Price as a Creative Variable

Price should not be used like a simple blunt object

Dr. Brian Monger

Implicit in the argument that price must reflect value is the need for flexibility in the methods used to establish prices.  While it may seem obvious to some, a fundamental truism in a market-oriented environment is that “price is a variable.” The opposite of a variable is a constant, something that is unchanging.  Many managers approach price as a constant.  That is, they set prices using a fixed formula, such as determining cost per unit and adding a predetermined margin to arrive at price.  Having applied the formula, they give no further thought to the use of price as a marketing tool.  Not only is such an approach naive and overly simplistic, but it causes the manager to lose sight of the real purpose of a price and to miss creative opportunities for realising profits.

Prices can be varied in many ways.  The only requirement is creative thinking on the part of the manager.  Examples of ten ways to vary a price include the following:

• Keep the same price currently charged but give the customer greater (or lesser) product quality.

• Keep the same price currently charged but give the customer a smaller (or larger) quantity of a particular item.

• Change the time of payment, such as by allowing a customer four months to make payment.

• Offer a rebate or a dollars-off coupon.

• Provide cash, quantity, and/or trade discounts.

• Charge different prices to different types of customers.

• Charge different prices based on the time of day, month, or year.

•  Offer to accept a trade-in from the customer.

• Accept partial or full payment in the form of goods and services instead of money.

• Bundle the product with other Products and charge a single price lower than the combined individual prices.

These are but a few of the possibilities.  The downside is that price as a variable is a more complicated management task and requires considerably more hard work than does price as a constant or fixed phenomenon.  Also, creativity can be dangerous if not properly structured.  Pricing decisions should not be made in a piecemeal fashion, but instead should be part of a larger pricing strategy.

Do you have any ideas to add?

Dr Brian Monger is Executive Director of MAANZ International and an internationally known business consultant with over 45 years of experience assisting both large and small companies with their projects.  He is also a highly effective and experienced trainer and educator

Did you find this article useful?  Please let us know

These articles are usually taken from notes from a MAANZ course.  If you are interested in obtaining the full set of notes (and a PowerPoint presentation) please contact us – info@marketing.org.au

Also check out other articles on http://smartamarketing.wordpress.com

MAANZ International website http://www.marketing.org.au

Smartamarketing Slideshare (http://www.slideshare.net/bmonger)

Basic Strategy And Psychology For Handling Objections

Dr Brian Monger

During an average sales interview you may have to handle from two to five objections.  Your first problem is to determine whether they are real objections or mere excuses or stalls.  Your second problem is to decide on the strategy and tactics of handling them in order to retain control of the interview.

Your standard reaction to all objections should involve these principles:

Welcome the Objection.  Do not resent it or attempt to argue.  The prospect may be offering you a point around which the sale can be rapidly closed.

Listen Carefully to It.  Keep quiet, smile, and concentrate on what your prospect is saying.  You may think the matter is trivial, but to him or her it may be very important.  Allow the prospect adequate time for full expression – to finish speaking.  Do not make the mistake of cutting him or her off in mid-thought even if you do recognise the objection and are eager to acknowledge it.

Rephrase and Repeat the Objection.  By taking the time to rephrase and repeat the objection, you accomplish three major goals:

1.         You demonstrate that you have understood and respect the objection and thus please him or her with your interest.

2.         You gain time to think for a moment how best to handle it.

3.         You can soften the objection by rephrasing it into a question, which is easier to handle than an objection, and you put yourself in the position of helping answer it.

For example, if the complaint is that your product is too expensive, he or she may really be wondering if a cheaper one would not be just as practical.  You can test this objection by rephrasing it into a question, such as, “Mr. King, aren’t you really wondering whether the expense for this item can be justified?”

Do not guess at the reasons behind objections.  Your aim is to try rapidly to pin down the real issue.  Sometimes the problem bothering the prospect is not clear even in his or her own mind.  You have to find the right question if you expect to handle the objection.  You then have to give facts that will influence him or her to answer the question favourably rather than unfavourably.  Rephrasing and repeating the objection help clarify the issue for both of you.

Agree at Least in Part.  By agreeing with the prospect’s right to object and by agreeing that he or she has raised an important point, you avoid contradiction and take him or her off the defensive.  You lose nothing by agreeing that the complaint is reasonable, logical, and worth thinking about.  You can then supply additional facts that may help to show the situation differently and may turn the objection to your own advantage by making it a positive sales point.

Uncover Hidden Objections  The Process of rephrasing and restating objections into questions helps determine whether the objections are valid ones or mere excuses or stalls.  If your prospect offers more than five objections during the interview, you can assume that he or she is probably stalling.  Most likely he or she is hiding the real objection, and your problem is to bring it out into the open.

How can you uncover hidden doubts or objections?  The best technique is to ask questions that bring them into the open.  You have to watch as well as listen for clues, since some prospects mask their real emotions or feelings.  Keep searching for the real reason.

 

Dr Brian Monger is Executive Director of MAANZ International and an internationally known consultant with over 45 years of experience assisting both large and small companies with their projects.  He is also a highly effective and experienced trainer and educator

Did you find this article useful?  Please let us know

These articles are usually taken from notes from a MAANZ course.  If you are interested in obtaining the full set of notes (and a PowerPoint presentation) please contact us – info@marketing.org.au

Also check out other articles on http://smartamarketing.wordpress.com

MAANZ International website http://www.marketing.org.au

Smartamarketing Slideshare (http://www.slideshare.net/bmonger)

What Should you Charge Clients?

Charging What You’re Worth for Professional Consulting Services

Two of the perennial problems that many consultants face are how to set their prices, and how to convey to potential clients the value in working with them, buying your service product.

Lack of clarity as to what you are worth to clients will undermine your confidence and often lead to trying to compensate by over delivering and over promoting.

Here are some simple ideas to help you get clear on the value you deliver, and to charge fees that are in line with that.

1. Not all clients (customers) are the same.  Your value to them will be different.  That is why it is important to think like an effective marketer and segment/target.  And segmentation needs to more than Demographics/Firmagraphics.

Value is specific (and perceptual) to each market/segment and situation.  You need to create a market segment profile for each target market.  The more detail, the better your understanding.  If it is only a few words, you do not understand your market well enough.

If you are struggling to make a useful segment profile (it takes a bit of knowledge and time) – seek help.  Also check out http://smartamarketing.wordpress.com for ideas about effective segmentation.  You will find other useful and free ideas in the many ideas there as well

2.  What value do you offer? An effective exercise is to list 30 results that your clients get in working with you. Your Product is both goods (tangibles) and services (intangibles). Be sure to list the tangible as well as the non-tangible. Dig deep. If you’re new to your business, then look at the results that are typical of your particular profession or industry, and ask yourself how you can help people create that.

If you are struggling to make a 30 list (it takes time) – seek help

3  Once you have made your basic list, look at it from a client’s perspective.  What benefits are there for them?  Clients/customers buy benefits (intangible services – supported by tangibles).  Put yourself in their shoes and ask “What’s in it for me” (WIIFM).

4. Determine a Price.  Determine not what you think you are worth – but what your prospective clients are prepared to pay.  What clients think may be wrong, but that is what you need to work with.  If you think they should see you as being worth more, then you need to work out how to persuade them of that fact.  While your costs are important in determining an asking Price, Clients don’t care about your costs except where it offers them some advantage.  Adopt a good marketing approach when looking at your cost decisions.  Ask “How can this benefit my clients in such a way as I can add it to my value offer”?

Create Price Lines – that is different asking prices for different segments and offerings.

Price different offerings (Products) differently

4. Don’t stop researching, thinking and planning about your offering. Be sure to ask your clients (frequently) what they value most about working with you or your competitors.  Don’t just assume that what you think is goog is good for your clients – find out.

5. Think strategically as well as tactically.  Tactics – short term plans and action to suit the particular situation are needed, but to get ahead consistently, you need to also think strategically about your business. Look for (and create) value offerings that will differentiate you from your competitors.  If your offering is undifferentiated, it is a commodity.  Commodities only compete on price – or luck.

Thinking strategically means looking at the whole Marketing Mix (eg. 4 P’s) not just Price.  It is also about establishing an effective Brand in your market place.

6. Do your prospective clients know about you and what you can offer them?  Now that you know what you should offer to clients, it’s important that they become aware of it too. How you can let them know is another (important) topic. This is also where knowing a lot about your target segment will pay dividends.  You will know what media they use; what key ideas they want to know about – and how you can effectively communicate with them (not just to them)

Check out the other articles on the SmartaMarketing blog (http://smartamarketing.wordpress.com and https://smartamarketing2.wordpress.com); visit MAANZ International (www.marketing.org.au) and look at the short courses on offer.  Or contact me for specific advice and projects you are looking at

It is how you can build your business/consultancy

Dr. Brian Monger

info@marketing.org.au

Value, Pricing and Competitors

Dr Brian Monger

In the modern marketplace customers are faced with a wide choice of products that potentially offer it is important that an organisation understands the influence that competitors have on customers.

Value is comparison-based.  That is, value is perceived in terms of competitive offerings.

For a competitive advantage to eventuate, an organisation must be perceived to provide better value than its competitors. This requires a good understanding of the competitors’ strengths and weaknesses, their capabilities and, most importantly, the customer’s value perception of their offerings.

Pricing objectives

* Profit oriented Objectives – prices are set to maximise profits (maximise long-run profit or maximise short-run profit

* Sales Oriented objectives – prices are set to maximise sales volume (increase sales volume quantity; increase dollar sales; increase market share

* Survival – low prices, even under cost are set to create needed cash flow in the short term to ensure the survival of the firm

* Status quo objectives – prices are set to match and not exceed competitors’ prices

* Obtain a target rate of return – on investment (ROI) or rate of return on sales

* stabilise the market or stabilise market price – this objective aims to stabilise price in the marketplace and too compete on non-price considerations. The manager attempts to maintain the same margin regardless of changes in cost.

* Maintain price leadership

* Desensitise buyers to price

* Discourage new entrants into the market – encourage the exit of marginal firms from the industry

* Avoid government investigation or intervention

* Obtain and maintain the loyalty and enthusiasm of distributors and sales personnel

* Enhance image  – of the firm, and brand

* Social, or ideological objectives – be seen as honest and fair by customers and potential customers

* Build store traffic

* Prepare for the sale of the business (harvesting)

Pricing Should be Focused on “Payment”

Marketing is a discipline of four coequal elements: (1) the product, (2) its promotion, (3) its distribution, and (4) its pricing.  The role pricing plays in marketing strategy differs essentially from the roles of the other elements, and it is the element most often poorly managed.  The first three elements-product, promotion, and distribution-are a firm’s attempt to create value in the marketplace.  Pricing is the firm’s attempt to capture some of that value in the profits it eams.  If effective product development, promotion, and distribution sow the seeds of business success, effective pricing is the harvest.  While effective pricing can never compensate for poor execution of the first three elements, ineffective pricing can surely prevent those efforts from resulting in financial success.  Regrettably, that is a common occurrence.

Why pricing is often ineffective

It is quite interesting and puzzling why many companies fail to price effectively, even when they otherwise employ very effective marketing strategies.  The reason: They do not apply to their pricing decision the same fundamental principle of marketing that they apply to other marketing decisions.  That fundamental principle is that success in marketing comes from understanding how customers evaluate your marketing decisions, since the customer’s response to those decisions will ultimately determine their success or failure.

Many managers correctly reason that by creating exceptional value through careful attention to their customers, they can reduce the importance of price in the buying decision.  They also reason that price is of primary importance to their   companies.  They conclude, therefore, that it is quite appropriate to evaluate product, promotion, and distribution strategies from their customer’s perspective while evaluating pricing from the company’s perspective.  They forget about the customer when pricing, focusing instead on the company’s need to cover costs, to maintain cash flow, or to achieve a target rate of return.  That is a serious strategic mistake.