Push up the price

I attended a seminar by Karin Klerfeldt the other day. She talked about taking proper charge and learning the business process and gave these valuable tips.

-Can we raise the price? she asked and answered her own question.

-Yes, a general conclusion is that you can raise the price about 20% - if they can sell! So how is it done?

·      Make a beneficial offer

·      There needs to be a market for you offer

·      Sell!

Some will think that it's too expensive, while others know you and your skills and are willing to pay. There are lots of different pricing strategies, but the most important questions you have to ask yourself are "how much do I want" and "how much do I want to earn." Write it down!

Either you can sell on high volume at a low price or on lower volume at a higher price, but you cannot do both. To stand out, you can not be somewhere in the middle. Entrepreneurs who dare to push up their prices will be tomorrow's winners. As an entrepreneur it is easy to get stuck in a low-price trap, especially if you shoot from the hip when they set prices and do not dare to raise the prices for fear of losing the customer.

It should be easy to sell and easy to buy:

·      Make a price list

·      Put together a package solution

·      Get yourself some business confidence

Forget the cold leads! When you get an idea for a potential business:

·      Schedule a customer visits with someone who might benefit from your idea

·      Make a sketch of your offer

·      Ask Questions

o   Is this the right person for the decision and who sits on the budget?

o   Is there room in the budget?

o   What is the time frame?

Follow-up with a tactics email within 24 hours (I’m pleased to hear that you feel we can do this together... I was thinking about what you said about...). Then:

·      Visit your customer

·      Present your offer

·      Go for closure

Follow up with an order confirmations immediately after your visit. This should contain a summary of what has been determined.

·     Invoice 

Effects of price adjustments

This is the time of year, at least in the western part of the world, when we are looking over our price lists for the upcoming year. We either increase our product prices to cover for increased costs or decrease our prices in order to be more competitive. Either way, it is important to know how a price adjustment will affect your profit.
Imagine you have a product with a list price of 1000 EUR, a cost price of 800 EUR and of which you sell a volume of 100 units. This will generate a turnover of 100000 EUR with a profit of 20000 EUR from that particular product. A decrease in the list price with 10%, by adjusting your list price downwards or giving a discount, will affect your turnover in that way that you have to sell 12 more units to reach the same turnover. However, for you to gain the same profit on this product you have to double your sales.
If you instead decide to increase your list price with 10% you can sell 9 units less and still obtain the same turnover. With a 10% list price increase you only need 2/3 of your current sales to gain the same profit.
You can go in for being the cheapest on the market and hope to by this way generate a greater sales volume. This strategy will make a smaller business very vulnerable. In tough times of decreased sales due to customer budget austerity, a small business will be left with significantly reduced profit. For a small business it is of more importance to keep good margins in order to cope with sales fluctuations.
Whatever strategy, it is important to keep in mind how a price adjustment will affect your turnover and profit.

Authenticity and transparency

Consumers tend to have an increased interest in authenticity with an increased need for transparency. With the increased range of products, it is hard for the consumers to decide what is authentic. Marketing is not working as it used to. Therefore we need to change our focus on marketing from “what consumer needs” to “what consumer wants”. Distinctive brands need something more – sensory marketing. Advertizing campaigns has become less important. Instead, quality-to-price ratio has increased in importance. There is a shift from lowest price competition to quality-to-price ratio. Also the story of tradition and origin is important. Advertize with your heart, not your brain.

Become a star negotiator

The most common mistake in negotiations is to be unprepared and initiate with the lowest (if selling)/highest (if buying) acceptable outcome. I once had the opportunity to listen to a seminar by Karin Klerfelt and here are her tips for us to become star negotiators.
1. Initiative; If coming from your opponent, buy yourself time by asking if you can get back later, for example at 2 pm. If coming from you, be prepared.
2. Preparations; Set goals at 3 different levels - best, okay and worst outcome. This gives you space for negotiation.
3. Greeting; Build a good atmosphere by sending a “I want us to reach an agreement” message to your opponent. All your expressions (spoken language, vocal, body language, etc) need to send this message.
4. Introduction; What are the rules – how long will the negotiation take part? Take acceptance!
5. Demands; Ask the opponent. Practice your lines/questions before the meeting. What is the goal, budget, is there any other person that has the final mandate, etc?
6. Agreement; List of demands from opponent needs to be prepared. See to that you reach win-win for both partners. Give and take! This is a human mechanism called “reciprocal action”. Money is not everything, instead of giving a discount you may add a supplementary product. Be flexible!
7. Finnish; Settle the agreement. First make sure to have real eye contact and then summarize what you have agreed upon. To summarize is what drives the meeting forward.
8. Follow up; Important to follow up with the opponent in between negotiation events. This is when you build your relationship before next event.

0.5 – 5.0 method

I once had a sales coach that taught me a method to base customers visit or sales calls on. He called it the 0.5 – 5.0 method and it works so that you follow a scheme to eventually get an acceptance, for example on an order. Subsequently you continue with conducting a needs assessment or a presentation of the company and the products.

0.5 Waking the interest – Have you ever had this problem with…?
1.0 Aim and objective – Then I have this solution for you.
2.0 General problem picture in third person – I’m often in contact with customers who have a demand for…
3.0 Our solution, the product – For these type of customers we have this solution…
4.0 References – Our customers are…and for them it is important that…
5.0 Acceptance question – Is this important for you, too?

The method is off cause not applicable to all customer situations. Sometimes for example, only 2.0 – 5.0 are applicable to the situation. As my sales coach pointed out “our customer shall enjoy doing business with us, not only meet with us”.