Archive For May 21, 2017

Know Your Value, Hold the Line

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Vendors and customers work toward opposite purposes. Customers want to acquire the most at the best quality for the lowest price–or free if they can eliminate the obstacle of money. Vendors want to deliver the least at the highest price. To see this dichotomy at work, head to any automotive dealership, refueling station, or supermarket where price-based competition reigns.

Price-based competition reduces services to commodities. Pricing on services may be more difficult to explain. Vendors must establish their brands and position themselves in the market. In short, vendors must know their value and confirm it. Mark Ritson, writing for Branding Strategy Insider, states, “If your quality is good and your targeting and positioning are right, have confidence in the price you have set and do not consider dropping it.… Something cannot be good and cheap. Don’t be afraid of a premium price or maintaining it in the face of market pressure.”

Tim Cummins’ article “What Price Integrity?” states, “The data consistently shows that politicians and business executives are struggling when it comes to the issue of integrity.” Those executives lose integrity–trust–when they underbid projects for prices they cannot honor. The argument that undercutting the price is necessary to win the project due to unreasonable customer expectations certainly has validity. In such an argument, however, both the customer and the vendor display a lack of integrity.

All other things being equal, value may not depend so much upon the type or quality of service, but upon other intangible aspects such as proximity (“buy local”) or affiliation (membership in a certain organization). Regardless, something must distinguish the chosen vendor from the rest of the competition.

That something is value. Customers who value a service or commodity will pay the vendor’s price. This ties into managing customer expectations. Gurus who advise businesses to under-promise and over-deliver miss the point. That tactic adds often excessive value to the service delivered to the customer who then quickly grows to expect more than what he pays for, which then morphs into the vendor becoming the low-bid provider when competitors’ prices rise.
By establishing one’s value, one sets a price on the service and holds firm, promising only what can be delivered. Says Tom Reilly, author of Value-Added Selling, “Buyers want equity—they want to feel that they get at least as good as they give. Equity strikes a balance between expectations and performance.”

This means stopping customers from fixating on price. Writing for the Harvard Business Review, Marco Bertini and Luc Wathieu state, “Constant price undercutting can damage brand equity and erode profit margins. Meanwhile, customers develop low expectations and become disengaged.” In their article, they cite four strategies to establish value and avoid underpricing.

Entrepreneur magazine says, “Thinking about price and value… is at least a two-dimensional problem. That is, you can change the pricing and leave the value alone, or you can change the value and leave the pricing alone. You can also change both value and pricing or leave them both alone.” Each of the three options has an impact upon customer perceptions. Your job is to establish and maintain a perception of good value that balances expectations and performance.

 


The Customer Is Not Always Right

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It happens to every business: you take on a new customer and the anticipated happy experience turns into a nightmare that stresses your staff, demands many more hours of work than expected, results in a financial loss, and leaves bad taste in your mouth. Unreasonable clients and customers who will never be satisfied lead to employee turnover, job dissatisfaction, and declining morale.

How does a responsible businessperson avoid the pitfall of the unreasonable client? How do you recognize which clients are worth chasing? The first considerations in qualifying clients concern whether a prospect values your time, expertise, and the service or product you provide.

Potential clients who don’t value your service or time will demand your time, attention, and expertise to solve their problems without actually hiring you. Beware of prospect who “will just use you for information without any intention of doing business,” says Melinda Emerson in her article “How to Qualify Potential Customers.” In such a scenario, she advises giving “just enough information to demonstrate that you know how to solve their business challenge.”

Potential clients who consistently miss appointments do not value your limited time. Emerson recommends disengaging from prospects after two failed appointments. Should the prospect keep attempting to reschedule, “simply say you are unavailable due to a huge new project, or give them a bid that you know far exceeds their budget.”

New entrepreneurs often make the mistake of accepting every contract offered, because they’re just getting started and want to establish a client base and reputation. Often potential clients understand this mindset and take advantage of it by requesting low bid rates, accelerated delivery schedules, and extra services. They’re pre-qualifying vendors, too, to see who can deliver the results they want for the absolute lowest price.

The result of accepting every offer that comes along is stress and a reputation for being the low bid provider. Qualifying clients means “making sure that prospects have budgets and are likely to buy,” says Ruben Gamez in his article “How to Qualify Your Business Leads Like a Top Agency.” In short he warns, “When you don’t qualify leads, you wind up with bad clients, and servicing bad clients comes at a high cost.” And they don’t give referrals, either.

Weeding out good prospects from bad means turning down jobs. Before you know which prospects to turn down so you can focus on the good ones, you must determine the key characteristics that define a good client. If you already have a portfolio of work, analyze the clients who commissioned your favorite projects and identify their common traits for pros and cons. Then break down the list of pros into “must-have” and “nice-to-have” characteristics. The “must-have” characteristics form your qualifying list. A prospect must meet those qualifications in order for negotiations for proceed.

Amber Leigh Turner’s article “How Prequalifying Your Potential Clients Could Save Your Time” suggests asking the following questions:

1. Is the prospect requesting services you offer?
2. Is the prospect serious?
3. What is the prospect’s budget?
4. Will your schedule accommodate the project?
5. What’s your gut feeling?

Once you’ve determined that the prospect feels like a good fit and that you understand the project challenge, propose a good solution and submit an estimate (for small projects) or a proposal (for large projects).

 


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Change to Remain Relevant

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Change, like a certain scatological reference, happens. You can’t prevent it. You may not even be able to delay it. That means you have two choices: adapt or stagnate.

The market will always find room to accommodate those who stick to their guns and refuse to change. After all, one can still find buggy whips, even though society has long since moved to automotive transportation. However, one cannot find buggy whips sold on every street corner. They’ve become a niche item. Don’t change, and your business becomes a niche industry or service.

Adaptation translates into survival for most businesses. When the personal computer finally became an affordable and feasible piece of desktop equipment in the 1980s, business migrated in droves. Try to find an office now that doesn’t have a computer on every desk.

What’s the next change?

Consultant Michael Hyatt comments, “Pundits, consultants, and strategists are always trying to forecast what’s coming down the pike. … It’s impossible to miss predictions about automation, the freelance economy, Big Data, and AI in our social media feeds and favorite news sources.” Regardless of what changes affect your business and your future, the important question “is whether you see possible changes as threats or opportunities.”

In Huffington Post, Jacob Morgan speaks to the three things everyone can do to adapt to change and make the best of the opportunities it presents: “1. leverage online education platforms; 2. use social channels and create filters to stay on top of current and relevant information; 3. participate in communities that are relevant to your interests and passions.”

The Harvard Business Review takes a somewhat different angle in its advice to stay relevant. Writing for the magazine, Pat Wadors reports that university career centers commonly ask the wrong question about how they can best prepare their students for the “real world.” Wadors notes that’s the wrong question. The ability to adapt and take advantage of change doesn’t rely upon “learning a set of skills and then being ‘prepared’ for life. It’s about learning to continuously learn over the course of your whole career.”

That attitude, unfortunately, is a hard sell, particularly in a market wherein employers with jobs to fill complain they can’t find applicants with the right skill sets. Perhaps what they should seek are applicants with the right attitudes, applicants who want to learn and are committed to ongoing learning and improving their skills. These applicants will embrace change and evolve with it. Businesses with such adaptable employees and which invest in continual education and training for their employees will not only survive, but thrive, in an era of rapid change.

As they say in finance, past performance does not indicate future performance. Business in general must adopt that perspective, because growth only happens through evolution to meet the needs of a constantly changing, dynamic business climate. Such evolution occurs only when employees are offered feasible opportunity to learn and adapt. Investment in your employees not only shows you care about their futures, but also helps to better position your business for future success because they’ll be more likely to stay with the company and use those new skills for the company.

 


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