Be aware that there are two 'gaps', or surpluses, whenever any product or service is offered for sale. There is the gap between what the customer is willing and able to pay and the 'market price', in other words between their perceived value and the market price. This is the "buyer's profit."
“Developing strategies for charging different prices for different
value takes innovation, creativity and a willingness to experiment”
There is also a gap between the price the producer would be prepared to provide the product/service for and the price it is actually sold for. This is the "producer's profit." Whilst buyer's profit makes customers happy, it is producer's profit that makes firms and individuals rich.
If a supplier can identify and segment customers willing to pay more, presumably for more perceived value, they can capture some more of the buyer's profit too. Developing strategies for charging different prices for different value takes innovation, creativity and a willingness to experiment.
Anything can be differentiated - This is what marketers are paid to do. Therefore there is no such thing as a commodity, only lazy marketers!
You can differentiate yourself at low cost - It's the perceived value that matters. All it takes is imagination!
“Anything can be differentiated. There is no such thing as a
commodity, only lazy marketers!”
If you agree with these thoughts and would like to find out more about structuring your business in a better way, selling properly, how to make sales without selling and get paid what you're worth,, visit www.sws3.co.uk to download 30 more free practical ideas you can implement straight away in your business.
Service providers who charge for their time or their materials, or whose prices are influenced by their competitors can find out how to get paid what they're really worth at www.sws3.co.uk
How many people in your business have an influence on Customer Service? The Customer Service department I guess, if you have one. And the salesperson too probably, unless there is no human interaction involved in the sale? What about the delivery driver, or the switchboard operator? Should we include the Marketing function, the copywriter and the web designer? After all, they will be responsible for creating all the promotional and other material the customer gets to see and hear.
In fact any time a customer comes into contact with your business in any way whatsoever, they will get an impression of your service. Each of these occasions may be a minor event in itself, but they all add up. Each individual experience will be either Positive - magical! - or Negative - misery! - or Neutral - a rarity!
As business owner, you should ensure that every possible point of contact is managed so that as many as possible are positive and as few as possible are negative. Those that look like being neutral should be worked on too to make sure they become positive, and to remove any risk of them slipping into negative.
“Any time a customer comes into contact with your business they will
get an impression of your service”
If you agree with these thoughts and would like to find out more about structuring your business in a better way, selling properly, how to make sales without selling and get paid what you're worth,, visit www.sws3.co.uk to download 30 more free practical ideas you can implement straight away in your business.
Service providers who charge for their time or their materials, or whose prices are influenced by their competitors can find out how to get paid what they're really worth at www.sws3.co.uk
Perhaps unsurprisingly, people's views on price acceptability can vary with circumstances as well as with the issues they face and the products and services they may be thinking of buying. One set of circumstances that can vary from occasion to occasion for the customer concerns money and the way the customer is spending it.
There are essentially four ways in which money is spent, depending on whose money it is and on whom it is being spent.
* Spending your own money on yourself - You'll want the biggest 'bang for your buck'!
* Spending your money on someone else - You'll still want the biggest bang but if you're
not sure, you just give them the money - As you might with a Birthday or Christmas
present. But then you've put the recipient straight into the previous category!
* Spending someone else's money on yourself - There's little incentive to economise!
You just need to ensure you're not being totally ripped off.
* Spending someone else's money on a third party (for example Government
programmes) - Again there's no motivation to economise as there's no incentive
for spenders to evaluate Return on Investment for those providing the money,
or to ensure that the expectations of the recipients are being met.
“There are four ways in which money is spent, depending on whose
money it is and on whom it is being spent”
Understanding this pretty simple structure enables the supplier to set their pricing accordingly, so it is essential in your questioning to establish whose money is being spent and on whom, amongst the many other pieces of information that allow you to fully understand the customer's problems and the circumstances surrounding them.
If you agree with these thoughts and would like to find out more about structuring your business in a better way, selling properly, how to make sales without selling and get paid what you're worth,, visit www.sws3.co.uk to download 30 more free practical ideas you can implement straight away in your business.
Service providers who charge for their time or their materials, or whose prices are influenced by their competitors can find out how to get paid what they're really worth at www.sws3.co.uk
I've spoken elsewhere about the folly of risk aversion and the desire to be risk free. As I pointed out, profit comes from entrepreneurs taking calculated risks. But of course the customer also needs to take calculated risks in order to generate their profit too.
“It is the customer's perception of these risks that is important. No
matter if some of them aren't actually real!”
There are seven types of risk for the customer:- Will it work?
- What will I lose financially if it fails?
- How much time will I lose if it fails?
- I absolutely have to make a choice now, so will it be the right choice?
- What if it doesn't do what I thought it would do?
- What will the 'neighbours' think?
- Will it harm me?
As with value, it is the customer's perception of these seven risks that is important. No matter if some of them aren't actually real; in the mind of the customer if they are creating anxiety then they are real enough that you need to help the customer achieve an acceptable balance between overall risk and overall reward.
If you agree with these thoughts and would like to find out more about structuring your business in a better way, selling properly, how to make sales without selling and get paid what you're worth,, visit www.sws3.co.uk to download 30 more free practical ideas you can implement straight away in your business.
Service providers who charge for their time or their materials, or whose prices are influenced by their competitors can find out how to get paid what they're really worth at www.sws3.co.uk
Many will be familiar with the four Ps of Marketing:- Product, Place, Promotion and Price. But are you really sure in your mind what all four Ps mean? Could you define them all? Could you describe them all to someone else?
One analogy that I think makes things much clearer is to think about an arable farm. The farmer decides which crop to grow in each field, then prepares the ground, sows the seed, nurtures the crop and reaps the harvest.
“Think about an arable farm”
In this case:- The seeds and the planting process are the equivalent of Product
- The type of soil where the seed is planted equates to Place. Another equivalent of Place is target niche or ideal customer type.
- The fertiliser and water applied to the soil to encourage growth of a healthy crop are analogous to Promotion
- The harvest which is gathered in, the value which results from the other three Ps, is the manifestation of Price
And for those using cost-based pricing there is a fifth P: Prayer!
If you agree with these thoughts and would like to find out more about structuring your business in a better way, selling properly, how to make sales without selling and get paid what you're worth,, visit www.sws3.co.uk to download 30 more free practical ideas you can implement straight away in your business.
Service providers who charge for their time or their materials, or whose prices are influenced by their competitors can find out how to get paid what they're really worth at www.sws3.co.uk
Given the choice, and supposing there's a restriction allowing you to only do one or the other, should you focus on efficiency or effectiveness?
Is it good to be doing the wrong thing brilliantly? Firms can be inefficient yet effective. Few if any can increase effectiveness by increasing efficiency!
Productivity and efficiency are ratios - Output divided by input - But what inputs should we take? None will have any effect on the outputs of an artisan, knowledge worker or service provider. So who knows? Actually, who cares about the efficiencies of these groups?
Because costs are easier to compute than benefits, most will focus on cutting costs in order to increase the efficiency. This may well prove so, but it has little impact on effectiveness. And as noted above, we don't even know how to measure the efficiency of knowledge workers!
Efficiency is meaningless unless we know what was being attempted. It is linked to what people want and what they are willing to pay for it.
“Most will focus on cutting costs in order to increase efficiency. This
may well prove so, but it has little impact on effectiveness.”
Efficiency in the business sense or the 'knowledge worker' sense is not the same as efficiency in the thermodynamic sense. How would you go about increasing the efficiency of an orchestra? Get rid of some of them?
Efficiency is only concentrated on because it can generally be measured more easily than effectiveness, but that doesn't mean we can control it or manage it.
Efficiency and productivity should not be totally ignored, but please note that neither is a competitive advantage.
If you agree with these thoughts and would like to find out more about structuring your business in a better way, selling properly, how to make sales without selling and get paid what you're worth,, visit www.sws3.co.uk to download 30 more free practical ideas you can implement straight away in your business.
Service providers who charge for their time or their materials, or whose prices are influenced by their competitors can find out how to get paid what they're really worth at www.sws3.co.uk
It is almost business suicide for a professional services provider to operate as a commodity supplier - For example publishing a 'catalogue' listing services and prices and then competing on price - Yet many professionals put themselves in this category by their actions.
In reality the professional at least provides an 'experiential' service, with many customers demanding something totally unique. The mistake is to treat all customers equally, by having just one hourly rate - Indeed by charging by the hour at all.
“Measuring what's easy to measure is a poor substitute for
innovation. Benchmarking outside your own industry would at least
be innovative!”
Believing you are a commodity is a self-fulfilling prophesy. If you think you are a commodity - And demonstrate the fact in your products, promotion and pricing - Then so will your customers. There's nothing else for them to believe!
Benchmarking yourself against your competitors helps perpetuate the commodity myth. It's another symptom of lazy people measuring what's easiest to measure, rather than what's most important to measure. Benchmarking studies results and not processes - It confuses cause and effect.
“If you think you are a commodity then so will your
customers. There's nothing else for them to believe!”
These lazy people compare apples with apples because it's easy. Sure, they will vehemently claim that the things they measure are the important things to measure, but in fact it's just a poor substitute for innovation. Benchmarking outside your own industry would at least be innovative.
If you agree with these thoughts and would like to find out more about structuring your business in a better way, selling properly, how to make sales without selling and get paid what you're worth,, visit www.sws3.co.uk to download 30 more free practical ideas you can implement straight away in your business.
Service providers who charge for their time or their materials, or whose prices are influenced by their competitors can find out how to get paid what they're really worth at www.sws3.co.uk
