As we slowly and hesitantly climb our way out of the recession, more and more business owners are wondering “Is it safe to increase my prices yet?” Many business owners are nervous about customer retention, about competitors’ reactions, and so decide to just keep prices status quo. I can’t tell you for sure if it’s time for you to increase your pricing, but I can give you thoughtful questions that will help you make the decision intentionally, rather than as a decision by no action.
When was the last time you increased prices? If it’s been over a year, you need to consider a price increase (move to question 2 automatically). If there have been unusual industry changes within the past year, you may also need to increase pricing.
Are eight or nine out of ten prospects saying ‘yes’ to your fees? If you’re having troublekeeping up with demand, it may be time to increase the entry level of doing business withyou. Increasing pricing because of demand is not necessarily being greedy; it is a question of attracting customers and clients that are ready to step up to your new level.
Do you recognize that you are giving less than “your all” to your customers and clients? Charging too little for our products and services gives us an excuse to do less than our best. If you see your business stepping up its level of service by increasing your fees, you actually do your customers a dis-service by keeping pricing flat. Give your customers what they want and deserve; it may start with you increasing your fees.
What reasons have kept you from increasing your fees? If the honest answer is “fear”, it’s time to take a hard look at increasing your pricing.
Do you feel adequately rewarded for the effort you put forth in your business? Some of you may have trouble with the “feeling” of this question. If so, consider it as a simple algebraic equation: if energy expended times pricing is greater than the reward you feel, consider increasing prices. Even as a former CPA and Chief Financial Officer, I consider this question the most important for small business owners in knowing when it is time to increase fees.
Increasing your prices, or not, can be a difficult decision. All too often, business owners choose to keep pricing flat by ignoring the issue altogether. If two or more of the above questions point to potentially increasing your fees, it’s time to pull out your data and consider your pricing thoughtfully. Ignoring the questions may provide short term relief, but may also lead to you resenting your business and your customers. Do everyone a favor and ask the questions.
If you’d like an independent third-party to help with your pricing questions, consider my one-hour laser focused coaching session.
I was two for two today. First, I ordered an unsweetened ice tea with lemon to go. As I drove away I took a sip and almost spit it out; sweetened, and I mean sweet! I then picked up a custom order for my niece’s graduation. I was so excited to see it but waited until I got home because I didn’t want the gift to get damaged. I opened it up and…it was all wrong. To make it even worse when I called, the owner referred to what “she” did - placing blame on an employee.
Both retailers corrected their mistake and neither was critical in the grand scheme of life, but they were critical to my desires. The iced tea was not just a drink; it was a treat for me, a refreshing drink during a busy day. The custom order was not just a book; it was obviously a gift for someone I loved very much. Both retailers had enough goodwill built with me that I forgave the error and will visit them again, but I did tell my husband about the custom gift error immediately. You never know who your customers tell about your errors, and you may not have enough goodwill to withstand an error. Enough errors made, and you will lose customers guaranteed.
Humans make errors, but how do you limit them as a business? There are three must-haves:
Understand what your customers are really after - the emotion they want to experience as a result of your product or service. In the case of the custom gift for my niece, I wanted myniece to feel my love for her. Tough to do when the gift is made incorrectly. The iced tea was refreshment. A pet-sitting business client o fmine, Common Bonds Pet Services, understands that they don’t just walk animals, they are in the business of Trust.
Build systems to prevent errors; make sure the systems are built around your customers’ core wants and needs. For Common Bonds, a cardinal rule of the pet-sitting business is that a client’s door hasn’t been checked until its security has been checked three times. A final comparison of my custom gift template compared to the final product would have prevented the error at a cost of 1-2 minutes.
Take ownership of errors. If an employee makes an error, it stinks. But it is your responsibility to hire and train, instill your company’s core values, and to have systems in place to prevent errors.
How do you prevent errors? I’d love to hear what systems you have in place to insure you deliver exactly what your customers want, or more, every time.
Mother’s Day is right around the corner. A radio ad the other day went something like this:
“If you have a mom, know a mom, or are a mom, come on down…” Seriously? Just a little more creativity, thought and insight could yield this business credibility, recognition, and business. Consumer spending is up generally this spring, and small businesses can benefit at the same time as doing a good turn for moms and those buying for mom.
Whether it’s Mother’s Day, Father’s Day, back-to-school time, or Hanukah, the key to reaching potential customers is the same: know your strengths and know your customer. Here is how you can increase customer traffic now, and any month of the year.
Know your business’s strengths. What makes you unique? What attributes cause you to stand out from your competitors? Be specific - “great customer service” does not make you unique; it allows your doors to remain open. Consider advanced training, personal experience of the owners, or a specialized niche for which you are known. For holiday purchasing, expanded hours and proximity can be considered strengths and also be key decision factors.
Know your customer. Understand why your customers come to you and look for behavior patterns or demographics that drive their purchases.
Use keyword research to understand what potential customers are searching for; use their language in your marketing. A common search this week might be “unique gifts for Mother’s Day in New Hampshire”. If you have that language on your page or in your social media campaign, not only do search engines like you but, personally, I will feel understood by you and that your offerings are a perfect match.
Use your internal systems to sort customers by seasonality. If they purchased from you before the holidays or the weeks just before Easter, chances are they will be gift shopping for Mother’s Day.
Knowing your strengths and understanding your customers are critical whether you are placing a local print advertisement, Facebook ads, or developing other social media campaigns. Spend focused time creating clarity around your market and you can develop credible marketing for any season or holiday.
Citigroup investors last week let the Board of Directors know that they would not approve executive pay when the company’s performance was less than stellar; last month Citigroup failed the Federal Reserve’s latest stress tests. Further, investors saw an inequity between shareholder value and executive pay. In short, they wanted performance for pay.
Whether executive pay on Wall Street, sales incentives, or company-wide bonuses for performance, incentive packages can be tricky business. I’ve learned the hard way that rewarding the performance you want more is not as simple as it seems. Here are my top five tips to designing an incentive pay plan that your employees are excited about and that increases your bottom line.
Understand and incent for the behavior or performance you truly want. Creating marketing materials within a timeframe may be a goal, but if no one remembers it or picks it up, you haven’t achieved anything. Another desirable goal is to increase client loyalty, but never lose sight that the bottom line objective is revenue. While it could make sense to reward for repeat appointments, incorporating a pay component based on increasing revenue is also critical.
Understand that by rewarding one behavior, you may discourage other behavior. By rewarding the retention of customers, you may inadvertently incent employees to avoid marketing and building the customer base. It’s about balance.
Engage the employees in the process to make sure your goals are in alignment. Incorporating the employee’s goals is a win-win; if they’re enthusiastic about meeting or exceeding the goals the company more easily meets its goals. Understand what rewards are valued by the employee; not everyone is motivated by financial reward. Ask what motivates them and incorporate their goals and motivators.
The behavior or performance being rewarded needs to be measurable. If systems need to be built just for the purpose of calculating incentive pay, think again. You are either not incenting a behavior directly in line with your goal, which are generally simple (increase revenue, decrease inventory levels), or you need to break it down into smaller, simpler components.
The employee ought to be able to easily calculate where they stand during the performance period. Incentive plans should be so simply designed that whenever a sale is made, an appointment booked, or customer payment received, the employee can quickly calculate the associated pay.
If you don’t see the desired results from your performance pay plan, get ideas from employees and adjust. When incentive pay is done well, it’s easy and you’ll see your desired outcome quickly.
Facebook announced earlier this week that it is buying the photo-sharing application Instagram for $1 billion. My mind went straight to calculating the value per employee; too many zeroes to do in my head. Turns out to be around $83 million dollars of value per employee. Intrigued to say the least, I started digging to see what made Instagram so special and how small business owners could apply the same principles to build value.
The first thing I learned is that Instagram customers are incredibly loyal, almost cult-like. The application is easy to use, works very well and adds functionality that didn’t otherwise exist (cool filters).
Lesson: Give your customers ease - whether in using your service or in product functionality; excellence; and provide unique products or services, not the same old thing they can find around the corner (today, around the corner means anywhere around the globe).
The photo sharing app fills a void - the mobile market. Facebook is often criticized for its mobile interface; Instagram recognized that hole and filled it.
Lesson: Look for voids in your marketplace; walk through your industry’s typical customer experience from the customer’s viewpoint; what elements are missing? Where does the customer need to make a leap, or do some extra work? Fill the void and make your customers’ lives easier. You’ll increase loyalty and become that “why didn’t someone think of this sooner?” company, which increases company value.
Instagram founders decided early on (a whopping two years ago!) to be really good at one thing: mobile photo sharing. They stripped productivity out of a previous application to focus solely on a cool app allowing mobile users to share and edit photos.
Lesson: Make a conscious decision about what your company is all about and do it with excellence. Instagram is a one-product company but you can have many products or services focused on an experience; Wal-Mart has millions of products but the focus is the same for all: low prices, wide selection. Decide and act in line with that decision.
30 million users have chosen Instagram and now Facebook has chosen them, as well. They must be doing something right; select at least one lesson to apply to your business. Let me know how it grows.
Car sales is an interesting business. One dealer sells the exact same large ticket item as the next, yet most of us have strong preferences for one dealer over another. Since it’s not the product that makes the difference, it has to be everything else. Interesting, when the investment in the product is so high.
Every business has “competition”; on the other hand, none of us has competition, because no one else provides the exact same experience as we do. Those nuances in how we provide our product or service are our strengths; they are the reasons our customers and clients will choose us over alternatives. Understand your strengths and you’ll attract more ideal customers more easily. Here’s a simple exercise to help you get a clear picture in your mind, which you can then translate into your marketing and branding:
Who do you think of when you think “competition”? Go to their website and look at the pictures; what’s the overall impression you get from the pictures? Who is the customer they portray? Write down one or two words or short phrases.
As objectively as you can, now go to your own site and view the pictures. What story do your pictures tell about your business and your customers? If you don’t have pictures (fix that!), read customer testimonials you’ve received and look for oft-repeated words, phrases, or ideas. Write down what your pictures say about your business.
Compare the two.
The differences are what makes you stand apart and are the reason your ideal customers and clients selected you. Your pictures tell a story, they tell readers how you are different. A client was stressing about new competition the other day, so I did this exercise. The pictures told me that these two businesses were night and day! The “competition” pictures were of individuals; my client’s pictures almost all had several of his customers in the picture, his customers were high-fiving, laughing, enjoying being with each other. Clearly, one of my client’s strengths is the community built amongst his customers.
Rather than reacting to your competitors’ messages, identify what separates you from them. By doing so, you will clarify your strengths and you will never suffer at the hands of so-called competition again.
Americans are lining up to buy tickets for the Mega Millions lottery drawing tonight, estimated at $500 million. As in half a billion dollars. That’s a pretty big return for putting a dollar bill on a counter and asking for a ticket. I think most of us realize that winning is a LONG shot but all too often I hear of business owners looking for a big return without much more effort than buying a lottery ticket. When I look through e-mail campaigns I’ve received just this week, I could have been lured by these lottery-like promises to get rich “easily”:
I've done all the work for you….
…make fabulous money and be amazingly successful!
How to Make Your Business – and Yourself – Rich & Famous!!
I wish I could promise all of my clients similar results, but the fact is that your success depends in large part on you and your efforts. Business ownership is rarely easy, but when it’s done “right”, it is full of ease. Understanding your personal strengths (the ones you were born with and can’t help but BE and DO), defining your ideal customer so that you would recognize them on any street anywhere, and an incessant attention to your customers’ wants and needs takes some effort. With that clarity, though, your business and your success becomes simple, a matter of following the roadmap you’ve created.
If you’re tempted to buy in to one of these quick rich offers, ask yourself these question instead:
What business growth opportunities exist for me right now?
Can I describe my business’s strengths in 30 words or less?
What action can I take this week to step up the attention I give to my customers?
Invest in your business, and your livelihood, by adding clarity and focus. You may not get the same thrill as when you give the clerk a buck in exchange for the dream of $500,000,000, but I can promise a higher likely return. Winning the lottery is fun to think about, but with odds estimated at about one in 176 million according to lottery officials, I need to get back to work.
My Blog
