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Blog posts tagged pricing

Should your business increase its prices?

August 07, 2014 by Guest Blogger

Should your business increase its prices?{{}}It is only natural to try to compete on price. But what you’re telling customers is “buy from me because I’m cheaper”, when what you should really be saying is “buy from me because my product meets your needs at an affordable price”.

Where does this tendency come from? Price is very rarely the primary motivator. What tends to happen is once someone has decided to buy from you they just want to pay a bit less. It makes them feel like they got a bargain. How often have you thought to yourself: "I will only buy this product if it is at this price"? Maybe at an auction, but you wouldn’t think this way when making daily purchasing decisions.  

There have been many studies showing that a small proportion of customers buy on price and the rest for a multitude of other factors. If price was the primary motivator there would be no luxury items. Luxury items sell for high prices because they are seen as exclusive, high quality and, of course, they make the buyer feel good about themselves.

The key is to make sure that your product is unique. So why is it that some sales people are against raising prices?

1 “They go against industry prices”

Some will say: "Nobody in this market will pay that sort of price!" Alas, if the product is worth it, customers will. Many successful entrepreneurs have created extra value or new products in their industry for their customers and have charged a higher price.

A classic example is the Dyson vacuum. When the first Dyson came out in the mid-1990s it sold for £400. In today's money that is £600 at least. Yet they were snapped up and made Dyson a fortune. Why did it sell? It was different and made people feel good about themselves. A boring household appliance has been turned into something a bit cool, trendy and exclusive - a bit like Apple did with the home computer.

2 “I can’t sell expensive products”

So many sales people complain that the service or product they are selling is too expensive, but they forget that others in their team are not having any problems.

3 “It’s wrong to charge a high price”

Remember the “bitterness of low quality lasts longer than the sweetness of low price”. If you put up your prices, you will always lose some customers, but only those who have bought solely on price. So what? Isn’t it better to have a higher proportion of customers who actually value your products or your services and are prepared to pay for them? Obviously, charging more money brings in more capital, which enables you to invest more into your business. It can also allow you to cut costs as in some ways fewer customers paying more are likely to use up less of your time complaining!

How do you raise prices? 

It’s probably best that you do not set your own prices. The best person for the job is your customer. Ask them what they like and don't like about your products or services. Listen to what they say and focus on improving the negatives. Test everything and raise your prices by a minimum of 5% and perhaps a maximum of 20% on your existing offerings.

If you raise prices, make sure you have a plan. Try a few customers and see what their reaction is. Give them plenty of warning, because no one likes a surprise increase. If you lose too many, keep monitoring and adjust if necessary. Can you start charging for products or services that have previously been free?  Almost always free stuff isn’t as great as paid-for services and customers often expect this.

Where have I seen this before?

When I was selling information about businesses for sale, the yearly subscription was £165. This had not changed in many years. Our sales were good, but we decided to put up the price to £195 and this made no difference to our monthly figures of c.100 new subscriptions a month. In fact – it went up.

Three months later we put the price up to £225 a subscription. Sales levelled off, but our margin was up significantly. Our closest competitor was offering a similar and in our view inferior product at £99 a month. When the Credit Crunch hit, we lowered it back down to £195, but never back to £165. It turns out that my co-director just felt uncomfortable charging more than £200! People deemed the product to be worth it and in the end, it helped us to drive more innovation like e-books, additional products and a better website experience.

One computer consultant I’ve hired in the past was charging £35 per hour. I knew this was far too low but didn’t let on, of course. They decided to later raise the price to £45 per hour but this made no difference to me. I am actually happier because I am confident they will deliver an even better service.

Copyright © 2014 Robert Moore of KSA Group and www.companyrescue.co.uk

Further reading

Mumpreneurs and money

June 16, 2010 by Antonia Chitty

Most mums with businesses are serious and committed, but don’t always find it easy to turn this commitment into big bucks.

Many women need to change the way they think about money and how they feel asking for money. Research has shown that women are less comfortable to ‘name their price’ than men, and women in ‘helping’ professions are less comfortable than, say, women working in IT. Say how much you want for your service out loud: are you comfortable saying this or do you feel a bit apologetic? I know I do.

When I run courses the majority of women attendees are in business to HELP in some way. You can only be truly effective as a helper if your business is strong and making a profit will allow your business to grow and help more people.

If you are in the position of running a business that doesn’t make enough profit you could:

  • Pay close attention to where the money comes from. Which clients/product lines bring in most profit? What can you do to maximise these?
  • Look at your outgoings. Could you source more cheaply, alter suppliers to ones with bigger discounts or buy in bulk?
  • Work out which jobs you should outsource to allow you to work more effectively. Pick tasks that you struggle with which someone else could do more efficiently.
  • Ask clients and customers about the value your business offers. Collect their feedback and spontaneous thanks to help build your confidence in what you offer.
  • Work out what motivates you to earn through the business. Is it the feeling of independence, the need to put food on the table or the ability to pay for treats? Remember this when it is time to chase for payments.

Follow these tips, stay in control of your finances and you will see your business grow.

Antonia Chitty of Family Friendly Working

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The Future of Ecommerce

April 23, 2010 by Chris Barling

There are a huge number of companies peddling different solutions to boost ecommerce sales, and of course they all state that they are the future. Some claim that they will address the “trust” issue of online commerce; others are working on smart imagery, providing the consumer detailed product information via zoom, crops and 360 degree transitions. Then there are the latest developments enabled by smart phones, including augmented reality.

Anyone considering starting an ecommerce business needs to take all of this into account. There are many different things to think about, and in this blog I try to touch briefly on a number of them.

SellerDeck has around 12,000 sites using our solutions to sell online, so I do feel that we have acquired some insight into what works and what doesn’t. Interestingly, the most successful sites seem to focus on some of the most basic things: like a great range, helpful descriptions, competitive pricing and a dedication to customer service.This may be the case, but complacency is not a business virtue. So what is really likely to prove important to the future of ecommerce?

Payment on the mobile

The first area is payment. It’s difficult to make payments online, and the fact that it’s still possible for buyers to see charges appear on their card if their details are stolen is a real issue. We’re waiting for the banks and the mobile operators to get their collective acts together. There’s lots of optimism that the next couple of years will see progress towards the mobile being the prime payment and payment validation device.

Multiple channels

It’s never been easier or more cost effective to sell online, and the trend is to put online, in-store and telephone sales together in one integrated application. It makes sense that some people want to see merchandise for themselves, think about it at home, then order online. Conversely, some people want to look at what’s available in the web store, then visit the shop to pick up the goods in person. As demand has risen, ecommerce suppliers have been able to provide these integrated systems without breaking the bank.

Mobile commerce and augmented reality

Nowadays a large and growing proportion of the population are carrying around sophisticated computers – aka smart phones – that know their geographical location, can combine this with real time pictures or sound and are continuously talking to the web. This is very exciting and brands such as RayBan sunglasses and IKEA are already demonstrating the possibilities. Companies such as Red Lazer are also working on innovative applications that allow you to use the power of the smart phone to combine real world items with online shopping; I’m convinced that there is much more to come.

Reputation management

One area that has moved from beneficial to vital in ecommerce terms is reputation management. I’m very excited about this  because my company has recently done a deal with one of the companies that we see as a rising star in this field – Feefo. This area is about managing online merchant’s reputation online, and services like Feefo have a vital role to play. Feefo (which stands for Feedback Forum) runs an independent service which asks customers for feedback on both merchants’ service and products. The merchant can’t change the feedback (anything illegal or obscene is edited), but has a right of reply. There will always be feedback about merchants on the web. Having it in one place where the positive balances the negative, and having a right of reply are major benefits of an independent feedback service. The result tends to be around a 10%  rise in sales, more on some sites.

The final word

We are now in the second ecommerce boom. The first, around the year 2000, proved partly illusory and partly a harbinger of the future. This time it’s for real. Someone contemplating a start up needs to assess pursuing brand new areas enabled by the latest technology and where much more technical skill, money and luck is required. In contrast there’s more chance of success with a traditional ecommerce venture, although the potential rewards are smaller and it’s still vital to be aware of the latest trends.

Budding entrepreneurs need to decide whether to build a traditional business with reasonable chance of success, or shoot for the stars in areas that are yet to be discovered. Whichever route you take, good luck.

Chris Barling of SellerDeck

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10 ways to get your attendees on board with online booking

February 09, 2010 by Alan Anderson

If you are an organiser who has recently switched your event booking and payment process from offline to online, then you’ll know that sometimes it takes a little getting used to – both for you and for your attendees.

At first organisers can be a little tentative and reluctant to becoming exclusively online. And attendees? Well, they will continue to use the booking and payment methods that they have traditionally associated with the organiser, no matter how imperfect and unsatisfactory that process is – but only until they are otherwise instructed.

Yet for organisers it is vital to grasp the nettle sooner rather than later – the financial payback of online registration and payment demands it. And you'll be surprised how quickly even your most traditional attendees will adapt to online registration.

Here’s 10 tips for getting your attendees onboard:

1. Go 100% online
Don’t give your attendees a choice. Stop offering alternative booking methods. When you are booking a flight online, airlines don’t also give you the option of booking your ticket via the phone. As a result we all book our flights online without a second thought.

2. Get your marketing focus right
To maximise your online registrations make your marketing emails short and punchy – a paragraph in length. See it as a short trailer for your whole event. Give a concise overview of the event highlights and make your ‘register now’ button very highly prominent. Make the button impossible to miss and ensure that when it is clicked that it links to the event registration website.

Your marketing email is about persuading your attendees to visit your registration website and not for displaying all your event information.

3. Always be linked in
Always include the URL link of your registration website in your emails. Always send several emails to potential attendees for each event and include the link in every one.

Always include your URL link clearly and prominently on your corporate website. Include the link in emails about your event to your social networking groups such as Facebook, MySpace and LinkedIn. Talk about your event and include the link on online forums or on Twitter or on your Facebook updates.

Make the link a clear ‘call to action’ for the attendee such as ‘register now’ or ‘register here’ or ‘to register for the event click here’.

4. Create incentives for online bookings
Offering online registration discounts encourages early attendee adoption, so make the ticket price more expensive for offline bookings. Charge a processing fee for manual or paper registrations. Make it clearly financially beneficial to book online. It is, after all, generally accepted that you get better deals via the internet no matter what product you are buying. You need to tap into that mindset.

Similarly, consider offering discounts for early online registration.

5. Refuse phone bookings
If potential attendees phone in to book manually then explain that registration and ticket payment are now exclusively online. Let them know that you will send an immediate email that will include the link for them to go straight to the registration page.

Have the email ready to go and explain the benefits for the attendee of using online registration and payment.

6. Give prior warning
Prepare your potential attendees for the switch. Give then good warning. Send them an email in advance that will explain that your next event will only accept online bookings and payment.

Let them know what to expect and how the process will work.

7. You’ll love it
Let your attendees know how they will benefit from your online registration system, such as ease of use, convenient and quick, more secure, self service, better communication.

Get them on board either with an email or a link to a page on your corporate website.

8. Make it official
Add a message to your voicemail system announcing the newer and more convenient online registration option along with the URL of your registration website for your next events.

Promote your online registration by placing your URL address in all printed materials, e-newsletters, email communications, handouts, signage etc for each event. Or if you run many events devote a page to your events on your corporate website with clear links to the registration website for each event beside each event description.

9. Educate them
Include a short frequently asked questions section or page on your corporate website.

Provide easy to follow numbered steps on how to register for your event. Put it on your corporate website or in your emails to give attendees confidence. Make it along the lines of ‘it’s easy to register and pay – here’s how’.

Offer attendees an online demonstration of how registration works.

10. Get your staff on board
Make sure that your staff are familiar with the online registration process and comfortable explaining it all to potential attendees.

Enrol your staff participants in one of our free, online registration training sessions to answer all their questions and build their confidence.

Alan Anderson, Blue Tube Design

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Is it really so easy to set up and run a successful business?

January 19, 2010 by Simon Wicks

I'm sitting in the lecture theatre of the Royal Institution, listening to the investor Doug Richard, founder of The School for Startups, tell an audience of potential social entrepreneurs the 20 questions that every successful business should ask themselves. The questions cover most aspects of business operation - market understanding, differentiation, industry knowledge, business model, pricing, operational dynamics, people.

The good thing about Doug Richard is that he keeps it simple. He tries to deal in the realities of running a small operation, is sceptical about big business and the claims of people touting big theories. Moreover, he's interested in doing things cheaply and effectively. It's good solid stuff and the questions are smart and get to the point.

So, in relation to your market, the three key questions are:

1) How many are there?

2) How can we reach them?

3) How many can we reach?

It's good, basic stuff that people well-versed in business might nod sagely and carry on - though it bears restatement often. However, the difference today is that this is an event specifically for social entrepreneurs. These are people who might not be "entrepreneurs" in the conventional sense; who perhaps are driven more by values or a charitable principle than by the desire to make profit. So the mechanisms of marketing and sales may be quite alien - and even frightening - to them.

But the truth is, as Doug points out, no matter how you dress it up, you can reduce marketing and sales to core principles. You need a product, you need a market for that product, you need a business model that suits your product and your market, and you need to price your product correctly. That's more or less it.

On the way, you get lots of gems. Pricing theory is misleading, says Doug: the way you price a product is to sell it to people. Efficiency counts for an awful lot: look at Tesco - few people say they like Tesco, but they shop there nevertheless. Don't listen to the opinions of friends and family about your product: they will give you a polite answer, not a truthful answer. "Every business needs three people: someone to sell, someone to deliver and someone to count." And so on, and so on.

Worthwhile? Absolutely. And I'm sitting here thinking "Wow, it's all so simple. If it's this easy, why haven't I started a business?" Ah, that's a much more difficult question to answer and I doubt even Doug would have a satisfying answer for that one.

Simon Wicks, BHP Information Solutions

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Prepare for the VAT rate rise in January 2010

December 22, 2009 by Raphael Coman

Just as you were getting used to the VAT rate at 15 per cent, it’s nearly time for the rate to change again. From the 1 January 2010, the rate will be going back up to 17.5 per cent, after 13 months at the lower level. Many businesses are already using the change to encourage customers to make purchases before the start of 2010, but there are other ways to benefit from the lower VAT rate. The VAT rate that applies is established by the tax point. If the tax point is before 1 January, then the rate to apply will be 15%. The tax point is the earlier of the date the invoice is issued, the date money is received and the date that the goods are delivered or the service is completed. As an exception, if an invoice is raised within 14 days of the supply of goods, then the invoice date will become the tax point. Therefore, you may wish to consider the following options that may be attractive to customers:

  1. You may accept a deposit or a pre-payment before 1 January 2010, which will be charged at 15 per cent.
  2. You provide goods or services in December and more than 14 days before the issue of the invoice. For instance, you must apply VAT at 15 per cent for goods or services supplied before 18 December, for invoices raised on 1 January 2010.
  3. Where you supply a service over a period spanning the rate change, it is possible to charge VAT according to the value of work done before the 1 January. Be careful, though, because you must be able to show that the way that you have split the value of the work is fair.

There are special rules to prevent avoidance of VAT by establishing a tax point before the new rate comes into force. Under the rules, a 2.5 per cent VAT charge will apply where:

  • The total value of sales are more than £100,000 (and the advance invoice or pre-payment is not normal commercial practice)
  • The supplier and customer are connected
  • Payment is due more than six months after the invoice date or
  • you provide funding for your customer to make a pre-payment.

HMRC has indicated it will only seek adjustment to an error on a VAT return relating to the rate change where there has been an overall revenue loss. With careful planning, there are ways to reduce the impact of the VAT change on your business, but the fact of the rate rise is unavoidable. To prevent misunderstanding, it may be prudent to start making your customers aware as early as possible of the VAT change and any increase in prices that will result.

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