Posts Tagged ‘sales’

Do You Have a Job or a Business?

Tuesday, February 19th, 2013

I don’t know who first asked that question, or when.Business owner's strategy determines job or business

I do know that there are lots of business owners who either have never heard it or who have heard it but choose not to think about it.

How do I know? Because we meet them and, if you think about it, so do you. In fact you may even be one.

How do you recognize them? They fit one of 2 groups.

The first is the “solopreneur”. A solopreneur is someone who starts a business but never grows it beyond the point of having only 1 employee – themselves. (If I seem a little nervous it’s because, a few years ago, I came uncomfortably close to being one.)

Some people do it deliberately. They’ve often had successful careers in large corporations with large teams reporting to them. They reach a point where they’ve had enough of managing people and playing politics and want to get back to just doing the work they love.

Others do it by omission. They want the rewards of building a larger company but either won’t take the financial risks or they share some of the characteristics of people I’ll talk about next.

The second group is people who can’t get out of their own way. Their companies have grown, but nothing can happen in the business without them. For example, only they;

• Know the key contacts in every customer and supplier.
• Can fix things if a customer is unhappy.
• Understand how products are produced/services delivered.
• Can conduct interviews “properly” and offer jobs to new hires.

As a result they work as close to 24 hours a day, 7 days a week as is humanly possible – for years.

And, despite what they tell you, they are not happy.

The irony is that, even when they collapse because of exhaustion, no one will buy their company because without them it doesn’t exist.

Andy Bailey, who is a reformed member of the second group, recently wrote an article about it. He describes the 4 steps he believes make the difference between building a business and having a job.

1. Define the company’s purpose (tip – begin with why the business was started) and hire people who buy into it. That will build a strong culture.
2. Replace the people with all the knowledge in their heads with systems and processes. This is what Michael Gerber talks about in “The E Myth”.
3. Create demand instead of always chasing sales. Consistently deliver quality products/services on time and build a reputation for the brand.
4. Create a strategic plan which produces results via prioritized action plans involving everyone.

These 4 steps are a neat précis of the advice in books like “Built To Sell” by John Warrilow. And they separate the owner from the company and a job from a business.

Why is that important? Because you can’t sell a job when you’re finished with it. But you can sell a company.

So which do you have – a job or a business?

 

If you enjoyed this post you’ll also enjoy 8 Things That Hinder Growth.

Click here and automatically receive our latest blog posts.

Share

Increase Your Profits In 20 Minutes A Day…

Tuesday, July 31st, 2012

Our guest this week is Adam Green, founder of Maple North Internet Marketing, a Toronto-based online marketing firm specializing in search engine marketing, social media marketing and Google Analytics consulting.

The title may read like an overused infomercial – but if you’re reading this, you are interested in the offer.

We drive traffic to clients’ websites to generate sales, leads or increase brand exposure to help their business grow. So I’m often asked: “What’s the secret to online marketing?”

It’s really quite simple. Look at your analytics stats daily. Analytics, in the online world, are your website statistics. They track your visitor activity, traffic levels, goals and so much more.

So step 1, make sure you have some form of analytics installed starting today. I recommend Google Analytics as the system is quite robust – and it’s free.

Think of your website like a retail store or sales person on the road. How do people interact at your location/with your people and what types of behaviour have lead to sales in the past?

Write these ideas down on a list. Let me help you with a few:

1. We tend to close a sale when our sales reps use a case study.
2. We often get a “yes” when we discuss a specific service offering.
3. Customers purchase our products when they spend more than 5 minutes in our store or come back 3 times.

Step 2 is to consider how these questions relate to your website and what information it delivers. Do you have the case study in question on your website? How often is it visited? Can a visitor find the case study easily in your navigation? Should you make it available on your home page?

If your business gets more sales through an entry level service, how is that service portrayed on your website? How many people visit the page and what path do they take to get there?

If your retail stats show your customers’ purchase behaviour increases after “x” amount of store visits… guess what? You can see how often they visit your site in your analytics stats also.

Step 3 is to encourage repeat visits. Take some time each day and look at your web stats. Are you leveraging your email marketing list? Are you engaged in banner advertising and remarketing to drive traffic back to your website?

Create a baseline and begin to test ways to improve your website to grow your profits.

These 3 simple steps embody much of the secret to online marketing. Start using them and, in the 20 minutes a day you spend on them, you will increase your profits.

You can contact Adam at adam@maplenorth.com or by phone at 416-616-8597

Cop Out Or Common Sense?

Wednesday, July 18th, 2012

“How can you be sure that you’re not just taking the easy way out?”

“If you let yourself off the hook once, won’t it be easy to do it again?”

Last week’s post clearly touched a few nerves. I understand that some business owners feel strongly that a sales budget shouldn’t be cut mid-year. But I have an answer for those 2 (and the other) questions which were fired at me this week.

You’re not taking the easy way out if……….

1. At the beginning of the year you applied your execution “know-how”¹  to the setting of the goal. You do that by inviting the key people responsible for achieving the goal to participate in setting it. Before giving the goal the “go ahead” you persist in asking probing questions until you understand how the goal will be reached. Questions such as:

• Which products will generate the sales? (e.g. old or new)
• Who will buy them? (e.g. existing customers or new ones)
• What compelling reason will they have for buying them, now?
• Who is responsible for getting the sales and making, delivering and supporting the products?
• How will they need to work together and why will they do that?
• Are our reward systems strong enough to make them want to work together?
• How will our competitors react?
• What are the milestones along the path to reaching the goal?
• Who is accountable for reaching the milestones – and do they know that they are?

2. By doing this you ensure that:

• The goal is linked to the company’s capability for delivering the results.
• There is strict accountability for reaching each and every milestone.
• There are contingency plans to deal with the unexpected things that life consistently throws in the path of even the best laid plans.

3. Even if, despite all of that, unexpected circumstances force you to consider lowering the goal, you:

• Relentlessly seek out and focus only on the facts – not opinions, emotions, feelings or anything else – which have caused the situation to change since the goal was set.
• Evaluate the alternative responses to those facts using logic and experience.
• Conclude that the only alternative that makes business sense, in the long term, is to lower the goal.

You’re not letting yourself “off the hook” because………..

Lowering the sales goal is not the result of an emotional reaction. Nor is it a step which is taken lightly.

The decision is based on facts (about circumstances which might not even have existed at the time the goal was set). It’s a rational, well thought out response to the situation.

To act in any other way is not a logical approach to business and so flies in the face of common sense.

¹ “Execution: The Discipline of Getting Things Done”, Bossidy and Charan, Random House, 2009, pages 32 and 38

If you enjoyed this post you’ll also enjoy Bad Strategy – How To Spot It

Click here and automatically receive our latest blog posts

Can You Lower Your Sales Goal During The Year?

Tuesday, July 10th, 2012

The meeting was moving along well until the topic of the annual sales target came up.

The leadership team wanted to lower it to a point significantly below the previous year’s actual results. They believed that the arguments for doing so were logical and made good business sense.

• Actual performance at the end of the first quarter was well behind target.

• Research, admittedly informal, revealed that sales producers made a limited contribution in their first year with the organization. Things improved in the second year. But it took 3 years for them to produce sales at a rate which would keep the organization at the level of the previous year.

• Because of growth, almost half of those responsible for producing the sales were in their first year with the organization.

• There had been a number of large non-recurring sales in the previous 2 years. And while it was reasonable to hope there might be some this year, it seemed unwise to plan on them.

Some of those at the meeting were shocked. After all, this was only the end of the first quarter.

The target was set a few short months ago. The leadership team believed it was possible then. How could they argue it was impossible now!

Then the view was expressed that companies couldn’t (or didn’t) change their budgets once the year started.

We hear this quite often and my response is usually “Who says they can’t”? There’s no external authority that says it’s not allowed.

Publicly traded companies regularly revise their budgets during the year (ask any RIM shareholder). They call the new set of estimates a forecast.

Why can’t privately owned companies do the same? What happens if, for example, it becomes apparent that the company can or will exceed its budget? There isn’t a leadership team I know that won’t revise upwards.

The challenge is when it comes to a downward revision. Our first response is that it’s giving up, quitting, losing. But that’s an emotional reaction.

What happens, for example, if the economy tanks; or a competitor introduces a new technology; or people with needed skills can’t be found; or financing for additional resources couldn’t be obtained?

All of these events can be demonstrated to have happened. They’re not a matter of opinion, they’re facts. To cling to a budget that was developed either before any of those things occurred or which assumed their impact would not be as great as it was seems illogical.

I mentioned some of the facts in this case earlier. Here are some others.

• Every member of the current leadership team was new to their role when the budget was developed.

• No analysis of the drivers of the organization’s previous results had been done in recent times. So none was available to help or inform the new team. 

• The previous leadership team had been in place for only a year and had other challenges to deal with.

• The handover period between the teams from was relatively short.

After some heated discussion the budget was lowered.

If you enjoyed this post you’ll also enjoy Where Do The People Fit?

Click here and automatically receive our latest blog posts

Why Would Anyone Hire A Management Consultant? – Part 2

Tuesday, June 26th, 2012

In my last post I talked about how owners of companies can find themselves faced with situations they haven’t encountered before – and not realize what’s happening.

After all, that happens in our personal lives. Remember the first time you fell in love?

We’re caught up in the symptoms – the tune playing endlessly in our head, the face we can’t get out of our mind and the grin we can’t wipe off, no matter what else is going on. How many of us simply didn’t understand what was happening? I don’t know about the ladies but believe me, none of the men did!

Sometimes it takes someone who has already had the experience, to alert us to the situation.

Think for a moment about a company with between $3 and $5 million in annual revenues and which has been in business for anything from 5 to 20 years. The owner is successful by any measure. They’ve grown their businesses to a respectable size, provided employment for others and beaten the odds of failure.

But then things start happening that many of them have never encountered before.

I’m So Frustrated

For example, in companies of this size the owners are typically directly involved in everything that happens. That may work well for a time, but eventually either the volume or the complexity of the business reaches a point at which no human being can sustain the effort required.

That’s when we hear them say things like “I’m just so frustrated!” When we ask why, typical responses are “I’m working 16 hours a day, 6 or 7 days a week – but sales aren’t going up.” Or he or she often feels that they’re not paid enough for hours they work. They only want to work 4 days a week in the summer and take more vacations with their families.

Because they’ve been successful up to this point, they believe they can figure it out for themselves – overlooking the fact that this is a situation they haven’t encountered before.

Some may try developing (or hiring) supervisors or managers to take work off their shoulders. But it isn’t successful and they feel it isn’t worth trying again.

But a consultant, who has had experience delegating and working with a management team, knows that it isn’t something that comes easily or naturally to most people. He or she can help the owner select competent team members and get them working together effectively.

A Victim of Their Own Success

Business owners can also be a victim of their own success. For example, adding a new distributor can result in sales growing so quickly the company can’t cope.

This leads to a dramatic increase in customer complaints – about customer service, quality, delivery or all three. And the owner is caught in an endless cycle of dealing with urgent, day-to-day issues and juggling operational balls.

An experienced consultant can see beyond the symptoms, help the business owner break out of the cycle and put processes in place to maintain control of key functions.

I don’t want to take the romantic analogy too far and suggest that a management consultant could be a business owner’s best man (or woman). Even I realize that may be stretching things a bit!

But there are times when getting an objective, third party opinion could be the best thing to do – no matter how difficult or unlikely a solution it seems.

 
If you enjoyed this post you’ll also enjoy 3 Reasons Why Consulting Assignments Fail Part 1 and Part 2
 

 

Why Would Anyone Hire A Management Consultant?

Tuesday, June 19th, 2012

 I gave a presentation last week on the topic – “Why would anyone hire a management consultant?”

I think the topic the organizer actually had in mind was – why would anyone in their right mind hire a management consultant? But they were too polite to be that specific.

Many members of the group I talked to know business owners whose companies have between $3 and $5 million in annual revenues and who have been in business for anything from 5 to 20 years.

So, I customized the presentation to that situation, which wasn’t difficult, because owners of businesses like that often face an intriguing situation.

They’re successful by any measure. They’ve grown their businesses to a respectable size, provided employment for others and soundly beaten the odds of failure (80% of new businesses don’t make it beyond the second year).

But, at around $3 to $5 million, something changes and annual sales stop growing. The exact point at which it happens varies depending on a number of things e.g. the industry – but it does inevitably happen. It’s not that sales go into free fall, they just stay flat or go up one year and down the next.

The owners’ first reaction is to focus on their sales team. They may, for example, try to get their salespeople to make more calls or they even make personnel changes. They may also try some marketing – by which they generally mean promotional – programs.

Most of the business owners have never encountered this situation before. And because they’ve always been successful up to this point, they believe they can figure it out for themselves.

However, life is full of situations we’ve never experienced before. The analogy I used in my presentation was falling in love for the first time.

Lots of us (particularly males) don’t understand what’s happened. We focus on the symptoms – the churning stomach, the same tune playing endlessly in our head, the picture of the other person we can’t get out of our mind and the grin that’s fixed firmly to our face no matter what else is going on around us.

It may take a good friend, who is already in a long-term relationship, to alert us to the situation – we’ve finally met the “one”.

An experienced management consultant can play the same role for a business owner. An objective third party, they use the symptoms to find the root cause of the situation.

For example, we had a client in an industry in the early stages of consolidation. The bigger players were beginning to buy up the smaller ones, changing several aspects of how the game was being played. We spotted that because we’d seen it before – unlike our client.

I’ll tell you about a couple of other situations when hiring a management consultant will help in my next post…….
 

Profit In Process

Thursday, April 28th, 2011

This week’s guest post is by Tibor Shanto – Principal of Renbor Sales Solutions Inc., – a recognized speaker, author of the award winning book Shift!: Harness The Trigger Events That Turn Prospects Into Customers, and sought after trainer.

Most sales people are taught that companies go under due to lack of sales. We all know that the reality is that companies fail due to a lack of profits.  But this disconnect is one reason sales people see discounting as an alternative to selling. Reps fail to realize that the 5% discount they give on a deal could be half, or more, of the margin in the sale (why worry, they still get  their commission).

One way to address this is to ensure that you have a detailed, clearly defined and suitable sales process.  This needs to include defined stages that align with the buying process, and clear workflows.

The sales process also needs to align with other processes in the company. While sales does drive orders,  if it is not synchronized with the rest of the organization, there is a real risk to productivity and profits. One example is the waste that results in working at cross purposes, typified by the often found disconnect between sales and marketing.  I recently saw the results of a survey that suggested that 75% of marketing managers do not know what the sales team’s quota is. 

Once the sales process is aligned with other processes in the organization, they can be harmonized and leveraged for further advantage. A good example can be found in environments where production and related resources are directly tied to orders.  Having a logical process that helps sales execute and at the same time delivers predictable and reliable forecasts to production is a definite competitive advantage. 

For example, one of our clients publishes a series of trade magazines. One challenge they face is maximizing revenue from each issue.  Specifically, the more ads sold the larger the issue, but this impacts editorial, layout and other areas of production.  Add to this the fact that the issue has to be locked down many days before publication.

There was a constant to-and-fro between sales and production with sales trying to get one last advertiser in to an issue after the deadline or ads that sales had guaranteed would come in evaporating. Both situations caused havoc for production.

We worked with both groups, analyzing how different ad sales unfolded, the time from start to finish of the process, critical points along the way (go/no-go points), confirmation points and elapsed times from those points to close. This allowed sales to quantify aspects of the sale and establish reasonable probabilities to close from specific events during the sales.

Armed with these facts, we sat down with the production team with two goals in mind. First, was to help them understand in an objective way how a typical sale unfolds,  including critical turning points. Second was to establish a rule and workflow with respect to objectively agreeing which opportunities were to be included by production, based on where they were in the process at a specific point in time prior to publication date.

This allowed production to better plan a given issue, and sales to be more confident in communicating and adhering to deadlines with advertisers.  While there are still instances where sales try to bring in one more ad, production has built in a bit of wiggle to their timelines.

This same approach can be implemented by aligning the sales process with other areas of the company.  It goes without saying, that the same efficiencies can be realised in other environments – JIT or otherwise.  The key is to have a sales process to begin with, one that suits the needs and the type of sale on which the entire organization needs to execute. 

This removes the emotion and subjectivity when it comes to sales predictability, forecasting and driving both revenue and other key objectives of the organization.

Tibor can be reached at info@SellBetter.ca, or + 1-416-822-7781. You can read his blog, The Pipeline and follow him on Twitter @Renbor.

How Strategy Evolves – A Great Example

Wednesday, April 20th, 2011

We consultants love to hold forth about how strategy and business models can, and should, evolve. But today I came across an article written by someone who has actually proved that it works.

Here’s how.

Worm Your Way Into Business – The Original Strategy.

Tom Szaky, a Canadian immigrant, started TerraCycle as an eco-friendly waste management company. His customers paid him to haul away their organic waste and, instead of dumping it in a landfill, feed it to worms.

In less than a year he realized that they couldn’t get customers to pay them enough to make a profit doing it.

Then they figured out that instead of making money only by providing a service they could also turn the output into a saleable product.

Evolution # 1 – Turn S#*t Into Gold.

TerraCycle took the worm waste and sold it as premium, organic Plant Food, packaged in recycled soda bottles. The product was sold by major retailers – e.g. Home Depot, Wal-Mart – and revenues grew to over $3 million in 4 years.

They sourced bottles via their web site and a program launched in schools. TerraCycle paid the shipping to get the bottles to their plant and made a 5 cent per bottle donation to a school or charity of the sender’s choice. The program was so successful that they were soon paying out hundreds of thousands of dollars. And that almost broke the bank.

So they tried to find sponsors to pay the shipping and donations in exchange for publicity. That idea didn’t work but it did lead to another opportunity.

Evolution # 2 – More Waste = A Broader Product Range.

Sponsors didn’t want to pay to haul away waste created by other companies – but they did pay TerraCycle to take away their own waste. The opportunity was to turn that waste into raw materials to be used to make consumer products e.g. backpacks made from used juice pouches.

Within a year the new products were sold by the major retailers who agreed they embodied the same values as the Plant Food – better, greener and cheaper.

But once again, success brought a problem. Over time TerraCycle had learned how to bottle worm waste profitably. But it didn’t know how to manufacture these new products, manage supply chains or compete against low cost, Chinese manufacturers.

In 2008, TerraCycle lost $4.5 million on sales of $6.6 million.

Evolution # 3 – Focus On Eliminating Waste.

Szaky, walking through a major retail store one day, noticed that Disney had products in a wide range of categories – from shower curtains to food products. He realized that one company could not be an expert in so many consumer product categories – and then a friend explained licensing.

TerraCycle evolved once more and now even their Plant Food is manufactured under licence. The company has grown to over $13.5 million in sales, is operating in 14 countries – and is profitable.

Szaky says that they will stick to their core business (eliminating waste). But he knows there will other challenges to deal with and that more evolution may be required.

Summary.

It’s easy to assume that a company has always done business using its current strategy/business model. But it frequently isn’t that way – e.g. Starbucks original strategy was for customers to stand, listen to classical music and be served by baristas with moustaches.

5 Tips To Improve Margins and the Bottom Line……

Wednesday, May 5th, 2010

Sometimes the old truths are the most important ones. A conversation with a client the other day got me thinking about these simple tips that can pay major dividends.

There are really only 4 ways to increase profits – sell more, improve margins, cut costs or do all three. Costs always have a habit of creeping upwards over time. So, particularly in these economic times, it pays to take a hard look at them and then eliminate the things we can live without. But there’s a limit to the extent to which we can cut costs before we hurt the company’s long term growth potential. To get steady, incremental increases in profit we have to sell more and improve margins.

There are only 2 ways to sell more – add new customers or increase sales to existing customers. In my experience, when we talk about selling more we tend to put the focus on adding new customers. But we know that it costs at least 6 times more to sell to a new customer than to an existing client. That’s not hard to understand when we consider the “acquisition” costs – e.g. advertising, telemarketing, etc.

Tip # 1. Don’t lose your least expensive prospects – existing customers. They must be convinced that we do a great job; otherwise they wouldn’t buy from us. Every business loses some customers over time, but when customers leak away, replacing them with new ones cuts into profits. The key is to focus on our “retention rate”. We need to have a process that alerts us when a customer stops purchasing from us. And we must find out why exactly they’re leaving – not simply make assumptions. Keeping customers satisfied is better for your bottom line than replacing them.

Tip # 2. Remember not all customers are created equal when it comes to profitability. Pareto’s rule tells us that 80% of our profits will come from 20% of our customers. But, how many of us slip into the situation, over time, of treating all customers as equally important? That actually hurts our profits because we waste money using the same marketing and selling techniques on everyone and treat them the same way when they contact us.

So, how do we recognize the 20% of customers who give us 80% of our profits? They are the companies who buy from us regularly and understand the value of what we do for their business. They focus on quality and reliability rather than price and they pay on time. Because they are successful in their field, they have the potential to grow, allowing us to grow with them. They may even refer potential clients to us. These are our “A” customers. Can you identify yours?

Tip # 3. It makes good business sense to treat “A” customers differently than the others. Everyone in the organization should know who they are. So, when they talk to them on the phone or face-to-face, answer their email, make product for them or pick their orders, these “A” clients get the most prompt, attentive, efficient service we can give. We should market differently to them too. Stay closely in touch personally and via email, e.g. send them our newsletters, and develop the relationship by figuring out how we can help them respond to the changes in their industry.

Tip #4. Watch the customers who offer some, but not all, of the benefits of our “A’s” very closely. They still focus on quality and reliability but may not have been around as long as “A’s” and so may not buy as regularly and/or as much. These are our “B” customers, and apart from what they do for our bottom line today, they have the potential to be the “A’s” of the future. Identify them and build a strong relationship with them. They may get fewer face-to-face visits than the “A’s” but they do get regular calls from our internal sales staff – a very effective but much less costly method of maintaining contact. They are also on our email database.

Then there are customers who buy smaller amounts consistently but who have very little potential for further development. These customers – our “C’s” – are solid contributors to the remaining 20% of our profits but the ones who may be most likely to drift away. Our sales and marketing strategies are designed to maintain these relationships in a cost effective way. Primary contact is via regular (but less frequent than for “B” clients) calls from internal sales and email contact about the products or services they buy.

The final group is easy to recognize – they complain most and buy small quantities of our products irregularly. That’s because they are focused on price and discounts. They buy from us only when we’re cheaper than our competitors – they have no loyalty. When they do buy from us, they are abrupt, demanding, they always need delivery immediately and people hate dealing with them. Processing their orders requires our staff to drop everything else and get them to the front of the line. They are our “D” accounts. Dealing with “D’s” can be so disruptive that occasionally they even cause us to make mistakes with the orders for the profitable customers.

Tip # 5. The final tip is to “fire” your “D” accounts. That’s correct, if orders from “D” customers are profitable they’re at the bottom end of the margin scale and the amount of resource required to get them out the door wipes out anything we were going to make. Yet we all have “D” accounts – why don’t we just get rid of them? We don’t have to be rude, simply play them at their own game – quote high prices or long lead times. They’ll make the decision not to deal with us. Do it often enough and they’ll stop calling.

Focus on your “A” and “B” customers and you’ll improve your margins. Match your sales and marketing resources to customer type and get rid of your “D’s” and you’ll improve the bottom line. Make retaining “C’” customers a priority; work hard at turning your “B” accounts into “A’s” and get your sales staff focused on understanding your “A” accounts’ business – then you’ll not only sell more but you’ll make more profitable sales.

Some “oldies” but truly “goldies” in these very difficult times!

Prices – 6 Reasons To Keep Them Up

Monday, November 23rd, 2009

Some of the questions which I get when I finish a seminar, workshop or webinar inevitably involve price strategy. It’s a topic close to my heart (I am a Scotsman after all) and one that provokes strong emotion amongst most business owners. And that’s interesting really, because most buyers typically rank price around 4th in their list of buying criteria.

Price is important only when the product or service being sold is a commodity and very few products actually are true commodities (can you think of one right now)? Large consumer goods companies spend millions on advertising to convince us that some products which are commodities, really aren’t. (Does it really make a difference if you buy gas from PetroCanada or Shell?)

But it probably isn’t necessary for the average business owner to cut prices, offer discounts or to spend a lot of money on advertising to get customers to pay a price which enables them to make an acceptable profit. In fact here are 6 reasons why you shouldn’t be discounting or cutting prices.

Reason # 1. There is no business that doesn’t have the potential to command an acceptable price for its products or services if it is able to market those products or services in such a way that the customer perceives added value. If you don’t believe me just think about the difference in price between a Lexus and a Hyundai – they’re both just a means of transportation. Tip Top tailors and Harry Rosen both sell men’s clothes – but don’t wait for Harry to have a $199 sale before buying your next suit!

Reason # 2. As business owners it’s our job to create the perception that our products and services offer superior value and to back that up with superb service. How do we do that? One way to begin is to figure out who your best customers are (they buy regularly and never complain about price) and ask them why they buy from you rather than from someone else. But don’t ask them to rate the reasons you think they buy from you, ask them to tell you what they consider is important and then ask them to rate your performance on those. Then you can figure out what makes you unique in their eyes.

Reason # 3. Two easy ways to add value are to really understand what’s going on in your customers’ business and how your products impact their success; then pass this information on to your staff and train them to provide what your customer will see as great customer service. (Of course maintaining the quality of your products, and doing regular customer satisfaction surveys won’t hurt either.)

Reason # 4. Remember if your gross margin is 30% and you reduce price by 10%, sales volumes must increase by 50% to maintain your initial profit level. For some reason we’ve come to believe that offering price discounts is a good long term strategy. If you still believe that consider the problems that the North American car manufacturers have created for themselves with, for example, “Employee Pricing” campaigns. Or think about how hard it was for the Bay to get away from “Bay Days” or Sears to stop their “Scratch and Win” promotions. You’re right, despite saying they were going to stop them they’re both still doing them. Once you’ve dropped your prices it is very difficult to get them back up to previous levels.

Reason # 5. Price discounting works in only two situations – where you have a definite cost advantage over your competitors and/or your product or service is one where customers are genuinely, truly, price-sensitive. We’ve already dealt with the price sensitive case and if you have a cost advantage why would you pass the entire extra margin on to consumers rather than investing some of it maintaining your technological or other advantage? Let’s face it, you aren’t in business to simply match the price your competitors set, you are here to serve your customers well and make a profit.

Reason # 6. Remember, if your gross margin is 30% and you increase your prices by 10%, you can sustain a 25% reduction in sales volumes before your profit is reduced to the previous level. Research shows that roughly only 15% of customers think in terms of price. They are better left to your competitors because they will never be satisfied and will always be looking for a better ‘deal.’ Their loyalty is impossible to achieve and they’ll never recommend you to anyone else. Focusing resources on servicing this ‘low’ end of the market won’t sustain the future growth of your business through either your turnover or profitability. It’s far better to work with those people who are happy to pay for value.

If you don’t believe my math or that customer surveys don’t have don’t have to be expensive or if you just want to know the date and location of my next seminar drop me an email

Post History