Sep 12, 2024 | Sales, Small business
Imagine the difference.
You go into a sales call and the first item on the agenda is the price. The potential buyer knows that the price stated is the price, without variation. The whole conversation therefore is about quality, delivery, and all the other things that make up value to the buyer. It may also save you time by quickly eliminating those for whom the price is beyond their budget or expectations.
On the other hand, when you go into a conversation with the other party believing that price is negotiable, the whole conversation then becomes about price, and not about all the other elements that create value for both parties.
What if we’re undercut by a competitor you cry?
Inevitably that will happen from time to time.
Get used to it.
Two strategic questions about price to ask yourself:
- Do I want this customer who is prepared to swap supplies for a few bob in the absence of the other services that we provide?
- Who is it that this competitive supplier is overcharging that we should be talking to?
Most sales conversations I have seen default to debates on price. This does no party any good, as price is only one element of value.
As Benjamin Franklin noted: The bitterness of poor quality remains long after the sweetness of low price is forgotten’.
Header cartoon credit: Tom Fishburne at Marketoonist.com. Thanks Tom!.
Aug 14, 2024 | Analytics, Marketing, Sales
There is lots of talk, often sales-hype from digital urgers, about Lifetime Customer Value. When applied correctly, it is a vital measure, but when you look closely, it often means lifetime customer revenue.
Revenue is of little commercial value in the absence of margin, so the discussion can be completely misleading.
Understanding the margin generated by customer segments, or in some cases, individual customers is an immensely valuable metric that enables you to focus resources where there is the most benefit to the enterprise. You can make informed tactical choices with a great level of confidence based on the margin delivered.
Customer margin is also an enormously useful metric elsewhere.
Sales people are often rewarded on revenue, which can be gamed. Margin over time is much harder to game, and a far better measure of the effectiveness of a salesperson in delivering value to the enterprise while serving customers.
Similarly, calculating the cost of acquisition of a customer gains traction when measured against margin rather than revenue.
One of my clients businesses relies on referrals as a source of business. Increasingly they are moving towards margin on converted referrals as the single metric that best measures the impact of their marketing and product delivery efforts.
You cannot generate margin in the absence of revenue, but you are easily able to generate revenue without margin. Not a good idea!!
As an aside, also beware of the difference between margin and mark-up. They are similarly often used to mislead the unwary.
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
Jul 7, 2023 | Branding, Marketing, Sales
A hundred years of practical experience and academic research proves that cutting marketing budgets during tough times is the worst thing you can do. Most do it, simply because it is easy, seems sensible to the uninitiated, and often prevents yelling from the corner office.
This provides great opportunity for those who hold their nerve.
Brands are built by having a ‘share of voice‘ greater than their market share over time. Brand building is a long-term exercise, which becomes cheaper in a recession, as others cut their expenditure, demand for advertising space drops, so does the price as a result, and your customer is more likely to see your ads in a less cluttered environment.
This is a strategic investment.
You should reduce the existing tactical, promotional deals if you can, as they are costs to the bottom line, not investments in your brand. You might get a short-term volume bump, but the added volume rarely replaces the margin lost from the discount.
Do the maths before you agree to the discount.
How much extra volume do you need from the promotion to recover the margin surrendered? Consider also the customers perception of the ‘right price’ for your product. Have you just lowered it?
You can cut yourself to oblivion, easily, while being clapped from the sidelines. Usually those clapping control access to consumers, as do supermarkets, or are those customers who would have been happy to pay more.
Do not miss the opportunity to build your brand while your competitors are hunkered down giving discounts in an effort to maintain volume, while destroying long term commercial sustainability.
Header credit Tom Fishburne at marketoonist, who very effectively pokes fun at marketing hubris.
Jun 19, 2023 | Customers, Sales
Optimising a sales process is not just about the conversion rate, as that is an outcome, a function of many things that come before and contribute to that outcome. The challenge is more about optimising each stage in the process that leads to a maximised conversion rate.
Over the years there have been many tools that assist the process, BANT being one of the best known. All of them in one way or another recognise a progression through a process that should be simple, but which consultants and others have overcomplicated.
The following 3 part qualification process should play a role.
Basic criteria for qualification.
Does the prospect fit the picture of your ideal customer?
Basic criteria + Fit.
Does the prospect have a need for what you have, do they have a problem you can solve better than anyone else? How compelling to them is your value proposition?
Basic criteria + Fit + Intent.
Is the prospect aware of the problem, are they searching for a solution, have they engaged with you in some way? Are they willing and able to pay for your solution? What elements will drive the timing of their decision to buy now, delay, or decide not to buy?
While this may seem too simple, often the best is also the simplest.
Mar 17, 2023 | Communication, Sales
Goliath, contrary to the stories, usually does win, it is just that we simply never hear about it. There is no drama, no unexpected outcome, no backstory of how little, under resourced David beat the giant who had all the advantages, and got away with the prize.
We use these stories in marketing all the time, because they work, and we know they work, because they have been told to us as stories when we were kids, and we remember them.
They have meaning.
Go to a live event, with someone selling something from the stage, and you will always hear pretty much the same sequence: hardship, battling against the odds, a personalised stage of despair then some insight that shows them the path, which made them hugely successful.
Now they want to help you walk the same path, they offer a picture of what it will be like at the end of the path, you just must be brave enough to take those steps, to grasp the opportunity they are offering, which they know works, because they are the living proof.
Trouble is, just buying the books and courses of someone who has been successful does not make you successful.
In fact, the reality is usually that the only success that someone flogging a book or course has had, is in selling you a book or a course.
