Thoughtful Thursdays - Is it worth it?

Today's thought is about the age old topic of price versus quality. I will start with a quote from many years ago that has helped  me to remain grounded when the subject comes up.

"It's unwise to pay too much but it's unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do. The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it's well to add something for the risk you run. And if you do that, you will have enough to pay for something better!" John Ruskin (1819-1900)

Price is simple - dollars and cents

Quality can be interpreted in several ways, encompassing many things. In every case, a sale most likely to be made when the price is equal to or less than the perceived quality of the product. No one wants to overpay.

From a sales point of view one of the most common objections we face is typically to do with price. Sometimes it is legitimate, but in most cases the prospect is testing us. How hungry are we for the order and are we willing to sacrifice profit margin at the expense of the value of the product/service we are representing.

On the other side of the coin, at what point is the risk John Ruskin talks about too high before the potential customer decides not to buy?

When you find yourself in a situation where the easy way out is to compromise on price, don't do it without giving due consideration to the consequences.

• The value of the product/service is immediately lowered to that point
• Decreased profit margins
• Ultimate quality may be at risk
• Potential of customer dissatisfaction
• Continuing profit erosion as a result of lowered value

Is it worth it?

Good selling,
Richard

Thoughtful Thursdays - Stuck with entry level pricing?

Many new business owners are so anxious to make sales they set aside sound business management practices and sacrifice price for revenue. In some cases the need for cash flow is a driver, in others it may be thought that the a price concession will be a strategically wise decision. Whatever the reason for the concession,eventually you want to quickly get prices up or the consequences may be less than desirable.

I was very pleased to hear recently that a client of mine successfully increased prices. They overcame the fear of losing the customer and proposed a plan to ramp up prices over a reasonable period of time and the proposal was accepted. If this sounds too good to be true, it may have been if they had not first planned their strategy objective and tactics for the increase.

First and foremost was the task of reviewing their operations processes and determining the true cost of delivering the products and services. As is the case with most micro businesses, the owner/operator is responsible for many of the process steps, What is important is to assign responsibility for each step from the business owner's point of view. The step may be an administrative function, research, contracted help or any number of job descriptions. Once the responsibility is assigned. cost out each step based on the going rate for each of those functions.

When it is all added up, a more accurate cost is determined. Applying the appropriate mark-up gets you to the new selling price.

When one is able back up the reasons for a price increase the easier it is to implement. Knowing your cost of operations is the first step.

The worst case is that you may lose the customer, but if it is not profitable, is it really a loss? The best case that the customer sees the value in dealing with with you, remains loyal and your business is profitable.

Don't fear the challenge of increasing prices when your costs go up, be energized and rise to it. Your business is depending on it to survive.

Good selling,

Richard

Is consignment giving it away?

All your hard work is showing signs of paying off. The prospect is enthusiastic about your product and wants to carry it in their store. They must see the value in dealing with you... or do they really?

The sales process is moving along and you hear the word consignment.

Merriam Webster defines the term 'on consignment' this way: "shipped to a dealer who pays for only what is sold and who may return what is unsold."

What is in it for you as a supplier when your customer shows minimal commitment to carrying your product beyond displaying it? You may not even have a say on where it is displayed. Consignment can be a one way street that does not point in your direction. Managed properly it might work, but in the long run it may be a better policy to avoid it.

If the value of your product has been clearly communicated and understood, there should be no hesitation to purchase it. The commitment demonstrated by your customer in purchasing your product will result in that customer making the effort to turn it over as quickly as possible.

Many times I have seen good products languish in the dimly lit back corner of a store with little or no hope of being sold. I wonder if the supplier is aware that this how their product is being promoted.

It is any retailers ideal situation to have no money invested in inventory. Think about it, wouldn't it be great not to have to pay for any of your materials until you receive payment for them? Reducing costs is important, but at who's expense?

Please note that when it comes to fine art, consignment is a standard practice. It is not this sector I am referring to in this post.

If you do find yourself in the position of going the consignment route here are a few tips that may be useful:

• Contact other vendors and ask them about the store
• Visit stores on a regular basis and see how your product is being promoted and displayed
• If your product is not moving, be prepared to remove or change it
• Build a solid relationship with the store owner(s) and staff, they are your sales people

Good selling,

Richard

Thoughtful Thursdays - Resistance isn't futile

Today's thought is about the realization that your sales cycle may be longer than expected or that you may have to talk to more people than you thought to make a sale.


This realization can be very discouraging and often results in the decision to change marketing and sales strategies that may not be best for the long term sustainability of the business.


One of the easiest ways to sell is on price. Note that the operative word is easiest, not most profitable. Although it may feel like it, your target market is not a Borg-like collective of people or businesses driven to assimilate you into their way of thinking and drive your prices down and resistance is not futile.


Persistence and ongoing commitment to your business will help make it happen. Belief in the value that your product and/or service brings to the table combined with the appropriate promotional and sales activities are also essential components. Getting discouraged is not uncommon. It is how you deal with it that will help determine how successful you will be.

Resist the temptation to lower your prices or offer discounts that will only result in one time sales. If you are giving something up, then set a measurable expectation for a level of return in exchange for your investment.

There are times when it will make sense to offer price incentives, but this must be part of your overall business strategy, not a temporary action that goes against your business plan.

If your activities are producing quality opportunities, the targets have been quantified into real dollar potential and the probability of closing has been determined, then it should only be a matter of time before your efforts begin to pay off. Stick with the plan.

Good selling,
Richard

Thoughtful Thursdays - Crunch the numbers

This week I read and enjoyed a recent post on Sant's Messages That Matter titled Overcoming the Fear of Value, where the fear is identified as "value paranoia".

I strongly agree on importance of quantifying the value proposition and how critical it is to shortening the sales cycle.

If you can not place a dollar value, or propose a process to calculate and measure this value with your customer I expect you do not yet have enough information to advance to the proposal stage of your sales cycle or for some reason you are not ready to be accountable to your customer.

Whether you are providing a product or service, the value can be calculated and expressed as a dollar value or a percentage.

If your product can save production time, you can estimate annual savings based on time saved multiplied by hourly production costs.

A service offering may require a more collaborative effort to establish mutually agreed to metrics and a baseline to compare measured results, but you can still convert this to dollars and cents.

Also be mindful that there is a cost to taking on a new vendor. Setting up a new account, adding new SKU's or raw material numbers, modifying manufacturing orders are all tasks that require resources. The value you bring must take this into account as well.

Take the time to quantify the value, and the chances of a successful close will be significantly increased.

Good selling,
Richard

Thoughtful Thursdays - Establishing Value

I have yet to come across a marketing text that states in one from or another that a unique selling proposition (USP) or value statement is not key to establishing a successful business.

Businesses work hard to develop USP's, yet many new ventures find it difficult to make sales. Self-doubt starts to set in and before you can snap your fingers prices start to drop. So what happened to the added value.

One thing for sure is that if you do not believe in your USP, you will have a difficult time convincing anyone else to believe it.

In my experience the value statements are correct, it is for other reasons the USP is compromised in the sales process. These reasons can include:

• Being too anxious to make the sale
• Failing to clearly communicate the USP
• Incorrect positioning of the product or service
• Not understanding the buying process or sales cycle and making unecessary concessions
• Caving to the prospects price objections without confirming the situation
• Not sticking to the plan
• Fear of losing the sale

Before making a sales decision you may regret in the future, ask yourself why you are doing it and think about the consequences of that decision. There are situations where you may find it strategically beneficial to make concessions. What ever the situation, you must be sure the customer recognizes the value of the concessions and that you get something of equal value in return. Use your sales and negotiating skills to make it the "win-win" situation you hear about all the time.

Good selling.
Richard