Mar 26, 2024 | Governance, Sales
This is one of the most common questions asked, particularly when configuring a new product.
The ‘right ‘ price will be the pricing model that delivers superior value to customers while delivering optimal returns to the seller.
Developing a pricing model involves a series of strategic and market driven choices. Packaging, high Vs Low, the channels used, marketing collateral deployed, shape of your business model, identification of your ideal customer, and a host of other factors that make up the ‘marketing mix’.
However, despite most of us knowing these things, typically price is set on a cost-plus basis, mixed with what others are charging for the same or similar/substitute product.
For an entirely new product, it is a guessing game that has potentially serious consequences. At one end you kill the product, at the other, you leave money on the table.
Dutch economist Peter van Westendorp introduced a method that ended up being named for him in 1976. It has been used sparingly since, but not as widely as it should be.
It is a simple and reasonably reliable method to determine the ‘right’ price for a product or service.
There are four questions that will set your price ‘guidelines’:
- At what price would it be so cheap that you would question quality?
- At what price would you consider the product to be a bargain?
- At what price would you start to think the product is getting expensive, but you still might consider buying it?
- At what price would you consider the product to be too expensive, and you would not buy it?
Analysis of the responses will give you the point at which you are attracting the most customers who make the trade-off between buying intention, price, and quality perceptions. Putting this on a simple two-dimensional chart makes explanation easy.
Header courtesy Wikipedia
Mar 22, 2024 | Customers, retail, Small business
Anyone dealing with Australia’s two supermarket gorillas knows how hard it is.
You know the old adage:
Question: Where does a 400 kg gorilla sleep?
Answer: Anywhere they bloody like!
Over the 45 years I have rubbed up against them, beginning as a young bloke when there were a number of now disappeared alternative retailers, it has only become harder. However, the rules of dealing with them have not changed much, just become clearer and more cut-throat.
Some years ago I did a presentation to the CEO’s of the SME group of companies who were members of the food industry lobby group AFGC. Looking back on that presentation, republished in several places, it is clear little has changed, certainly not for the better for battling SME’s.
My advice to those I work with also has not changed much, and can be summarised as:
- Have a solid commercial foundation before you contemplate the challenges of distribution through supermarkets.
- Never forget that retailers might be your customers, but they are not your consumers. At best they are a massive barrier between you and your consumers.
- Be relentlessly focussed on your long- term strategy, while recognising retailers are only the means to that end, not the end itself.
- Unless you are clearly differentiated from others, particularly in the minds of consumers, you will be a retailers breakfast.
- Know your numbers intimately. This is the barrier upon which most are wrecked, they have insufficient control and understanding of all their costs, margins, risks, and cash flow.
- Be very willing to say ‘No’ and live with the consequences, as they will almost always be better than the consequences of saying ‘Yes’.
These basic rules, and several others were the topics of conversation in a podcast with Chelsea Ford, published yesterday. The links to the podcast on Spotify and Apple are below.
🎧 Spotify: https://lnkd.in/dWzMN5mN
🎧 Apple Podcasts: https://lnkd.in/dq7yWGJZ
Feb 7, 2024 | Analytics, Marketing
Every customer segmentation exercise I have ever seen is based on geography, demographics, some combination of behavioural characteristics, or all of the foregoing.
‘Young women, 25-35, single, who live in the Eastern suburbs, earn more than 80k, and eat out a lot’ sort of analysis.
Misses the point.
There are five types of customers in every business I have ever seen
Unhappy. These will often tell you and anyone else they can grab, of their unhappiness. Usually these are users, rather than the ones who make the purchase choice. This means they can be a fantastic source of improvement ideas, but can also consume lot of your time with things that cannot be changed.
Satisfied. When a customer is satisfied, they go away happy and you rarely hear from them. The more time you spend understanding the drivers of their satisfaction, and doubling down on them, the better.
Loyal. This group of people usually quite small will not go anywhere else and will generally pay premium to you in the knowledge that you will not fail them. In effect, it is in effect a risk mitigation strategy for them.
Apostles. Apostle customers these are generally small subsection of your loyal customers and occasionally just a satisfied customer when conditions are right who are prepared to aggressively push your case to others in their various networks. These people are your best salesman and also your cheapest, although there is a cost get him to getting them to the point where they will proselytise on your behalf
Cheapskates. The fifth type, the one you can probably do without, is the one who dips in and out of your product, chasing the cheapest price irrespective of other considerations. It also seems to me from experience, that they are also the ones who complain a lot.
Think about it.
I am prepared to bet there will be nuggets of value hiding in plain sight you can use.
Header credit: My thanks to the exiled Scott Adams, and sidekick, Dilbert.
Jan 15, 2024 | Collaboration, Leadership
‘Do not ever patronise me again.’
Those words are seared onto my brain, coming from the mouth of a new boss many years ago.
I had not long been employed and wanted to make an impression. Therefore, every conversation was a combative one, a conversation I set out to win, seeing that as a way to impress.
As the conversation which took place in my office ended, the new boss for whom I had quickly built a strong regard, stood up and walked out. He turned around just outside the door, and walked back a couple of paces, and uttered those words.
‘Do not ever patronise me again’.
He then turned on his heel, and walked out.
I was both astonished, and very concerned. It was only after a painful re-run and examination of the conversation that I realised he was right.
I had, completely unwittingly, patronised him.
What had driven that destructive behaviour?
It took a while for me to understand my own behavioural characteristics. In those days I went into every similar conversation with a point of view that I was prepared to defend aggressively. While I was always prepared to adjust my position in the face of good arguments, this was deeply hidden. In addition, I failed the most significant test of a good debater.
I failed to listen.
My ‘tin-ear’ did not hear a word that was said in any context other than: ‘with me or against me’.
No such thing as active listening, understanding the basis of a differing view, or reflecting on the quality of the foundations of my own.
Later that day I did go into the boss’s office and apologise, acknowledging my mistake, and thanking him for bringing it so painfully to my attention.
We worked together very productively for a decade after that incident in two different companies. We had many debates, and rarely was the outcome black and white, right, and wrong. It proved absolutely that two heads are always better than one, assuming the heads are aligned to the same objective.
Header acknowledgement. My thanks to Dilbert and Scott Adams.
Dec 13, 2023 | Customers, Marketing
The best word in sales is ‘Free’, it will close more often than any other, by a long stretch. However, being free also implies there is no value to the buyer, and in any event, it is not really a sale, as there is no money involved. At best a ‘freebie’ is a ‘bait’ of some sort that may lead to a sale.
As a freelancer, I am tempted often to give away a lot of time and advice for free, partly to demonstrate expertise, which may lead to a sale, and partly because I am asked, and am able to do so to help. It is also partly because I find it difficult to just say a flat ‘No’
Recently I had some assistance from a professional to address a health problem. It was someone I knew quite well, and have helped a bit in the past. As I turned up for the appointment, I was asked if I had some time afterwards so the professional could, as it was stated, ‘pick your brain‘ in a specific area where I have deep expertise. As it happened, I did have the time, so said it was OK.
The upshot is that I gave away an hour delivering expert advice, while paying full tote odds for the appointment and professional advice I had gone there to obtain.
Stupid me.
I should have used the second most powerful word in Sales.
‘No’
It is hard for us to say ‘No’.
We all like to be liked, we like to be asked, and to be seen as an expert, and we do not like to be seen as ungenerous, or even a jerk.
However, is my time and expertise of any less value than the professional I was talking to?
As humans, we also want what we cannot have, wanting something just out of reach is a driver of behaviour. Saying ‘No’ moves the opportunity to learn something,, or get something that is just out of reach further away, making it more attractive, and adding to the perceived value of that something.
Watch what happens at contested auctions, as the price goes up, those remaining in the bidding become more desperate to win.
There are many ways to say ‘No’, but the essential element is that it must be clear.
If you apologise, say ‘Sorry’, the door remains open, and you feel a little guilty, when there is no need for you to apologise.
If you say ‘I can’t’ does that mean you cannot now, but might at another time?
If you offer a range of excuses, the ‘No’ remains ambiguous, and everyone is confused.
Remembering that ‘No’ makes you more attractive, you do have options.
- Just be firm and say ‘No’ I do not do that.
- Redirect. ‘No’ I do not do that, but here is someone you could ask.
- Redirect back to you. Again, several sub options:
- ‘No. However, email me a few simple questions, and I will try to answer them quickly.’
- ‘No, but I do offer calls up to 60 minutes for $XXXX fee.
- ‘That is a complex question, usually only answerable after a detailed examination, for which my project fee is $XXXX.
Use one of these, and the chances of some sort of conversion are real.
Unfortunately, in this case I did not follow my own advice, and so know that the hour I spent outlining the solution to the problem will not be valued and implemented, so we will have both wasted our time.
At least, I got a blog post out of it, so maybe there was some value after all?
