Friday, September 25, 2009

So, What's the Price?

Many clients are losing ground simply because they may be charging too little for their product or service. In this price conscious economy that might sound a little weird but it’s true. Lots of businesses will go under this year because they will discount their widgets to the point where they no longer can keep their doors open. Here are some things to consider before you get that big red pencil out.

Basing your prices on costs, not customers’ perceptions of value Does a Rolex watch really cost between $3000 to $6000 to make? It would have to since they retail for between $6000 and the moon. Prices based on costs invariably lead to one of two scenarios: (1) if the price is higher than customers’ perceived value, the cost of sales goes up, sales cycles are prolonged and profits suffer; (2) if the price is lower, sales are brisk, but companies are leaving money on the table, and therefore not maximizing their profit.

Basing your prices on “the marketplace” Well that’s what they are charging across the street. The marketplace is often cited as the “wisdom of the crowds”—the collective judgment of a product’s value. But by resorting to marketplace pricing, companies accept the commoditization of their product or service. Instead, business owners must find ways to differentiate their products or services so as to create additional value for specific market segments. Is your product or service a commodity?

Attempting to achieve the same profit margin across different product lines
Cost accountants sometimes get stuck on this one. Some financial strategies support a drive for uniformity, and businesses try to achieve identical profit margins for disparate product lines. The iron law of pricing is that different customers assign different values to identical products. For any single product, profit is optimized when the price reflects the customer’s willingness to pay.

Failing to segment their customers
A cord of wood costs a helluva lot more in New York City than it does in Watertown New York. Customer segments are differentiated by the customers’ different requirements for your product. The value proposition for any product or service varies in different market segments, and price strategy must reflect that difference. Your price strategy should include options that tailor your product, packaging, delivery options, marketing message and your pricing structure to particular customer segments, in order to capture the additional value created for these segments.

RETAINING MORE CLIENTS: 9 STEPS TO GOOD CLIENT RELATIONS

In tough economic times, it’s more important than ever to ensure good client renewal rates as new business can become harder to find and close. So I thought I’d share my top 9 tips on how to create and maintain good client relations, which in turn can help you renew more existing contracts.

1. Be on time! I can’t tell you how many people I’ve met with in the past that actually show up LATE for meetings — consistently! Be on time. Be on time for calls, meetings, everything. Being late all of the time tells others that your time is more important than theirs — and you NEVER want to send that message to a client. Clients are typically understanding if there are unique, one-time situations (traffic, etc.), but call ahead if you know you’ll be late! It’s OK for the client to be late, but not the vendor — EVER.

2 Be a “solutions provider”, not just another vendor. What is your client’s main goal? - likely to sell more products/services. So help your client by being a solutions provider — not just another vendor. If your client is looking for a web designer, do you have one you’d be comfortable recommending? If you see an opportunity that might fit your client, do you pass it on to him/her? The little solutions you help provide show your client you WANT them to succeed — not just with your efforts but overall.

3. Get contracts up front — don’t begin work without having one. Seems like you’d be doing a nice thing to start work without the contract finalized, right? Wrong! Without a document stating everyone’s expectations and responsibilities, the waters can get murky quickly. What expectations does the client have? That you’ll do this service with the product for this price while you’re planning on just selling a product? It’s important to get everyone on the same page from the beginning so that there are no questions about the direction you’re taking, right from the start. It keeps everyone happy in the end.

4. The customer may not always be right, but tread lightly here. In our world, the customer can’t always be right. There are times when a fact about how a product or service works outweighs a client’s desire for the truth to be different. (Example: AJAX is not indexable. You have to have a workaround. That’s just the way it is!) Be sure that while you speak to your client as the “expert”, you don’t make the client feel that his/her concern is unimportant. You are both working towards the same goal, so be sure to structure your conversation in that way and be a “solutions provider”.

5. Schedule recurring calls (weekly, monthly, etc.) The recurring client call allows the client to express his/her feelings about how your relationship with them is going and to interject information you may not know — such as an upcoming event, announcement, etc. that may also help you provide better service. Be sure to touch base with clients regularly. I find that a scheduled call monthly allows clients time to get their thoughts together and is accepted as a regular calendar item. If you miss a month and the call has been productive for the clients/customers they may begin wondering why you didn’t call.

6. Visit in person when you can. Nothing beats face to face interaction. It allows you to gauge your client’s body language. Does the client’s body language say one thing while they are saying something entirely different?

7. Send a small gift. One thing you should always be doing with clients is showing them how thankful you are for their business. A small gift at the holidays, on a client’s birthday, etc. is a great way to show your appreciation.

8. Write Thank You notes. More than a gift, however, a HANDWRITTEN thank you note is even better. It tells the client that you took the time to make it personal. People really appreciate the time and thought, so take the time!

9. If you’re upset, sleep on it. I’ve written many an angry e-mail that I’ve never sent. There are always times that clients frustrate us, but instead of firing off an angry email, sleep on it. I’ve found this works well not just for my personal life, but also my business. You need to work with clients with a level-headed approach — let yourself cool off before responding. Don’t lose a client if you don’t have to!

Friday, September 11, 2009

How to Screw Up a Sure Thing

Problem: Jim, a software sales rep, had been having a rough day. He’d been bombarded with questions from several customers and had gotten behind on a proposal that he needed to finish before the end of the day. Then he got a call from Dave, a prospect who introduced himself by saying, “I’ve heard great things about your accounting software package. I saw a demo about a year ago, and was not in a position to purchase it at the time, but since then it’s become very apparent that I need to integrate it immediately into my system.”
“Wow”, thought Tim. “This will be easy. It’s about time something went right today.”
Then Dave said, “I need to know about pricing and availability. And tech support is important, too. Tell me how that works.”
Tim went into his pitch. He discussed tech support in detail, covered availability and other options, and explained that the price was $8000 with 30-day terms.
Dave’s response was unexpected. He said that $8000 was quite a hefty price tag and he needed a couple of days to consider the purchase more carefully. He’d call Jim back next week.
Jim did a double take. “What just happened?” he thought. “This sale was in the bag, a sure thing, and now he’s thinking it over? He said he needed the software right away.” And that was the end of the call.
Analysis: Jim got lazy, plain and simple. He thought Dave was sold. All he had to do was give Dave the info he needed, then write it up. He got conned into doing a presentation without getting Dave to demonstrate why he was so excited about buying the software. The entire transaction was conducted at the intellectual level.
Solution: Don’t be lured into taking shortcuts. Don’t mistake the prospect’s enthusiasm for your product or service as a sure sale. Take the time to qualify the prospect and make sure he’s real before you make your presentation. In Jim’s case, a couple of quick questions would have made a world of difference. He might have said, “Before we discuss pricing, help me understand why this software is so important. I want to make sure the application is correct for you. Mind if I ask you a couple of questions?” Of course, you’re probing for pain and one of the most important things to find out is the financial impact of not implementing a solution. Having discovered the financial impact and, assuming it was significant, you will find that the cost of the solution disappears as an objection.
Don’t take shortcuts! Don’t assume anything. Get the prospect involved at an emotional, not an intellectual, level. Use your system to qualify completely and get the sale.

Wednesday, September 2, 2009

Character Traits of Successful People

I had a conversation with a client recently that made me stop and think
about my own performance and attitude. Our conversation centered on
why some people seem so much more successful than others do.

What we discussed was a few simple character traits that seemed to
contribute to their overall success:

Drive Hard: a sense of urgency. They seemed to have a very high
commitment to achieving their goals. It was more than just not accepting
NO for an answer. These people seem to have an internal vision or
knowledge. Something that drives them. It is not fear — it is the pursuit
of the idea and a healthy dose of faith. They have the faith to believe or
know that somehow things will work.

Work Hard: these people also seem to posses a compulsive drive. They
see the goal - a vision, sense of what can be achieved. They are so
focused and committed to the goal that it seems they will let nothing
stop, hinder or interfere. Truth is they are so committed to achieving the
goal they see nothing else.

Play Hard: having fun while doing business is good. After working hard,
they take time to look after themselves, enjoy life and have some fun. It is
a sign of good mental health and indicates balance.

Finish Well: anyone can start well or sprint. These people finish what they
start. They leave nothing left undone. They have endurance. They might
appear to be perfectionists - actually they just want to finish what they
started. And finish it well!

The difference between success and failure is often just a short distance
away - the finish line! When you run a race, why quit 10 feet from the
finish line? The truth is you need endurance to finish the race. All you
might need is a little encouragement to finish well.

Surround yourself with driven, focused and passionate people. Ask them
to mentor, coach and keep you accountable. Because, you are going to
work hard and put in the time - why not maximize the results?

Carpe Diem! Seize the day!