Saturday, July 29, 2006

Value what you do

“When you undervalue what you do the world will undervalue who you are.” Suze Orman, American financial guru and author

Here are three ways of expressing a similar sentiment in a different way:
1) If other people are charging $100 for something and you only charge $10, your customer will wonder what is wrong with what you have to offer.
2) If you pay 20 cents for a pen, you don’t care who you lend it to; if you pay $200 you make sure you get it back.
3) If you buy an authentic Gucci™ product and it comes wrapped in a branded paper bag with a ribbon you will probably keep the bag and the ribbon; if you buy a cheap knock-off product and it comes wrapped in a paper bag with a ribbon you will probably chuck the wrapping out.

Jane Francis is the author of "Price Yourself Right”. She is available as a coach, trainer and workshop leader to help sales teams and companies pitch and present their price with creativity and confidence. To find out more buy the book here.

Thursday, July 13, 2006

The dangers of discounting

Discounting as a business practice is so entrenched that I probably don’t need to help you recreate the arguments that justify it.

The dictionary describes the effect well: “to deduct from the amount, cost; to disregard; to make less effective by anticipation.”

Before you succumb to the temptation to win new business by offering a discount take a moment to consider these seven problems associated with discounting:

1.Negotiations over discounts, focuses attention on price—as if that were all that matters. If your only competitive advantage is price, you are in trouble, because price can always be matched.

2.Discounting starts price wars. The company that usually wins is the one with the biggest balance sheet—the one who can afford to hold out the longest.

3.Discounting can affect the customer perception of your service. The less they pay, quite likely the less they will value it.

4.Discounting will affect your profit margins. Consider what would happen if all your competitors met your discounted price—do you think your customer is going to accept any less quality?

5.Discounting may affect the quality of your service. Yet, if you compromise the quality of what you sell, you risk disappointing customers and you may lose repeat business, and lose credibility or gain a bad reputation, or end up spending time fixing complaints. One way or another today’s discounts could rob you of future business, and profits.

6.Discounting may lead to ‘stockpiling’ where customers purchase more than they need while the price is cheap. This will affect demand and potential profits in the future.

7.Habitual discounting can become psychologically disempowering. A reduced price can be a short-sighted ‘quick fix’ that reduces business growth in the long run. Before you discount, stop and think: is this the only way to give value?

Be mindful when you’re offering a discount. Why are you doing it? Is it an investment, and will it net you a greater financial return in the future? Or is it something you do all the time, a thinly disguised (yet noble!) excuse for not charging your worth?

Are you offering a discount as the “lazy way out”—instead of making the effort to explain or demonstrate your value? One of the basic rules of negotiating is that if you are going to offer a discount, you offer a different product or service. Perhaps negotiate different terms, or a shorter guarantee, or longer lead times. Challenge your customer’s proposition for a discount with: “If you want a better price, give me a better order.”

You have permission to publish this article electronically or in print, free of charge, as long as the bylines are included. A courtesy copy of your publication would be appreciated.

Byline: Jane Francis is the author of "Price Yourself Right”. To find out more buy the book here.

Tuesday, July 04, 2006

Price Yourself Right

What do you have to gain by charging less than you are worth?

I can think of many ways you might be rewarded. For example, not charging what you are worth might make you feel safe by reducing the rejection you think you’d get if you charged more.

Perhaps undercharging allows you to feel like the ‘underdog’ and that makes you feel justified when you complain to your family how your clients don’t appreciate you. In this way, it buys you sympathy or gives you a sense of belonging within the group you associate with.

Here’s another not very pleasant but possible reason you may undercharge. It provides an ‘out clause’ i.e. you don’t want to finish the job properly so you think that if you leave it as it is and charge a bit less ‘they’ll understand’.

Or perhaps, if you’re not 100% confident in the job you’ve done, you might think: ‘well if it all falls apart, at least they didn’t spend too much on it.’ Or: ‘what did they expect; it was only a hundred dollars?’

If you see yourself in any of these situations, own up and learn a better way of communicating with your customer. Talk to your customer so you are both clear about the details of the transaction. Perhaps that should include the option of them paying you less to do less, or you improve the quality and lift the price.

You have permission to publish this article electronically or in print, free of charge, as long as the bylines are included. A courtesy copy of your publication would be appreciated.

Byline: Jane Francis is the author of "Price Yourself Right”. To find out more go to: www.priceyourselfight.com .