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Sunday, 25 July 2010

It's Expensive - Can You Afford It?

My wife took an old friend out this week to afternoon tea to celebrate her special birthday in a large and very prestigious department store restaurant in Manchester.  As the first glass of champagne went fairly quickly, she called the waitress over to order another one.

"You do know that it costs £8.00 a glass, don't you?" said the waitress.

The answer to that is, of course, "Why, can't I afford it?" but we don't always think immediately of the perfect riposte.

It reminded me of the time that I took time off, dressed in casual clothes, to go to buy some black shoes , again in a large and well know shop in the city.  I spotted a pair in the window which looked right, went in and tried them on.  They weren't right for me and I saw some more on a nearby shelf.

"What about those?"  I said

"Ah" said the assistant:  "Those are more expensive"

Once again the timely answer came some time afterwards but I have been thinking about the number of times that this has happened to me and, somewhat to my surprise, it is legion.

What is it that makes people think that they know better than the customer what is "expensive"?   I make no apologies for reverting to the question of pricing because it is at the heart of good business.  The true revenue of a business is the gross profit, not the sales turnover, and the right pricing policy is the major contributor.

Prices can be decided in many ways but generally, there are three standard methods; cost plus an uplift, following the price structure in the market, and, crucially, what the customer will pay for it.

This last method is far and away the best but it demands the inevitable quid pro quo, that the purchase must demonstrate value to the customer such that the apparently higher initial price is mitigated by the totality of the offer   Service, quality and guarantees are essential "extras" to reduce the dependence on price alone.

In the end, it is the WIIFM or What's In It For Me? question that must be answered.   The customer is the ONLY person who can decide what is and what is not expensive.  Certainly the seller can't make that judgement and if we do, then the danger is always that we under price in order to ensure that we make the sale.

Gross profit is more important than sales turnover and good pricing policy is the key.

For more information visit www.maa-uk.co.uk
To contact us, email to ivan.goldberg@maa-uk.co.uk

Sunday, 18 July 2010

Frankly My Dear, I Don't Give Damn!

On Thursday last, we held our Vistage Open Day at the Theatre of Dreams (that's the Manchester United ground at Old Trafford for the uninitiated) when we had over 80 people there to hear a great Vistage speaker, Peter Knight, expound on his HEMP system, the Highly Effective Marketing Plan. (read the book, it's excellent and very usable)

Peter made the point that we, the customers, don't really care that the product has been made in a state of the art, air-conditioned factory.  It could have been made in a cramped underground facility by trained primates for all that it matters to us.

Alright, we don't expect it to have been made in a way that exploits vulnerable people and that is a valid moral stance, but you get what I mean.

Many pieces of marketing "stuff", be it print, digital or even audio-visual, can be very self-indulgent when viewed with a discerning eye.   How many leaflets have you seen with a photograph of the company's office block or "the team" or, heaven forfend, the Chief Executive, in a prominent position? 

Ask yourself, would that encourage a customer to buy from you?   Ask yourself another disturbing question - what is the purpose of this piece of marketing?

The answer is, usually, that I want it to tell people what we do and how well we do it, but is that what the customer wants to know?   The days are long gone when we can merely say that this is our product range and then expect the world to beat the proverbial path to our door.

The Swiss engineer, Hans Renold, who in the late 19th century in Manchester invented the roller chain which has become a world standard of mechanical engineering power transmission, said that he would decide which companies were worthy of buying and using his chain.

Such lordly statements would carry little weight in these more competitive times but in the early days of his business, it genuinely worked and he built the foundations of an exceptionally successful business.

Naturally, following the expiry of the patent, the rest of the world decided to make roller chains, and far less expensively than its creator.

In the end, the customer wants to know one thing and one thing only and that is, the answer to the WIIFM question; if that is what you are selling, What's In It For Me?

Selfish?  Of course it is!  But I don't want to know how it's been made, where it's been made, who made it, who invented it, what sort of an office block you have or any other peripheral and not too interesting bits of information, so keep them off your marketing literature.  They get in the way of what I want to know.

What I want to know is, will it solve my problem, will it fit into my strategy, will it be economically viable; in other words, What's In It For Me?

All the other factors, the office block, the "team", even the Chief Executive; "Frankly my dear, I don't give a damn".

By the way, anyone know the next (and last) line of the film?

For more information about Vistage UK, visit www.vistage.co.uk and www.vistageblog.co.uk.
To contact us, email to ivan.goldberg@vistage.co.uk

Sunday, 11 July 2010

What Do You Mean, I'm Not Working? I'm Thinking!

One of the great things about my involvement with Vistage over the last eighteen or so years has been the opportunity to hear some wonderful speakers from all over the world.  One I remember with pleasure is Walt Sutton, a Canadian who had much business success in the USA and became a greatly lauded speaker on the Vistage circuit.

Walt's session was essentially about what makes an entrepreneur and, more's the point, what makes an entrepreneur successful.

One of the methods that he proposed was to take time out ,perhaps twice a year, to "take a day to walk on a beach" and to think about the business; no mobile phones, no notebooks, just quiet contemplation away from the day to day activity, and most importantly, on your own.

The clue to this bi-annual retreat is the fact that the leader, be he/she Chief Executive, Managing Director, Owner or whatever, is really the only person in the business who genuinely thinks about the business.   That is not to say that the other members of the management team don't think about it; rather they think more about their own functional responsibilities  such as sales, operations, finance and so on, whereas the leader needs to think about the business holistically.

It is all part of the development of a vision for the business which must be done holistically taking all aspects of the operations of the company into account, and there is really only one person in the business who can do that; the leader.

I recall one of my members having heard Walt's exposition, decided to have a day's contemplation of a particularly thorny issue which had been troubling him for some time.   He also decided to take his retreat at home overlooking some attractive trees which seemed a good idea to me.  I asked him how the day had been for him.

"Alright" he said: "I fell asleep a couple of times, and spent a lot of time thinking about the issue".

"So what happened?"

"Well, nothing immediate really" he said: "but a couple of days later - all sorts of ideas came popping out and I think that I have seen a way through the problem".

He brought the issue to the table at the next Vistage meeting and the group helped him tune and tweak it until it was in a condition to be implemented and, in the event, successfully.

The point about this story is that the leader needs thinking time about the business away from the hustle and bustle and demands of the working day, and that time spent just thinking can and should be very productive.  Immediate results are rare but just let the mind go into sub-conscious mode and it will continue working on the problem.

Sam Snead, the golfer, used to say "You gotta take time out to smell the roses".  Perhaps that should be rewritten for the leader: "You gotta take time out to work ON the business, not IN the business".

For more information visit www.vistage.co.uk and www.vistageblog.co.uk
To contact, email ivan.goldberg@vistage.co.uk

Sunday, 4 July 2010

We Can Only Compete If We Are The Cheapest! Really??

When I was a part-time visiting lecturer at a Business School, I was waxing eloquent in a session with business leaders about the need to increase rather than decrease prices.  A student in the front row sat there with a grumpy expression and arms folded and I knew that I had an impending discussion on my hands.

"Rubbish!" he said: "We can't possibly compete in our industry unless we are cheaper than anyone else" (he also said that "it's different in out industry")

"What's your product quality and service like then?" I asked

"Best in the industry" he said.

 I pointed out that there seemed to be something of a mis-match here and he subsided somewhat.   Perhaps the point got through because some time later he asked me to do a marketing study for him.

For a start I checked on the listed prices of all his competitors, 75 in all, and guess what;  he was smack in the middle, neither the most expensive and certainly not the cheapest.  In addition, the acknowledged brand leader was right at the top of the pricing chart and was the largest and most successful player in the industry.

This is a salutary lesson.  In many research programmes, price has been shown to be as low as no. 5 in a list of preferred attributes of a sale.

Furthermore, reducing prices in order to increase sales is seldom checked as to its likely result.  Typically, if you have a product with a 50% mark up (or 33% margin) then a 10% reduction in the selling price would require around 40% more sales just to achieve the same result.  What is more, a 10% increase in the selling price would mean that you would be able to lose 17% of sales before the exercise showed a loss.

If it all sound complicated I have a couple of price/margin templates which show the full range of possibilities when either reducing or increasing prices.   If you would like a copy just email me.

There is a good deal of fear in increasing prices; fear that you might lose business, fear that the customers will rebel altogether and just fear of telling people.   There is, of course, a vital need to ensure that all the other criteria which encourage people to deal with you are in place, so that you are delivering the highest possible quality in terms of product, service, delivery, promises fulfilled and general relationships.

On that basis, price becomes, if not irrelevant, certainly far less of an issue in the mind of a purchaser.

One of our great Vistage speakers, Malcolm Smith. says:  Ask your people "“Why aren’t we putting up our prices this month?”   

Now there's a thought for the day.

For more information visit www.vistage.co.uk and www.vistageblog.co.uk.
To contact and to request the price/margin templates, email to ivan.goldberg@vistage.co.uk