to people not organizations. Those people represent organizations, but each also possesses a self-interest motive that influences their buying decisions. So don’t dismiss the commonality of our humanity as a B2B phenomenon.

Next, we’ll explore the complexity of value pricing to see whether or not it’s a valid reason to avoid adopting value pricing.

Price Addiction

Don’t become addicted to low prices! Use the questions in this blog to get back on track to serving your customers in ways they want.

It never ceases to amaze me how addicted people get to low prices.  You probably think I’m talking about buyers, don’t you?  Well I’m not.

As I’ve stated in many of my earlier blogs we, as sellers, have trained buyers to be price conscious because we place price at the heart of every marketing piece we create. What I hadn’t, until recently, realized is we’ve been drinking that Kool-Aid so long we’ve become addicted to low price strategies.

This realization came as I watched yet another JCPenney’s square deal adds that highlighted the days when their customers could get the ‘best’ prices. These ‘deals’ come from a company that recently declared itself different than other retailers by ‘eliminating’ discounting.

Why is it that we, as sellers, have become so addicted to low prices? There are several reasons that come to mind:

  1. Walmart’s success
  2. Poor customer profiles
  3. Internalizing our beliefs

Walmart’s Success
Certainly Walmart’s success with a low-price strategy has been greater than any company in the history of commerce. Companies trying to emulate Walmart’s success overlook several realities.

First, there is only one low-price leader in any industry. Unless you have a plan for leapfrogging your industry’s low-price leader, you’re setting yourself up for failure.

Second, low-price strategies eventually fail. Yes Walmart is still enjoying revenue and profit growth, but it’s in countries in which they are still adding new stores. For those countries in which they’ve saturated the market, Walmart is struggling to maintain revenues and, here in the U.S., could only do so by giving up over 2% of their profit margin. That’s roughly 10% of their original margin.

Third, your customers may not value the same things Walmart customers do. Which brings us to the second reality; most companies do a very poor job of profiling their ideal customers.

Poor Customer Profiles
I’ve spoken to JCPenney customers who say they wouldn’t be caught dead in Walmart. Others tell me they go to Walmart for cleaning supplies, but not for clothing. What do these comments tell us?

These consumers have an image of themselves that’s quite different than what they perceive to be Walmart’s ideal customer. The questions JCPenney should be asking their customers are:

  1. What items do you go to Walmart to buy?
  2. When and why do you pay more for some items than the low price you get at Walmart?
  3. What items are those you would buy elsewhere?
  4. Why don’t you purchase those items at Target? Macy’s? Nordstrom?

These are the kinds of questions that help a company create a clear, concise profile of their ideal customers. With this profile, it’s much easier to craft marketing messages to attract customers who like what you have to offer and sales scripts to close the sale.

This brings us to the third reality of our price addiction - internalizing our own beliefs.

Internalizing Our Beliefs
Years ago I had a client comprised of seven entrepreneurs who had pooled some of their resources and invested in businesses around the country. Each of the seven was responsible for running a different business.

One of the seven crafted stories to explain his company’s performance (or lack thereof) to the other members of the group. These stories always had some element of truth, but were designed to hide critical facts.

I watched this man relate the story so convincingly that even I, who knew better, felt myself being drawn into believing what he was saying. How was he able to accomplish this? He rehearsed the story so frequently he actually came to believe it himself. That’s what’s happening to retailers suffering price addiction.

These retailers have trained their customers to be price conscious and, in the process, come to believe customers are price conscious - of their own volition. Consequently they’ve stopped trying to differentiate themselves on anything other than price. In the process they’re ignoring things that are truly important to their customers’ self-image.

By the way, the situation I outlined above afforded me one of the greatest learning experiences I’ve ever had. I had to learn how to introduce facts that contradicted some of the story being told without making that partner appear to be misleading his fellow partners.

Lesson Learned
Don’t become addicted to low prices! If you are, use the questions in ‘Poor Customer Profile’ section of this blog to overcome your addiction. You’ll quickly get back on track to serving your customers in the way they’d most like to be served.

For more pricing tips visit http://www.pricingforprofitbook.com. To discover how you can get higher prices for your products and services, call Dale at 314-707-3771.

Discounting During Peak Season

When it’s peak selling season, hold your price. You’ll not only enjoy greater profits, you’ll do so with fewer headaches.

Great strategy?

Or sheer folly?

It’s early spring.  I’m listening to the radio when I hear an ad for the premier carpet cleaning company in our city.  The woman in the ad is telling her friend how dirty her carpets after having dirt, sand, salt and grime tracked in all winter long.  Her friend recommends the carpet cleaning company touting all of its benefits.

The ad is clever and well-constructed until the friend says the company is offering a discount.  What?  Offering a discount during peak selling season?  Why would they do that?  Ostensibly, to increase market share, right?

Is that a good strategy?  Let’s play this out to its conclusion.  First, the company is giving up profit margin with its ideal customers to garner a larger share of the market.  It’s peak selling season. They’re already swamped with orders yet they’re pursuing more orders with their discounts.  How is the work going to get done?  Overtime and temporary help.

Employees that work incredible amounts of overtime are fatigued.   They’re going to make more mistakes.  That’s going to hurt the company’s reputation.  Indeed, given the claims made in their ads, the company has set expectations they aren’t going to be able to fulfill.

Temporary help is an alternative, but these workers aren’t as knowledgeable about the process.  They, too, are going to make mistakes and damage the company’s reputation.  Plus it’s going to take them longer to complete the work. Not only does the company incur additional costs, it angers a lot of customers because the temps are consistently behind the schedule they were given.

Then there’s the strain on equipment.  When the company is operating its equipment at full tilt 12 to 14 hours a day, six or seven days a week, there’s no time for maintenance.  When the equipment breaks down, which it inevitably does in this environment, it throws the entire schedule off; once again, damaging the company’s reputation.

Of course you could add more equipment to handle the increased demand, but then what do you do with this excess capacity in the off-season?  Offer more discounts?

It’s counter-intuitive, but offering discounts in peak selling season to garner a larger share of the market is one of the costliest strategies this company, or yours, could possibly employ.  Don’t fall into this trap.  When it’s peak selling season, hold your price.  You’ll not only enjoy greater profits, you’ll do so with fewer headaches.

For more pricing tips visit http://www.pricingforprofitbook.com.  To discover how you can get higher prices for your products and services, call Dale at 314-707-3771.

Pricing: Are You Confusing the Market

When your price doesn’t support your marketing claims, you’re asking the buyer to choose which to believe – your message or price. Which do they believe?

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

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

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

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

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

Does the Hallelujah chorus come to mind? Or are you wondering whether the product is as good as touted? Is this yet another example of advertising hype? But wait, the testing labs all supported the product’s claims! Hmm, I wonder if the testing labs aren’t as independent as I thought?

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

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

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

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

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

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

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

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

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

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

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

For additional business, pricing and sales strategy, check out Dale Furtwengler products and services at his websitewww.dale@pricingforprofitbook.com