Overview

Many small business owners are trapped by industry pricing and market misconceptions, when they could be compensated for the true value of the product or service being offered. The low price they feel compelled to offer limits their ability to generate profits which, in turn, slows their response to changing customer needs. The good news is that a business can command almost any price it chooses by focusing on the value-not the cost-to the customer. Pricing for Profit shows businesspeople how to break out of the ...
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Pricing for Profit

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Overview

Many small business owners are trapped by industry pricing and market misconceptions, when they could be compensated for the true value of the product or service being offered. The low price they feel compelled to offer limits their ability to generate profits which, in turn, slows their response to changing customer needs. The good news is that a business can command almost any price it chooses by focusing on the value-not the cost-to the customer. Pricing for Profit shows businesspeople how to break out of the stranglehold of industry pricing and charge more for their wares (regardless of the competition) without alienating their customers. Readers will learn how to: ? Quantify the value of their products or services ? Distinguish between price buyers and value buyers ? Bundle their offerings for competitive advantage and increased customer value ? Craft a powerful marketing message that communicates value ? Generate more unit sales and close more sales overall, at higher prices ? Make more money with less effort Filled with easy-to-use formulas, sample scripts, clear examples, instructive exercises, and more, this accessible and practical guide is a must-read for businesspeople who want to be well-paid for the value they provide.
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Product Details

  • ISBN-13: 9780814415184
  • Publisher: AMACOM
  • Publication date: 9/9/2009
  • Sold by: Barnes & Noble
  • Format: eBook
  • File size: 2 MB

Meet the Author

DALE FURTWENGLER (High Ridge, MO) is President of Furtwengler & Associates, P.C., a consulting firm dedicated to helping small businesses increase profits without adding resources.

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Read an Excerpt

Introduction

I can’t raise prices; I won’t be competitive.” This belief represents one of the greatest frustrations business owners experience. One homebuilder spent 45 minutes telling me why his homes were better than his competitors’. Yet he didn’t feel that he could raise prices, even though his prices were 10 percent below market.

How does this happen? Why do businesspeople feel trapped by industry pricing even though they know, with absolute certainty, that their offerings are superior? They don’t know how to quantify value.

During my 19 years as a business consultant helping clients increase profits, I’ve found that this is the single greatest challenge they face in increasing revenues. The inability to quantify value makes it impossible to communicate that value. This, in turn, leaves customers with the impossible task of trying to decide which offering really has the greatest value.

As a CPA, I’ve been taught to quantify all sorts of things, including the value that client offerings have for their customers. Once my clients understand how to quantify value, they have no problem communicating that value and distinguishing their offerings from those of their competitors.

Pricing for Profit provides the tools – formulae and sales scripts, as well as an understanding of buyer and seller psychology – to help you command and get higher prices.These tools will give you the confidence you need to stand firm on your price.

Confidence comes from knowledge.When you know how to quantify and communicate the value of your offerings, when you know that you’re charging a fair price, when you know how to bundle offerings to meet a variety of budgets, you’ll have the confidence you need to:

*Attract customers who value what you provide.

*Gracefully walk away from prospects who don’t.

*Avoid the scarcity mentality that plagues many business owners.

The goal of Pricing for Profit is to help you get compensated well for the value you provide. In subsequent chapters, I’ll share the approaches that I’ve used to help my clients raise prices and increase the number of customers they serve.

While that may seem improbable or even impossible, the reality is that when you can quantify and clearly communicate the value your offerings provide, buyers feel more comfortable buying from you. That’s how you attract more customers while charging higher prices. That’s how you overcome the fear of losing sales.

My consultant friends jokingly label me “the leading cause of inflation” because I help so many business owners raise their prices. The reality is that I’m simply helping my clients get compensated well for the value they provide. What isn’t so obvious is that I’m also helping their customers and prospects make better buying decisions.

Buyers equipped with a clear understanding of value make better buying decisions. They are not as easily swayed by emotional arguments because they have facts.They are also not as likely to postpone decisions. Often, we can trace buyer inertia to their uncertainty about the value they’ll receive. Poor decisions and no decision are costly to both you and your customers. How expensive can this be?

In Chapter 1, you’ll discover:

*How low prices created the subprime debacle and how costly it is for consumers.

*The hidden costs associated with attracting a WalMart store.

*How costly American Airlines flight cancellations were to passengers.

Once you get a sense for how costly low prices can be in Chapter 1, subsequent chapters will provide answers to such questions as:

*Why can’t my salespeople sell value the way I do?

*How do I attract more of the right customers?

*How do I generate more dollars on each sale?

*How can I improve my sales close rate?

*How do I price in a down economy?

*How do I make more money without working harder?

Not only will I provide the answers to these questions, I promise that the answers will be simple, easy to implement, and inexpensive. Here’s the kind of result you can expect:

After only six hours of coaching, a horse trainer learned how to bundle her offerings and communicate their value. In doing so, she was able to increase the price of her core offering 33 percent. Within 60 days she went from a 95 percent vacancy rate to 5 percent.

How was she able to effect such a dramatic turnaround? She knew how to communicate value to her customers and prospects. Her knowledge, and the confidence it afforded, instilled confidence in her customers and prospects, making it easier for them to buy from her.

Another client’s change-order revenue losses were eliminated with a two-paragraph memo. Not only did the memo increase revenues, it reduced the age of their accounts receivable by 15 days, freeing up more than $350,000 in cash.

Free yourself of the chains of competitors’ pricing. It’s time to be compensated well for the tremendous value you provide. Develop the confidence you need to command and get higher prices so that you and your customers can avoid the high cost of low prices.

***

Excerpted from PRICING FOR PROFIT by Dale Furtwengler. Copyright © 2010. Published by AMACOM Books, a division of American Management Association, New York, NY. Used with permission.

All rights reserved. http://www.amacombooks.org.

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Table of Contents

Acknowledgments xi

Introduction 1

1 Ignorance Isn't Bliss: It's Expensive 4

Costly for You 4

Lost Revenues: Leaving Money on the Table 4

Productivity Costs 7

Wrong Customers 10

Other Hidden Costs 12

Staffing Costs 14

Quality Costs 14

Costly for Your Customers 17

Subprime Mortgages 17

WalMart 18

American Airlines 20

The "Big Three" Automakers 20

Our Lack of Name Awareness 22

Our Customers Only Care About Price 23

Our Competitors Won't Raise Prices 24

We'll Lose Market Share 24

Executive Summary 26

2 Know Thyself...and You'll Know Others, Too 28

Selling Styles Mirror Buying Habits 28

Know Thyself 29

Apparel 30

Appliances 30

Automobiles 30

Auto Repair 31

Food 31

Home Furnishings 31

Electronics 32

Business Equipment 32

Business Supplies 32

Business Services 33

Are You a Price Buyer or a Value Buyer? 33

Confirmation 33

Sales-Side Confirmation 36

Nature and Strategy 37

Know Others, Too 40

Evaluating and Recruiting Salespeople 42

Frustration 42

Wasted Training Dollars 43

Turnover 44

Matching Styles 45

Professional Management 45

Admired Companies 46

Sales Experience 46

Pricing Policy 46

Productivity 47

Outsourcing 47

The High Cost of Low Prices 48

Executive Summary 49

3 Elementary School Math: Quantifying Value 51

Value 51

Are Things as They Appear? 52

Are Customer Preferences Constantly Changing? 52

When Customer Preferences Change, Do Customers Expect the Price to Change? 53

What Customers Value 53

Calculating Value 56

Image 56

Innovation 64

Time Savings 67

Executive Summary 77

4 Customers' Delight: Discovering the Value 79

The Power of Discovery79

What Your Prospect Values 80

The Degree of Interest 81

Little or No Interest 81

Some Interest 84

Genuine Interest 85

Your Ideal Prospect's Interest 85

Image 86

Innovation 90

Time Savings 95

Executive Summary 100

5 Icing on the Cake: Bundling for Greater Profits 101

What Bundling Can Do for Your Business 101

Sweetens the Deal for Your Customers 102

Increases Your Average Sale 102

Boosts Your Employees' Productivity 103

Reduces Your Risks 103

Creating Bundles: Examples and Exercises 104

Horse Trainer Example 104

Clothing Purchase Example 112

Computer Example 116

Consultant Example 121

Investment Advisory Example 126

Executive Summary 131

6 Avoiding No: Using Options to Close the Sale 133

Offering Options 134

Education 134

Budget Considerations 134

Delineating Options 135

Pricing the Options 142

Consulting Example: Value Calculation 143

Consulting Example: Price Calculation 146

Deciding to Sell Up or Down 147

Retail Product Sales: Home Theater Systems 149

Business Loans: Increasing the Close Rate 153

Executive Summary 165

7 Value as a Marketing Tool: Attracting the Right Buyers 166

Attracting the Right Buyers 167

Understanding the Value You Provide 167

Crafting Messages That Have Meaning for Your Buyers 168

Using Language That Conveys Your Value 171

Avoiding Price Language That Diminishes the Value You Provide 177

Creating an Effective Call to Action 178

Gaining Experience with Marketing Messages 179

Horse Trainer: Attracting the Right Buyers 179

Clothier: Attracting the Right Buyers 183

Executive Summary 187

8 The Value Trap: Avoiding the Pitfalls of Change 190

Identifying Pitfalls 190

Customer-Directed Change 191

Competitor-Directed Change 191

Self-Directed Change 192

Technology-Directed Change 194

Avoiding Pitfalls 195

Executive Summary 197

9 The Economy: It Just Doesn't Matter! 198

Why the Economy Doesn't Matter 198

The Right Way to Lower Prices 201

Executive Summary 202

10 Make More, Work Less 204

Bigger Isn't Better 204

Avoiding Price Competition 205

Executive Summary 206

Notes 207

Index 209

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