Monday, November 24, 2008

Six Things To Improve Your Sales And Price Position

Here’s a pithy article by Robert Imbriale, a Marketing Consultant
and author of The Business Hotline, and another favorite from the Professional Pricing Society Archives. In this competitive and slowing economy, any strategy you can capitalize on to give you a cutting edge will be important, and applying proven, best practices is always a smart approach. Cheers, EM

Six Things To Improve Your Sales And Price Position

#1 Add More Value To What You Sell
Have you ever heard a customer ask you, "Is that all I get for this price?" Chances are you have. It could mean that you are not offering enough value for what you are charging, or it could be a misinformed client. What can you do to add value to your products or services? Try adding value by including items that cost you very little or even nothing at all. Think of creative ways in which you can add value to your base product or service offerings.

#2 Offer Items Of Complimentary Importance With Each Purchase
This is one of the most profitable things you can do to increase your average unit of purchase. You accomplish two things by offering complimentary products or services. First, you add value to your products or services by offering items that you know your customers will need to buy at some point. And you are saving them the trouble of having to go to another business for these items. If you sell cameras, offer batteries, film, protective cases, and other useful accessories at the time of purchase. In a service business, you can offer products that enhance your service.

#3 Sell Upgrades

Upgrades differ from complimentary products in that they are generally a better version of the same product as opposed to a complimentary or "add-on" product. In the computer industry, this is done all the time. There is no reason that you could not apply those same.

#4 Use Risk Reversal

Here's a really powerful way to increase your sales, but you have to think this one out carefully. Offer your products or services as risk free as possible to your customers. You may offer a full money back guarantee, as opposed to most companies that offer only 30 days. The rule of thumb is to keep the risk to your customer as low as possible. Returns on quality products have proven not to increase proportionately with sales, so don't worry about being overwhelmed by returns, it won't happen!

#5 Create Special Offers To Past Customers
The most profitable market is your past customers. They have already participated in business transactions with you and have developed trust in your operation and in your products. Why not take full advantage of this fact by developing specials for "preferred customers?" If you negotiate a special deal for some product or you are planning on carrying an entirely new product line, why not let your preferred customers know about it before the rest of the world? Go a step further and offer them special pricing on those products or services if they act before a specified date.

#6 Market Payment Terms
Do you offer your customers various payment options? The more flexibility you have, the better off you will be. Leasing is an easy option to set up with the large number of leasing firms in business today. Offer as many payment options as possible so that you totally remove payment as a barrier.

These and numerous other pricing resources are available to members in the Professional Pricing Society archives.

Christmas Pricing Wars

Here are a few stories from Forbes covering retailers who are slashing prices to encourage high toy sales among Christmas shoppers despite low consumer spending and current economic conditions.

Wal Mart, not surprisingly, took the first step. Forbes reported on October 1:
Wal-Mart Toys With Xmas Strategy: Retailer will target cash-strapped consumers with low-priced playthings for their tots.

"Wal-Mart took the holiday-season initiative on Wednesday, announcing that it would be cutting prices on several toys in 3,500 American stores as a way to draw shoppers for the important year-end period. Wal-Mart (nyse: WMT - news - people ) said it made the call after conducting a survey that showed consumers will start Christmas shopping earlier this year in order to stretch their holiday dollars. Though Wal-Mart caters to low-income shoppers, retailers have been hurt by sluggish spending due to rising food and energy prices, the housing slump and a generally weak economic climate. (See "Trouble On The Street For Retail.") The industry doesn't see a quick fix to those trends and is anticipating a subdued holiday season."

Read the full article: "Wal-Mart Toys With Xmas Strategy."

One day later, KB Toys strikes back. From Forbes:
"Retailer matches Wal-Mart's $10 pricing strategy.

KB Toys said Thursday that it would be cutting prices on more than 200 toys to $10 or less in an effort to draw consumers to its stores and to compete against the large discount retailers. Wal-Mart (nyse: WMT - news - people ) made a similar move on Wednesday. (See "Wal-Mart Toys With Xmas Strategy.") The discount store has been able to fare the rough economic climate better than most as people flock to it for one-stop shopping. But smaller retailers like the privately held KB Toys have been having a hard time of it."

Read the full article: "KB Toys Strikes Back."

So how black will "Black Friday" be for retailers? And how will these pricing wars pan out? We welcome comments from our readers and will be keeping track of developments.

Thursday, November 13, 2008

Tips From a Software Pricing Guru

Pricing and negotiating software deals has never been easy
and every situation is different. Anyone trying to do a good
job of pricing and negotiating knows it takes experience,
insight, courage and wisdom. These tips come from the real
world experiences of Professional Pricing Society Board
Member Jim Geisman, President, Marketshare, Inc. The
complete brochure can be purchased at www.moreshare.
com. E.M.

1. Learn Your Customer’s Business

2. Value = Benefit - Cost

3. Reinforce Value with Price List

4. “Meet the Competition” Pricing

5. “Pre-emptive” Pricing

6. Use Credit Instead of Price Cuts

7. Use a Team to Set Pricing

8. Get the Support Pricing Requires

9. Take the Time to Resolve Pricing Up Front

10. Put Pricing and Discounting Together

11. Price List Must Fit Sales Comp

12. Make Easy-to-Use Price Book

13. Run the Numbers

14. Develop Standard Discount Policies

15. Product Bundle Discounts

To read the full article: Fifteen Pricing Tips from a Software Pricing Guru

Fundamentals of Pricing Strategies and Tactics

A timeless article on pricing strategy that I wrote more than 20 years ago. Notice how pricing strategies have long shelf lives. Warmly, EM
The following five factors should be considered when establishing a pricing strategy:

Competition: Who is your competition? How many competitors do you have? The number of competitors you face can often be more important than who they are,especially when involved in a bidding process.

Customers: Should you differentiate pricing according to customer class instead of service or product? This practice is more and more common as most businesses have several classes of customers, some of which are price sensitive, while others are not.

Financials: What are your gross margins on products and services?

Perceived Value: Do your customers perceive a difference between your services and those of your competition? If so, are they willing to pay for the difference you offer?

Marketing Objectives: What are your primary and secondary objectives? Obviously, some of your objectives will conflict. It is your role to resolve these conflicts by determining and communicating primary and secondary objectives. You instinctively know which objectives are most important, but your people require constant direction to maintain their focus. In addition, quantify your objectives whenever possible.

Click to read the full article: Fundamentals of Pricing Strategies and Tactics

Monday, November 3, 2008

4 Steps from Pricing Competency to Pricing Leadership

Here is another favorite from the PPS pricing articles archive. The subject is highly relevant, especially in today's environment of an uncertain economy and fluctuating prices on products and services. EM

Pricing Leadership is the ability of the corporate team to agree on the strategically sound pricing plan, implement it, and succeed in the marketplace. For the pricing professional to help the team reach a position of Pricing Leadership, he or she must develop the softer skills of business to complement the analytical capabilities. Pricing Leadership has a component of thought leadership, yet its true effectiveness is unleashed through motivating and orientating other individuals towards a common identified goal. To progress from Pricing Competency to Pricing Leadership, you must take four critical behavioral steps!

Step 1: Pick Your Battles
If you fight every little issue, people will consistently perceive you as arrogant or out-of-touch. In the end, this reduces your potential role as a pricing leader who helps create company strategy to one who at best, might provide technical pricing analysis. Pricing Leadership requires discretion; select in advance those issues you can champion, and which ones you will openly and proudly defer to the judgment of others.

Step 2: Explain, Don't Proclaim
Pricing Leadership implies that people willingly choose to follow an agreed pricing plan, not begrudgingly accept the restrictions of it. Teams will champion a plan when they understand the rational behind the decisions which formulated the plan. Authoritatively proclaiming your pricing plan is the right one ensures that others will find reasons to disagree with it.

Step 3: Understand That Pricing Is About Guidelines, Not Laws
Real life market situations will result in customer price transactions that are far different than those prices you developed at the strategic pricing level. In the end, the strategic pricing plan is just that, a plan, not a mandate. Good pricing plans are living creatures. They are flexible and evolve with time.

Step 4: Realize That Sales Is Your Ally, Not Your Enemy
Pricing professionals and sales teams have a common goal, to create customers and capture profitable revenues. As a Pricing Leader, you must find means to work well with the sales team. To the customer, the salesperson is the corporate advocate. To the corporation, the sales team is the customer advocate. As a pricer, please recognize their dual role and the unique insights they gain from being the conduit between the corporation and the customer.

Read the full article here: "Four Steps from Pricing Competency to Pricing Leadership."