February 2003 Issue #5
IN THIS ISSUE
- Marketing feature: After the sale - building customer loyalty
- Winter classes are underway but . .
- Entrepreneurship feature: The price is right, or is it?
- We want to hear from you!
- Pass it along
Marketing feature: After the sale - building customer loyalty
When business is slow, like it is now, and you are spinning your wheels trying to find ways to pump up sales, try taking a hard look at your current client/customer base. It's amazing that this is often the last place entrepreneurs look for that added business. People who already have done business with you in the past are your most likely future customers. It is faster, easier and cheaper (the 3 magic words) to close a sale to someone who is already familiar with you, your business and what you have to offer. People usually prefer to do business with people they already know.
To take full advantage of this phenomenon, set up a process for cultivating repeat business by cementing that customer relationship. Construct a customer relationship routine for after the sale as carefully as you construct the routine that you follow in order to secure a first sale. The after-sale process should be an integral part of your "marketing infrastructure."
Here are some tips for constructing an effective "after sale" program.
GET TO KNOW YOUR CUSTOMERS. This is as important after the sale as it is before. And once someone has purchased from you, they are more likely to share information. Touching base with customers after a sale, to see that all has gone well, shows that you care and provides you with the opportunity to gather some of this information in a tactful way. You can use this opportunity to find out in greater depth what motivated the purchase, things the customer liked or did not like, and suggestions for improvement. You can also home in on demographics such as age, education, distance traveled to do business with you, occupation and so forth. .
SAY THANK YOU. Do it in writing whenever possible. This is so rare these days that this very small gesture really makes you stand out.
COMMUNICATE. Let your customers know about different ways to use your product or service, new developments in your industry, new products or accessories, maintenance tips and advice, troubleshooting - the list goes on. Regular communication provides you with the opportunity to establish your credibility, sell additional products and help your customers be more efficient in using your product or service. Communication with solid content is a "win-win" proposition.
ADD VALUE. So many business want more money for less service that adding value has become the exception. Your customers are always delighted when a supplier gives them more for the same amount of money and even more delighted when they can get it for less. If you have found less costly ways of doing things, consider passing part of the savings along to your customers. When you can, improve your product or service without raising the price. Consider rewarding longevity or quantity purchases with discounts or upgrades. Offer good customers special deals for additional purchases.
GO ABOVE AND BEYOND - deliver more than what is expected. People always remember businesses that give them more than they expect. It's such a surprise! The garage I take my car to charges no more than most other places but washes the car even if I take it in only for an oil change. And sometimes they take care of minor things for no charge. Do you think I would go anywhere else?
STAND BEHIND YOUR PRODUCTS. Offer a warrantee or guarantee. Notify customers when warrantees or guarantees are about due to run out. Replace faulty products promptly, cheerfully and without red tape. This lets your customers know that you take pride in seeing that things are right. Then, even if something does go wrong, you are far less likely to lose the customer and his repeat business.
WELCOME FEEDBACK. Let your customers know that you are always available to hear feedback - even when it is negative. Both compliments and criticisms let us know when we are on track and where adjustments need to be made. Welcome this kind of communication and thank the customer for taking the time to let you know what's on their mind. We don't always get things right - we are human after all.
KEEP YOUR WORD. Follow through on your advertising claims. If you say you will do something, then do it! Seems obvious but, with business scandals in the headlines nearly every day, customers need to be reassured that you can be trusted.
Winter classes are underway but . .
there is still time to sign up for Power Marketing for Small Businesses (4 weeks starting Apr. 28), Write Your Own Business Plan Workshop (6 weeks starting Apr. 8), How to Start an Online Business with Little or No Money (April 10), Get More Done in Less Time (March 6), and Profitable time Management for Today's Busy Entrepreneur (March 18). Course descriptions and registration information are available at
Entrepreneurship feature: The price is right, or is it?
One of the most confounding issues facing entrepreneurs is pricing. Yet, there is very little written on the subject. Pricing at a level that will both attract customers and maximize profits is a real balancing act. We all know that charging too much can scare away potential customers but did you know that charging too little can do the same thing? Our perception of value is intrinsically tied to price. If a product or service is priced too low, the perception might be that it lacks quality. Prospects seeking a quality product or service could be turned off!
To establish the best price for your product or service, you need to know three things:
The first two are things that every entrepreneur should know. You probably already have lots of this information at your fingertips but let's take a quick look just in case.
- the numbers,
- the market, and
- the "balance" point or the point at which prospects will stop buying.
Knowing the numbers is very basic. You must have a good grasp of your costs on a per unit basis. Be sure that you include all of your costs. Include a factor to cover overhead - rent, administration, etc. Your accountant can help you establish a figure that is reflective of your true overhead costs. Also, factor in all of your marketing - direct sales costs as well as sales support.
Obviously, at minimum, you want to cover your costs. Some business stop here. Their strategy is to simply tack a profit onto their costs and sell at that level. This is often referred to as "cost basis" or "cost plus" pricing. Deep discounters most commonly use this pricing strategy. These business are built on volume selling at low prices and their customers expect bargains.
Most of us have other concerns in pricing our products and services so, more information is needed. Knowing the characteristics of your market is critical to establishing an effective pricing strategy and maximizing profit.
Are you prospects looking for convenience? prestige? value? Do they buy on impulse or are their purchases carefully planned and budgeted? Are you in a consumer market or business-to-business market? Are their purchases for themselves, for gifts, or on behalf of the company they work for? What are your prospects' ages, education, professions? Are you in a market that is growing or declining? How much competition is there? What is your competition doing? How are they marketing and pricing? Be sure to consider both your direct competition (businesses offering the same product or service) and indirect competition (businesses offering products or services that can be substituted for yours).
All of these factors are important components in determining your marketing strategy. Pricing is a part of that strategy. The more that you know, the less guessing you will have to do. This is some of the information that feeds into determining the position that you want to occupy in the marketplace. Your pricing strategy should support that "market position."
There are many different pricing strategies. I mentioned "cost plus" earlier. Here are two more common ones. You have probably noticed that new electronic technology is introduced at fairly high prices. After a year or two, prices drop significantly. There are several reasons for this. First, the mystique of being the first kid on the block to own the new technology has worn off. Those who are willing to pay extra to have brand new technology have moved on to other things. Second, factories are producing more and have achieved "economies of scale" which allow production at a lower cost. This is called "sliding on the demand curve."
Another strategy is "loss leader" in which you price below cost to attract customers who are likely to buy other, more profitable, products from you. Supermarkets often use this strategy to get people into their stores.
But we're not through just yet. The third thing you need to know in order to maximize profits is the point at which your prospects will stop buying. One dollar more and you lose the sale. Finding this balance point is a real trick. Experts have established methods that include advance mathematics, surveys, test marketing and more. It can be an expensive and time consuming process. This is the step most likely to be skipped because of its difficulty.
If you have used the first two components we discussed in this article, knowing your costs and knowing your market, you have a good start. For a thorough discussion of pricing strategies and the steps that are needed to establish that critical "balance" point, download your own, free copy of
Make Your Price Sell
by Ken Evoy, M.D. and Carol Ann Dorn, PhD.
This e-book provides the clearest and most comprehensive discussion of pricing I have seen yet. It is packed with information and techniques that you can use now. It also offers the opportunity to utilize their streamlined, easy-to-use pricing tool. Yes, this part is a sales pitch but the information in the free download is so good that it is well worth your while to take a look. Give it a try and e-mail me with your opinion of the book. I'd like to know what you think.
Make Your Price Sell
We want to hear from you!
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Pass it along
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Copyright 2003 Kathleen Thompson