Upload
business-success-center
View
640
Download
0
Embed Size (px)
DESCRIPTION
Better pricing gets higher profits. This seminar for Downtown Austin Alliance provided information for retailers, bakeries, and art venues on how to price for Platinum Profile customers, handle objections, strategy and considerations. Also includes some financial and administrative issues that should be considered. Recommended reading list.
Citation preview
With Jan Triplett, Ph.D. CEO, Business Success Center
#DAA Pricing
Better Pricing for Higher Profits
©Business Success Center, Austin, TX 2011. All rights reserved.
Your Passion, BSC’s Expertise
• Our Mission: to help you find your way• Providing guided growth strategy to achieve success since 1982• Sales, marketing, & financial management focus • Clients from hospitality, retail, manufacturing and professional services
©Business Success Center, Austin, TX 2011. All rights reserved.2
Your Focus?
Mostly B to C?Some B to B?
Better to be P to P
.)(. (Belly Button to Belly Button)
©Business Success Center, Austin, TX 2011. All rights reserved.3
“The purpose of business is to create a customer. Marketing is the distinguishing, unique function of the business. It is everything seen from the point of view of the customer.”
©Business Success Center, Austin, TX 2011. All rights reserved.4
Marketing Defined
Peter Drucker, Mgmt “Guru”
1. Find2. Acquire3. Reinforce4. Retain
THE BEST CUSTOMERS
© Business Success Center, Austin, TX 2011 All rights reserved.5
Think FARR, Go Far
What is Pricing About?
©Business Success Center, Austin, TX 2011. All rights reserved.6
ProfitImagePositioningResources available for marketing and
promotion.Recouping your investmentAbility to penetrate a new market
Price is only constrained by two variables: breakeven point and your preferred customer’s “flinch point”. What & how you price affects all the above.
© Business Success Center, Austin, TX 2010
Your Biggest Concern about PricingWhat keeps you up at night?
1. Losing too many customers.2. Not being competitively priced.3. Leaving money on the table.4. Not being profitable enough on each sale.5. Afraid I am not accounting for all my costs (missing something).6. Breaking the law with my pricing policies.7. When to talk about price or show price without scaring
customers away.8. None of the above.
7
Pricing Objectives
©Business Success Center, Austin, TX 2011. All rights reserved.8
Meet or Prevent CompetitionStabilize Price and Profit MarginCapture Market ShareProfit OptimizationGrowth in SalesReturn on Investment
New Approach: “Shopper Marketing”Assumes shopper and consumer are not the sameMarketing aimed at shopper instead because stats show: 70% of brand selections made at the store; 68% of buying decisions unplanned
©Business Success Center, Austin, TX 2011. All rights reserved.9
Customers usually can’t remember within 10% of cost what they paid.
25% of shoppers consider price less important than time.
20% of shoppers price-driven.
Consumer Price Index & Consumer Confidence Index
What’s keeping customers up at night? The Cost of Living in the US
• Consumer Price Index for All Urban Consumers (CPI-U) increased 3.6 percent over the last 12 months. Month increase 0.1 percent prior to seasonal adjustment. (Next CPI release Sept. 15, 2011)
• Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 4.1 percent over the last 12 months. Month increase 0.1 percent prior to seasonal adjustment.
• The Conference Board Consumer Confidence Index®, which had declined in June, improved slightly in July. The Index now stands at 59.5 (1985=100), up from 57.6 in June. The Present Situation Index decreased to 35.7 from 36.6. The Expectations Index rose to 75.4 from 71.6 last month. The proportion of consumers anticipating an increase in their incomes rose to 15.7 percent from 14.1 percent. (Cutoff for data July 15, 2011 next release Aug. 30, 2011)
©Business Success Center, Austin, TX 2011. All rights reserved.10
Pricing Considerations
©Business Success Center, Austin, TX 2011. All rights reserved.11
Pricing is an emotional issue for you, your employees, & customers.
Buyer reaction to price is unpredictable.
Shoot from the hip & you’ll end up shot in the foot or worse.
One price strategy usually doesn’t fit all products/services.
Controlling costs can make a business more profitable than raising the price.
Stay alert: pricing laws & regulations change.
What You Need to Know about Pricing
Pricing should be… Pricing will…
©Business Success Center, Austin, TX 2011. All rights reserved.12
An attention getter and qualifier.
A way to position your business.
Perceived by your Platinum-preferred client as a benefit not just a feature.
Make you rich or at least comfortable or just sick and tired.
Affect the success of all areas of the business.
Require that you don’t just set it & forget it.
Pricing Competitors
©Business Success Center, Austin, TX 2011. All rights reserved.13
RealTo youTo your customer
GhostsDIY (Do It
Yourselfers)DNAA (Do Nothing
At Alls)Daily Deals &
Other Coupons
Your Price is NOT Right for EveryoneIt’s all about:1. Getting the right customer2. Keeping the right customer3. Considering their perceived risk4. Knowing your true total costs5. Identifying the top value you bring6. Accounting for long & short term goals
THEN Pricing Right & legally!
©Business Success Center, Austin, TX 2011. All rights reserved.14
© Business Success Center, Austin, TX 2010
A Quick Word About Laws
15
Two key laws to be familiar with:
1. DTPA (Deceptive Trade Practices Act) — illegal to “bait & switch” or any of the many other ways that are used to mislead customers. Applicable to sales to businesses and consumers.http://www.statutes.legis.state.tx.us/SOTWDocs/BC/htm/BC.17.htm
2. Clayton Act (Robinson-Patman Act Amendment) — illegal to discriminate on price (except in some instances), tie or bundle purchasing contracts.
© Business Success Center, Austin, TX 2011
What Customer Do You Want?Set Your Prices Based on Them.
Platinum Gold Silver
Bronze Lead Concrete/Radio Active Waste
Platinum & Gold — create stabilitySilver — has potentialBronze — uncertainLead — a time wasterConcrete — a business killer & never satisfiedRadio Active Waste a long-lasting reputation & confidence destroyer
16
Platinum Profile™ customers are…
• VisionariesSee situation as you doSee value of your solution
• AdventurousConfident in youTrust you
• DecisiveHassle-free or less hassle
©Business Success Center, Austin, TX 2011. All rights reserved.17
Who’s Your Best Downtown Customer?
©Business Success Center, Austin, TX 2011. All rights reserved.18
List your external customers. (These are those who are not part of your business.)
List your internal customers. (These people have an impact on the potential of a sale and are connected to your business in some way.)
How do your external and internal customers affect your pricing decisions?
© Business Success Center, Austin, TX 2010
What Do Your Customers Want?
• More than a solution or something fixed.There are 6 Situational Outcomes™ they value.
Reduction, Elimination, Prevention, Create Opportunity, Use Opportunity, Status Quo
(More at ownersview.com: http://bit.ly/gtdaVP)
There are 5 personal risks they are willing to take to get what they value at the price charged:
Social, Psychological, Functional, Physical, Financial• Set your prices based on your ability to deliver that outcome and reduce their risk.
19
Price to Match Your Customer’s Attitude
Positive — Seeking Opportunity Negative — Been Burned, DissatisfiedStatus Quo — Maintenance, Same as I bought elsewhere
How would you choose to price? High, Low, Competitive, None of the above, All of the above?©Business Success Center, Austin, TX 2011. All rights reserved.20
Price Acceptance
©Business Success Center, Austin, TX 2011. All rights reserved.21
Which is best?Sell more for less or Less for more?
Pricing used to justify the purchase.
Willingness to accept a given price depends on conditions of the buyerImpulse buyCreditAlternativesPerceived ValueAffirmation made the right
decision
Pricing Right
Includes both financial and marketing decisionsHas administrative implicationsSets up present and future health of the business (Legacy Pricing™)
Who should you price for? (Hint: not just customers) Make a list.
©Business Success Center, Austin, TX 2011. All rights reserved.22
What’s Your Desired Pricing Goal?
Attract paying customers who are:• Most Lucrative• Easiest SaleWhich do you focus on in pricing?• Yes• No• Maybe
©Business Success Center, Austin, TX 2011. All rights reserved.23
Seller’s Financial DecisionsMSRPTrue Total Costs™• Development Cost (Create/Design)• Acquisition Cost (Purchasing Choice & Customer Choice)• Retention Cost (Vendor and Customer)• Hassle Factor• OverheadProfitContingencyBooks & Record Keeping Issues©Business Success Center, Austin, TX 2011. All rights reserved.24
Price For What You Want Customers to Do
Examples:• Try it• Stock up• Repeat buy• What else?
©Business Success Center, Austin, TX 2011. All rights reserved.25
Seller’s Marketing Decisions
Choice of CustomerGoal: acquire (new or steal), retain, resell, upsellCompetitive AdvantagePositioning
©Business Success Center, Austin, TX 2011. All rights reserved.26
The issue of sales and discounts
The Big Debate
Costvs.Value
©Business Success Center, Austin, TX 2011. All rights reserved.27
What value do you offer to justify your price?What does your staff think?
A “Fair” PriceCustomers want: To get good value, pay a fair price.
Sellers want: To give good value, get a fair price.
What do your customers value? How do you know? Features, Advantages, & Benefits. Make a list of the most
appropriate.©Business Success Center, Austin, TX 2011. All rights reserved.28
Customer Concerns about FairnessRisk (functional, physical, financial, social, psychological)Reward (features, benefits, and game)• Features = Facts• Benefits = Reinforce A, I, O,V, L (emotions)• Game = Winner (social, small biz, big biz, government, non-profit, university, political)
Flinch Point/Reservation PointEvery purchase is really based on emotion, not logic.
©Business Success Center, Austin, TX 2011. All rights reserved.29
Dealing with Pricing Objections
©Business Success Center, Austin, TX 2011. All rights reserved.30
Downtown too pricey; small stores more expensive than bigChoosing the right customerEmphasizing the right benefits with
corresponding featuresToo tough to get there
Demonstrating added valueNot worth it
Presenting price at the right time and place (Placing pricing in the right place — clothing, website, boxes, retail items)
Improving your sales process so price not first thing people hear or see
©Business Success Center, Austin, TX 2011. All rights reserved.
Seller’s Administrative Decisions
Who to hire• Experience selling at this level
• Their philosophy and perspective
• Avoid the defenders and apologizers
How and when to train• How price can help sell
• How to keep people informed and in the loop
The danger of change • Too often & sales people confused, customers mad
31
Best Practices in Pricing
• Price what you’re worth.• Use KISS pricing system.• Account for profit, contingency & hassle-factor.• Price for positioning.• Monitor & adjust.
©Business Success Center, Austin, TX 2011. All rights reserved.32
©Business Success Center, Austin, TX 2011. All rights reserved.
Worst Practices in Pricing
• Undervaluing your benefits.• Under-estimating costs.• Not considering your Platinum customer’s “Flinch Point”.• Blindly following competition.• Inconsistent pricing.• Violating laws - DTPA
33
Good & Bad Pricing Examples
1.Charging low price to get started2.Having regularly scheduled sales3.Using customer loyalty cards
Your examples?
©Business Success Center, Austin, TX 2011. All rights reserved.34
Worth Reading
• Beating the Commodity Trap by Richard D’Aveni• Co-Op Advertising by Bob Houk • Shopper Marketing by Marcus Stahlberg• Strategy & Tactics of Pricing by Thomas Nagle
©Business Success Center, Austin, TX 2011. All rights reserved.35
© Business Success Center, Austin, TX 2010
Pricing Practices Action Items1. Make sure you have accounted for your true total
costs.2. Know the value of what you sell.3. Ensure your pricing reflects your preferred customers
value outcome, your preferred positioning, meets legal requirements, includes profit and contingency as well as costs.
36
For a copy of BSC’s Pricing Terms & Concepts Glossary or additional questions, please email me at [email protected].
Homework1. Check your pricing. Make sure all costs, profit,
contingency, positioning and value are considered.2. Make sure staff know how pricing is determined. If you
have apologizers, defenders, or complainers retrain or rehire.
3. Do market research with your best customers. How valuable do they think you are to them? High, can live with or without you, low, no opinion. If you get many who do not say “high”, rethink your benefits and features with input from your Platinum Profile™ customers.
©Business Success Center, Austin, TX 2011. All rights reserved.37
Here’s to your success!
Jan Triplett
Blog:ownersview.com
(512) 933-1983
Please call if you have questions, would like to discuss this seminar or your homework, or meet. No charge.©Business Success Center, Austin, TX 2011. All
rights reserved.38
Sales & Financial Management Services
August 23, 2011