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What You Need to Know Before Raising or Lowering Your Prices to Boost Sales!

24 Sep

Cutting Prices 2

 

 

One size does not fit all. You can only go so far pricing all your products based on a fixed markup from cost. Your product price should vary depending on a number of factors including:

  • What the market is willing to pay.
  • How your company and product are perceived in the market.
  • What your competitors charge.
  • Whether the product is “highly visible” and frequently shopped and compared.
  •  The estimated volume of product you can sell.

That opens the door to raising and/or lowering prices for your products. In order to make this call one way or the other, you should first understand what’s already working. Analyze the profitability of your existing products, so you can do more of what works and stop doing what doesn’t work. You want to find out which of your existing products are making money and which are losing money. You may be surprised at how many of your products are losing money — fix those ASAP.

You should also constantly re-evaluate your costs. To sell it right, you have to buy it right. If you are having a hard time selling a product at an acceptable profit, the problem may be that you are not buying the product right. It may be that your cost is too high rather than your price is too low.

When to Raise Prices — and How  raising prices
You should always be testing new prices, new offers, and new combinations of benefits and premiums to help you sell more of your product at a better price. Test new offers each month. Raise the price and offer a new and unique bonus or special service for the customer. Measure the increase or decrease in the volume of the product you sell and the total gross profit dollars you generate.

It is an unpleasant fact in business that you will have to raise prices from time to time as part of managing your business prudently. If you never raise your prices, you will not be in business for long. Continually monitor your price and your cost so that you are both competitive in the market and you make the kind of money you deserve to make.

The best way to determine if the products are priced correctly is to watch sales volumes immediately after making any change. This can be done by watching cash collections (if the business is cash or credit card based) or credit sales (if accounts receivables are used) for the weeks following. If a price increase is too high, customers will react quickly. In addition, watching the competition can help. If you’ve made a positive change in prices competitors are likely to follow your lead.

However, there is a right way and a wrong way to raise prices. You do not want to alienate your existing customer base by raising prices too steeply, especially during a recession. Rather than have a sudden increase, have a strategic plan over two to five years during which you gradually increase your price 5 to 10 percent. If your business is in trouble and you say, ‘Hey, I’m going to mark everything up”… that type of move scares people away.

In terms of raising your prices — it is more easily accepted in ‘good’ economic times. As the underlying cost of producing the product rises, the customer is prepared to accept the rise in the price to them. If the customer perceives the firm’s costs are going down while their price is going up. This will not be received well and is likely to backfire.”

Cutting Prices 1  When to Lower Prices — and How
You may realize that you have missed your target audience by pricing your products too high. You can always choose to discount your products or give customers something for free in order to get them to try your product or generate traffic to your storefront or website. People are attracted to free bonus offer or some kind of discount. You can make Wednesday senior citizen day when seniors get a 20 percent discount. In addition you could offer a student discount day.

Generally, lowering prices is not a good practice unless you are strategically trying to garner market share and have a price sensitive product, if most of your competitors are lowering their prices, or if you need to clear out old stock. An alternative to lowering prices is to offer less for the same price which will effectively reduce your costs without appearing to reduce the value to the customer. Restaurants have found this particularly helpful in terms of portion sizes but this same strategy can be applied to service industries as well.

Monitor Your Pricing  Monitor Cash Flow
Another key component to pricing your product right is to continuously monitor your prices and your underlying profitability on a monthly basis. It is not enough to look at overall profitability of your company every month. You have to focus on the profitability (or lack of profitability) of every product you sell. You have to make absolutely sure you know the degree to which every product you sell is contributing to your goal of making money each month.

Here are some other practices to help you price right:
• Listen to your customers. Try to do this on a regular basis by getting feedback from customers about your pricing. Let them know you care about what they think.
• Keep an eye on your competitors. If you don’t have deep pockets and can’t afford to hire a market research team, hire some college students to go out on a regular basis and monitor what your competitors are doing.
• Have a budget action plan in place. Try to have a plan for your pricing that extends out three to six months in the future.
You owe it to yourself and to your business to be relentless in managing your product pricing. Remember, how you set the price of the products could be the difference between the success — or failure — of your business.

Business Owner 4

Now that you know how to correctly price your products and services, it’s time to sell them. Next week we will begin a new series on how to successfully sell your products and services just in time for the holiday season!

 

The-One-Question-That-Improves-Your-Job-Search-OutcomeHave a question you need an answer to? Post it below or send me a message. I love to hear from you and I will answer you question just a quickly as I can. Until next time…..

 

 

 

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The Last Three Secrets You Need To Know!

17 Sep

Keep A Secret

 

Over the last two weeks we have been talking about one of the big killers in your business, incorrectly pricing your products and services. I call this the silent saboteur because no one regularly talks about this and most small business owners like you are left to guess what they should be charging and hoping they are getting it right. So here are the last three secrets you need to know about how to successfully price your products and services.

 

Know Your Revenue Target pricing
You should have a revenue target for how much of a profit you want your business to make. Take that revenue target, factor in your costs for producing, marketing, and selling your product or services and you can come up with a price per product that you want to charge. Remember this is usually no more than 35 – 50 percent above your overhead costs, which include your costs of the item or service you are providing. If you only have one product, this is a simple process. Estimate the number of units of that product you expect to sell over the next year. Then divide your revenue target by the number of units you expect to sell and you have the profit margin at which you need to sell your product in order to achieve your revenue and profit goals.

If you have a number of different products, you need to allocate your overall revenue target by each product. Then do the same calculation to arrive at the price at which you need to sell each product in order to achieve your financial goals. Remember to not over price your item or service. The “use-value” to you customer should far exceed the “cash value” they pay you, but don’t under sell yourself either. Which brings me to my next point.

7-know-competitionKnow Your Competition
It’s also helpful to look at others in your industry. After all, your customer most likely will, too. Are the products offered comparable to yours?  If so, you can use their pricing as an initial gauge. Look to see whether there is additional value in your product; do you, for example offer additional service with your product or is your product of perceived higher value and quality?  If so, you may be able to support a higher price.  Be cautious about regional differences and always consider your costs.

It may even be worthwhile to prepare a head-to-head comparison of the price of your product(s) to your competitor’s product(s). The key here is to compare net prices, not just the list (or published) price. This information could come from phone calls, secret shopping, published data, etc. Make notes during this process about how your company and products — and the competition — are perceived by the market. Be brutally honest in your evaluation.

Know Where the Market Is Headed
Market Direction
Clearly your not a mind reader, but you can keep track of outside factors that will impact the demand for your product in the future. These factors can range from something as simple as long-term weather patterns to laws that may impact future sales of your products. Also take into account your competitors and their actions. Will a competitor respond to your introduction of a new product on the market by engaging your business in a price war? A good example would be the way Samsung has gone after Apple. Samsung provides a lesser priced product, but so is the quality with an exceptionally high repair rate. Apple’s prices have remained largely unchanged while their customer service has become one of the best in the industry. So you will need to know what is more important to your particular market and what they are looking for, value or quality.

Coming-Up-Next-purple

 

Next week we are going to end this series with critical information for you if you think you may have gotten it wrong with your pricing. I am going to give you the key information you need to know how to make the changes you need to get your product or service pricing right.  Until then, remember to leave your comments and questions below!

10 Sep

DataCrops-Pricing-Intelligence

 

Last week we talked about the pitfalls and effects of under-pricing and over-pricing your goods and services and the dire effect it can have on your business. So this week as promised I want to take this a bit deeper for you and show you three of the six key factors you can use today to successfully set your prices and help you generate more revenue, build your brand, and successfully grow your company. Here is step number one;

1. Understand Your Other Business Priorities  Icon 18
You need to have a clear understanding of what you want out of your business when pricing your products or services. Aside from maximizing your profits, it may be important for you to expand your market share which may help you decrease your costs or it may result in what economists call “network effects,” i.e. the value of your product increases as more people use it. (A great example of a product having network effect is Microsoft’s Windows operating system. When more people began to use Windows over rival products, more software developers made applications to run on that platform.)

The strategy I have found to most successful and one I use myself, is that you may want your product to be known for its quality, rather than just being the cheapest on the market. If so, I recommend that you price your product higher to reflect it’s quality. During a downturn, you may have other business priorities, such as sheer survival, so you may want to price your products to recoup enough to keep your company in business.
“There are many methods available to determine the ‘right’ price. I recommend that you use a combination of tools and know the key factor to consider is always your customer first. The more you know about your customer, the better you’ll be able to provide what they value and the more you’ll be able to charge.”

 

customer2. Know Your Customer
Undertaking some sort of market research is essential to getting to know your customer. This type of research can range from informal surveys of your existing customer base that you send out in an e-mail or using social media, to the more extensive and potentially expensive research projects undertaken by third party consulting firms. Market research firms can explore your market and segment your potential customers very granularly — by demographics, by what they buy, by whether they are price sensitive, etc.. If you don’t have a few thousand dollars to spend on market research, you might just look at consumers in terms of a few distinct groups — the budget sensitive, the convenience centered, and those for whom status makes a difference. Then figure out which segment you are targeting and price accordingly.

3. Know Your Costs  pie_chart_dollar_sign_pic
A fundamental tenet of pricing is that you need to cover your costs and then factor in a percentage of profit usually in the 35-50 percent range. That means you have to know how much your product costs to produce, ship, and sell. That may depend on your business. Restaurants overall make about 4 percent and grocery stores any where from 1.5-3 percent which is a fairly low margin. If you want 10 percent then you factor that into your costs and that is what you charge.
You also have to understand how many of your products or services you need to sell to turn a profit. Remember, the cost of a product is more than the literal cost of the item; it also includes overhead costs. Overhead costs may include fixed costs like rent, utilities, insurance. There are also variable costs like shipping or stocking fees. You must include these costs in your estimate of the real cost of your product. If you are a member of the Small Business Academy go to the Downloads section you will find a Budget Creator that will help you easily create a complete financial picture for you business and make sure you are covering your costs and identify your profit margins.

 

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Next week we will cover the last three keys to correctly pricing your products and services. In the meanwhile, go over the three steps we have covered this week and start to implement what you have learned so far and we will finish up this section in next weeks post. If you need help putting together your own expense sheet or don’t know what your profit margins should be, please feel free to post any comments or questions below. I read them all and I answer as many as I can personally.

How To Successfully Price Your Products and Services

3 Sep

One of the secrets to business success is pricing your products properly. Price your products correctly and that can enhance how much you sell, creating the foundation for a business that will prosper. Getting your pricing strategy wrong could create problems that your business may never be able to overcome.

There are a variety of different types of pricing strategies in business. However, there’s no one surefire, formula-based approach that suits all types of products, businesses, and markets. Pricing your product usually involves considering certain key factors, including pinpointing your target customer, tracking how much others in your industry are charging, and understanding the relationship between quality and price. The good news is you have a great deal of flexibility in how you set your prices. That’s also the bad news.

This is my formula for meeting your business goals in pricing your products or services, what factors to consider when pricing, and how to determine whether to raise or lower your current prices.

Get Clear about Making Money  businessowners.jpg
The first step is to get very clear about what you want to achieve with your pricing strategy: You want to make money. That is why you own a business. Making money means generating enough revenue from selling your products so that you can cover your costs, make a reasonable profit and continue to expand your business.

The biggest mistake many businesses make is to believe that price alone drives sales. Your ability to sell is what drives sales and that means hiring the right sales people and adopting the right sales strategy. The price is merely a reflection of the value you are providing to your customer base.  Let me give you an example of what I mean. The difference between an $8,000 Rolex and a $40 Seiko watch is that the Seiko is actually a better timepiece. It is far more accurate.  The difference is your ability to sell the Rolex and the “perceived value” to your customer.

Now let’s talk about the two mistakes entrepreneurs make the most often when it comes to pricing their products and services – under pricing and over pricing.

 

priceing-too-low-675x320.jpgUnder pricing. Pricing your products too low can have a disastrous impact on your bottom line, even though business owners often believe this is what they ought to do in a down economy, when they are not generating the volume of sales they would like, or when they are first starting their business in a potentially crowded marketplace. Accurately pricing your product or services is important at any point in the economic cycle, but no more so than in a difficult economy. Many entrepreneurs (particularly women) mistakenly under price their products or services attempting to convince their customer base that their product is the least expensive alternative and hoping to drive up sales volume. However, more often than not, it is simply perceived as a cheap alternative to a more “valuable” product or service. Remember that consumers want to feel that they are getting value for their dollar and most are unwilling to purchase from a seller they believe to offer products or services that are perceived to be of lesser quality. Entrepreneurs also need to be very careful that they are fully covering their costs when pricing products. Reducing prices to the point where you are giving away your products or services is a sure-fire way of putting yourself out of business.  The only time you under price something is when you are clearing out old stock to make room for a new product or service.

 

pricing-too-high.jpgOver pricing. On the flip side, overpricing a product can be just as detrimental since the buyer is always going to be looking at pricing from others in your industry.  Pricing beyond the customer’s desire to pay can also decrease sales. Entrepreneurs (particularly men) will be tempted to price too high right out of the gate. “They think that they have to cover all the expenses of people who work for them, the lease, etc. and this is what price it takes to do all that. Put yourself in the customer’s shoes. What would be a fair price to you? He advises taking short surveys of customers with two or three question and asking them whether your chosen pricing for your products or service seems to be fair, do they see your product or service as valuable to pay that price, and most importantly would they actually be willing to purchase it themselves.

 

5keys.jpg

Next week we are going to take this a bit deeper and discover the five key factors you can use to successfully price your products and services that will help you generate more revenue, build your brand, and successfully grow your company.  I know from all the questions I have been getting that this is a hot subject, so please feel free to post your comments or questions below and be sure to add a link to your business website.

 

 

 

 

How To Create Your Own Iconic Logo

3 Sep

logos-50-prime

 

With all the new business owners entering the market I have been getting a lot of questions on how to create a really great logo. So this week I have compiled a list of six characteristics that distinguish instantly recognizable logos from the more forgettable.

 

Make It Simple  logo - I Love NY

 

The success of a great logo is in the simplicity. Milton Glaser, the legendary graphic designer best known for the “I Love New York” logo, says “You want to move the viewer in a perception so that when they first look at [the logo]…they get the idea, because that act between seeing and understanding is critical”.

 

logo - Coca-ColaMake It Unique

 

Your logo should stand out and be recognized among the slew of others in your same market space. Keep in mind that a logo does not need to say what your company does. The Mercedes logo is not a car. The Virgin Atlantic logo is not an airplane. The Apple logo is not a computer. So do not feel like your coffee shop’s logo needs to show coffee beans. If you can convey an emotion with your logo that your customer will experience after using your products or services you should have a home run.

 

Make It Adaptable  logo - Starbucks

 

Strong logos translate well across different mediums. Will your logo evoke the same meaning on a business card, as it will on a billboard? “Keeping the design simple allows for flexibility in size. Ideally, your design should work at a minimum of around one inch of visual field without loss of detail. That is why keeping it simple works best. When your logo does not reproduce well on a small scale, it can cause problems for your brand’s clarity and value.

color-guide

Make It Appropriate

 

Before embarking on any sort of marketing campaign, you must first nail down your target audience. A logo needs to accurately reflect a company’s culture and values or the company’s essence. If you are creating a logo for a lawyer, you are going to want to ditch the fun approach in favor of something more professional. If your target market is the mothers of small children, you are going to want to take the opposite approach and keep things fun and light. Color is a major attribute in determining the appropriateness of a logo design. You want to use colors that are appealing to your target market.

 

logo - NBCMake It Timeless

Milton Glaser created the “I Love New York” logo in 1975. Thirty-six years later, shirts and souvenirs bearing that enduring emblem still line the walls of gift shops around the world. It is the neutrality of the design that makes a logo timeless, such as the NBC Universal logo as an example. Look at the clean lines, the symmetry, the modernist structure, the neutrality in color appeal and content that creates the timeless quality even though it has been updated over the years.

 

Avoid taglines if possible

Taglines can be an important part of a company’s image but should be separate from a logo. The size of the text in a tagline is so much smaller that it often forces the logo to be bigger in order to accommodate the text.

 

I would love to hear how you created your own logo and don’t forget to include a link to your website so we can see you logo. Got a question? Please feel free to post them below and I will do my best to answer each one as quickly as I can.

 

 

Success Can Mean Taking A Break!

20 Aug

Young woman watching airplane fly by from tropical beach

When summer hits its peak, people often take time off from work for a little rest and relaxation. Eighty-eight percent of Americans contacted for a recent survey said they plan to take a summer vacation this year, according to research released by Orbitz.

Unfortunately, the opposite could probably be said of entrepreneurs, according to the results of research by Office Team, a staffing service, about vacation mistakes made by managers.

One-third of the senior managers surveyed believed the biggest mistake they made during their last vacation was not taking off enough time. Why? Managers are hesitant to leave the office because they fear their absence will negatively affect staff productivity. Thirdly They’re also sometimes unable to relax while away: One-fourth of the managers polled said they’re unable to take their mind off work, and 22 percent of them said they check in with their office too frequently.

Does all this sound familiar?
Check out an info graphic released by Office Team below.

1405361411-5-vacation-mistakes-entrepreneurs-make-infographic

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How To Turn A Struggling Business Into A Success!

13 Aug

Small Business Academy Texas

If your business is struggling the first step to turning it around it to identify the reasons the business faltered in the first place and decide what assets your still have in addition to the brand name and whether you can salvage them.

Here are three of the most common problems entrepreneurs encounter with a struggling businesses and some first steps you can take now to start turning things around:

1. The Company’s Focus is on Branding Instead Of Customer Valuearticle-page-main_ehow_images_a07_no_8o_steps-greeting-customer-800x800.jpg
Just because you have been in business for a while means nothing if your company does not consistently provide the finest quality, most consumer friendly, the most dependable products or services at competitive prices and back up your goods with exceptional customer service.

In this fast paced, all things digital world, the stability of a business is more the exception than the rule. The process of starting a business has become quicker and easier, but the mechanisms of failure activate more quickly as well. Through social media, you can spread the good word about your businesses products and services for next to nothing. Yet, those same channels will spread news about consumers’ bad experiences even more quickly.

To get a sense of how your customers feel about your company’s brand, first try buying your business’s products and services yourself. Buy them in a shop, try them out at home, call in with a complaint, and see how you are treated. Be your own customer. Did you get value for your money? Now take this one step further and do this same experiment with your strongest competitor. The experiment may show you many areas in which your company can improve.

complacent employee2. You As The Owner Or Your Employees Have Become Complacent
If you as the owner of the business have lost your way, it’s possible your employees have also. Keeping them motivated and engaged can be a big challenge, since they may have been doing the same jobs for a while now.
Sloppy, lackluster customer service can quickly destroy even the best businesses.
Talk with your employees: How do they get along with their colleagues and your customers? What motivates them to go to work in the morning? Listen carefully to their answers. Those whose primary concern is “paying the bills” may need your help finding new inspiration.

Very few products are so good that they can not be improved. Product development should be an endless quest for improvement of your current products and well as the innovation of new.

This process is sometimes neglected or even abandoned at an established company. When your sales seem to stagnate ask yourself and your team, does your company’s products or services need a makeover? What are the opportunities for improvement? If you are not sure ask your customers. This is something that you should be doing regularly to make sure you are offering what they are looking for to buy. The answers may help you to identify what actions you need to take immediately to get your business and sales back on track.

3. Nostalgia Blocks Innovation solar-small-business.jpg
Just because your company has been around for a while doesn’t mean that it’s on track in today’s marketplace. If your brand has been tarnished by years of mediocrity, or is seen by potential customers as something only their grandparents would use, then a re-branding may be in order.

Ask your staff if your have them, and your customers what they like and do not like about their current experience in your business, using your products and services, or navigating on your website. While your company’s longevity is an asset, you need to focus on the present and the current needs and expectations of your customers.

One last word, whatever changes you decide to make, remember that your business’s best assets are your customers and your employees if you have them. Hang in there and keep sight of what inspired you to buy the company as you work to turn things around.

If you could use a bit more help please feel free to go to www.AlexzandraD.com and sign in for a free video series “How to Get More Customer and Grow Your Business. It is full of great ideas and step by step instructions on how to turn your business around quickly using primarily the resources you already have on hand. Being successful in business is not about working harder. It’s about working smarter and I will show you how with real life examples from myself and my clients. So click here now! www.AlexzandraD.com.

In the meanwhile, I would love to hear your stories!