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Niches - The Path to More Profits Hey, as business owners we CAN'T be all things for all customers. I mean it would be fantastic if we could, however, you just can't meet the needs and wants of everyone, you would run yourself ragged trying :o( Why Cutting Prices Is Like Cutting Your Own Throat Why cutting your prices is like cutting your own throat. It's the oldest sales tactic in the world? And one of the worst? Price cutting. Before you make your next price cut in the face of sales resistance, the question you have to ask yourself is not, "Does it work?," but rather, "Can you live with the bargain?" Here's a pop quiz: you ? in your role as salesperson ? go for the close. You ask the prospect to make a commitment and they don't. What's your first response? Well, if you are like most people in a selling situation ? whether you are the hired sales guy or the CEO-your first response to people not buying-for whatever the reason-is to say, "Would you buy if? ?," and the "if" is always some variant of, "...if the price was lower?" And you ask it almost before you ask them WHY they won't buy. And it's not only when they tell you they won't buy. Many people in sales mentally calculate the discount into their profit calculations, and start discounting even before they try to close the deal. In almost every sales job that I've worked in, people faced with an end-of-quarter crunch to "make the numbers" start playing the discount game. In many industries, it's become common practice to give away all the profits, and many customers are trained to expect it. Trouble is, people are not usually 'not buying' because your price is too high. If you've taken the trouble to establish the real of your product or service, you ? and your prospect ? already know that the value far exceeds the price you are asking. (If not, you better go back and rethink the math.) So if they are saying "no," or simply not saying "yes," it either means they are experienced buyers waiting for you to spontaneously cut your price, or it means they just do not see a sufficiently compelling value?yet. Cutting your prices will almost never lead to new sales if they didn't plan on buying in the first place, and the effect on your profits can be devastating. Follow these numbers: Let's say you sell a product for $100. Your cost is $70. That means it carries a thirty percent margin-your profit is $30. Now, to make a sale, you are "forced" to cut your price by twenty percent. Your new selling price is $80. All things being equal, your profit is now $10-instead of $30. That means a 20% price reduction cost you 66% of your profits. TWO-THIRDS OF YOUR PROFITS for a 20% price reduction! Cut your price much more and your profit quickly goes to zero. Or lower. And that's not even the worst of it. Once you lower prices, they tend to stay low. That $100 widget you just sold for $80? Well, sorry to say, but it's now an $80 widget. Even more damaging, your like-minded competitors will almost definitely lower their prices, and you, my friend, are in a price war. To win in this scenario, you need deep pockets to sustain a losing position for the duration. So for these three reasons-depressed profit margins, permanently lowered prices, and the devastation of a price war-it's a bad idea to lower your prices to buy business-regardless of the economic climate. What can you do instead? The two main strategies are clarifying and quantifying the value, and packaging products or services to maintain higher prices. Here's an interesting example. One of my clients-a software company-had a hot prospect who didn't want to buy the typical contract for software maintenance. They felt that 18% per year was just too expensive, and wanted to pay ad hoc instead. My client knew this was a bad idea. Customers without maintenance contracts typically become your worst. Why? Because they know it's going to cost them each time they pick up the phone for support, so they try not to. Thus, they don't get the right level of service, they don't know how to use the product and they don't get the results they paid for in the first place. And even though it's their fault for skimping, they point the finger at you and badmouth your company. On my advice, my client offered the prospect a four year non-cancelable maintenance contract, and gave them the first year for free. And although it was a 25 percent reduction in total purchase price, it never lowered the per year pricing, and it actually guaranteed more than the prospect's original commitment. Plus, my client locked in that customer for four full years, during which time they rightly expect to sell them additional products and services. Price cutting is the "lazy man's" response when it's hard to make sales. Unfortunately, it may not boost total revenues, and results in drastically lowered profits on the sales that do get made. Often the outcome includes permanently reduced prices and margins, and even a price war, which has disastrous consequences for all players, except very deep-pocketed ones. Sell the value instead. Spend the time to discover what your prospect is trying to accomplish, and make sure your product or service helps them do that. Then establish the quantifiable financial impact, and sell them that. Or package, bundle or go for the long-term, multi-year commitment. There are other approaches that not only maintain price levels, but even support higher ones. To get an overview of those approaches, visit http://www.lemberg.com/tipsandtools.html and download "5 tactics to avoid price cutting." --PL © Paul Lemberg. All rights reserved Reprint rights freely given. Please click here for details. How Testimonials Can Put You in the Spotlight If you need evidence that a testimonial or referral can help you, let me tell you a personal story: Tie-In With Others To Maximize Your Business Leverage One of the most rewarding, inexpensive, under-used, and effective methods of marketing is to tie in your marketing efforts with the efforts of others. Fail Your Way To Small Business Marketing Success! Are you willing to fail your way to great marketing Success? Thinking About More Business Did you increase your business in the past 12 months? Don't discriminate between more new clients or old clients spending more money--count the increase either way. If you didn't, you really should be asking yourself why not. Money-Makers Secrets to Renting Profitable Mailing Lists Common sense should tell you that without a good mailing lists,the time and money you spend for market research, advertisinglayout and knowledge relating to the "rules of direct mail," willjust be wasted effort. In other words, unless you get you offerto the buyers, you might as well save your time and money. Customizing Booklets By Industry or By Company Customizing booklets can be done by industry or by company. 7 Cheap & Easy Ways To Get Prospects Here are some quick techniques you can put into place on your web site or in your advertising to gather new prospects. There is practically no cost for most of these strategies yet they have proven to be extremely effective in any number of different venues. Use one, two or all of these strategies for a quick shot in the arm. New Years Revolution No, that's not a typo in the title. Resolutions are easy; most of us make them at least once a year. A revolution, on the other hand, is something you may not have made since you started your business. Baby Boomers - Marketing to the Me Generation Unless you've been in a dimly lit cavern for the past several decades, you know that "Baby Boomers" is the collective name given to the 76 million people born in the United States between the end of World War II and 1964. Often described as the largest, most knowledgeable and most fiscally influential demographic group in American history, their motto could very well be: Where does a 750-pound gorilla sit? Anywhere it wants! FREE Means MORE Business Why give freebies? 6 MUST Have Strategies To Make Big Bucks with Big Ticket Items Strategy #1: Change Your Mindset Financial Services Marketing Insights: A Marketing Compass What we now call "marketing" began long before the name was coined. In the mid-1800s, traveling salesmen dressed "snake oil" and other tonics in fancy packaging and extolled their virtues to a gullible public. New marketing applications soon proliferated in the belief that marketing could make many new things possible in virtually any business situation. For more than a century, implementation, experience and ultimately strategy have helped marketing evolve from crude beginnings into today's sophisticated practices. 7 Tips to Grab New Clients As a business professional, you probably realize the value of writing articles for print publications to telegraph your expertise. Have you considered that writing articles for online publications can build even more buzz for your business? Mastering the ABCDs of Small Business Marketing & Selling I believe that small business marketing and selling follows a certain flow. The pace of the flow may differ depending on what you're selling, but I still see the flow for virtually every small business. If you acknowledge and understand the flow for your own business then you can implement processes and systems to work within the flow. I call it Mastering the ABCD's of marketing and selling. Reach Thousands of Your Prospects, Absolutely Free I'm big on getting maximum marketing exposure at the lowest cost possible. After all, most small business owners don't have huge marketing budgets, so finding inexpensive ways to market is a necessity. 15 Commandments Of Creating A Wealth Pulling Niche Niches are like bathrooms; you never notice them until you need one." - Primm (From NicheBrain.com) Off the Shelf Small Business Mapping Software All small businesses can benefit from inexpensive off the shelf CD Rom mapping software. If you own a business you need to where your customers are coming from, where you would like to expand your sphere of influence to, where your competitors are located and how to route your delivery vehicles. We recommend the following companies and CD ROM mapping software: 50 Unbelievable Benefits Of Joint Venture Marketing What Is A Joint Venture?
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