Question: Should I discount?
Answer: Probably not
Let me explain and offer an example of the harm that a discount can do to your bottom line. First of all, I would say that you need to do a better job at creating value for your customer. If you were making a proposal on a job and you were going to sell a widget at $60 per unit but were asked to discount to get the business do you do it? The answer is it depends. One thing to note before I go further; is that the “widget” can be a manufactured product, an item you re-sell as a wholesaler or it can be an hourly rate if you are a service provider and you sell your time.
Assuming your $60 price is reasonable based on a fair assessment of the market place, that request for you to discount means you are not doing a good enough job showing the value you are offering at $60 per widget. You need to work on that before entertaining thoughts about cutting your price. I wrote about that topic last year in my blog entitled; Pricing Your Services.
If you want to realize the harmful effect to your bottom line that a seemingly “small” 10% discount has on your future revenue stream take a look at this example. In the example below I have shown the price for units sold over a five-year period. The first example shows a year one sales price of $54/widget after a 10% discount from $60/widget. In both examples it is assumed that each year there is a 3% price increase passed on to the customer. In the second example, no discounting took place in year one and the sales price in year one is $60/widget. Take note that it takes until year five to get the sales price back to $60/widget when offering the discount. I also show the total lost sale revenue over the five-year period and I believe it is significant.
With the example above I hope I have given you motivation for you to polish your skills so you can adequately demonstrate the value in your goods or services. It is worth the effort to sharpen these skills. I can think of 47,772 reasons. Please note that I also showed you why you need to try to get discounts from your suppliers – it works both ways.
Have a great week defending against the insidious effects of saying yes to a discount.
I wrote about my experiences with my move to a high-definition TV several times. Read about them here and here. The TV I bought was a smart TV since it is Wi-Fi enabled and can interact with other devices in the same network. I recently stepped up and bought a smart phone and can now waste time watching YouTube videos like this one when I should be helping clients by Turning Things On End To Achieve Results!
As I write this I have had the smart phone for less than a week but it is nice to be able to get my emails and surf the web for directions without having a GPS. My problem with all this technology is how can I keep up with it and use it to its full potential. As an example, I was playing a song on my new phone upstairs in my bedroom trying to learn how to make a playlist and all of a sudden I did something and the song was playing on the Smart TV downstairs! I found this to be very interesting but my wife didn’t like me interrupting her “stories” with a noisy guitar solo.
I think the manufacturers of these products must be required to make these smart devices safe for all people to use. In other words, idiot proof them before rolling them out. If not that, then upon purchasing one of the devices you are issued a 10-year-old on loan for 6 weeks to walk you through the learning process. I believe that is a reasonable accommodation for teaching dumb people to how to use these smart products. On the other hand, if these products were so smart we wouldn’t have to learn how to use them.
Have a great week embracing technology.
I wrote about Delta airlines last fall and my comments were not very flattering. Well, to be fair I had an experience with Delta Airlines that needs to be reported and can serve as a nice business lesson. I was booking a flight for travel later this month and made a mistake on my return flight that forced me to cancel and re-book it. I tried to re-book the flight and was unable to do so noting however that the fee to change the flight was $150.00. I was nervous to say the least as I was directed to call the number on my Delta frequent flyer card. I called the number and was put into a cue of callers but I elected to receive a call back within 5 to 6 minutes from a representative. I hung up and was skeptical. Sure enough, 5 minutes later I got a call from a nice lady that who handled my problem and informed me that there was a 24 hour grace period and that there would be no fee to change my flight. She proceeded to take my information and in minutes a bad day just got much better.
So, what is the lesson? There are a couple of lessons that I took from this incident (which was totally my fault.) The first was how much goodwill Delta earned by simply being fair. I don’t know if all airlines have this 24 hour “bonehead” rule but I assume most do. In today’s business environment, especially when dealing with a huge company expectations are very low. So low that just by being treated fairly I was blown away.
The second lesson is that much of the competition is sub par and by just doing what is right will set you apart. Keep in mind that doing what is right is the bare bones minimum of how a company should act – just above ripping someone off. Taking that thought further, do a little extra and you will be superstar. If you do a lot more than required your praises will be sung far and wide. I hope no one is satisfied with doing a little better than the competition. Make it your customer service goal to blow away the competition and higher profits will be your reward.
Have a great week rising above your competition.
It is that time of year again, time for March Madness. I spoke about this last year by describing a typical night at my house while the tournament was on. Read that post here. This year the Madness begins on March 19th and the finals are on April 8th in Atlanta’s Georgia Dome. I live in the Atlanta area but will not on attend the event but welcome the economic impact on the metro Atlanta area. To read more about the tournament click here.
This year I am eagerly awaiting the tip-off since I will be watching the games in “glorious High Def” on my fancy new smart TV. I wonder if the high def will make my alma mater look any better or will they disappoint again? They have been a top three seed 7 times over the past ten years but have failed to close the deal. Read all about the University of Pittsburgh’s March Madness woes here.
Over the next two weeks I will be practicing my 3 point shot by tossing crumpled paper into my waste basket from 5 feet away. I hope you can begin your preparation soon as well. Have a great week working on your game.
I was eating a restaurant recently and was served a ton of food, as was my wife. This is a fairly common practice in the dining industry. I am sure you can name a few restaurants that are known for their large portion sizes with diners carrying out Styrofoam encased leftovers. As my wife and I had lunch the next day on the ample leftovers, we were discussing our dining experience. During the discussion, it occurred to me that the restaurant was using a good sales tactic. Serving large portions (at the commensurate large price) is using one of the tactics I wrote about in my blog Ways To Increase Sales In 2010.
In that blog I spoke of 4 ways to increase sales. For review I have listed them below:
1) Increase frequency of the transactions
2) Increase the number of the transactions
3) Increase the value of each transaction
4) Increase the price of the transactions
In a subtle way the restaurant has increased the value of the transaction. Whether you realize it or not; when you go to the restaurant that has large portions sizes along with a higher price they are not just selling you dinner, they are selling you tomorrow’s lunch too. They magically combined two transactions into one and you are actually happy about it. How many times do you glowingly tell a friend about the place by saying; “they really feed you at…”?
The next time you go to your favorite place with the large portions, remember that a real life business lesson is playing out before your very eyes. The trick is to use one of the 4 ways to increase sales in your business. Think about it over dinner and get and get back to me. Perhaps you can mull it over at dinner at the place with the gigantic portions.
Have a great week determining your sales strategy for 2013.
Bacon seems to be enjoying a surge in popularity despite the recent increase in over-reaching dietary laws like the banning of sugary soft drinks over 16 ounces in New York City. I wonder if you are able to buy draft beer in a glass over 16 ounces? If so, that will probably be next on the banned list. Why would they stop at sugary soft drinks? Why not ban king size candy bars? I have an idea; why not ban containers that are larger than 16 ounces and stop the problem at the source?
So, in honor of that insanity I offer a short list of things that taste better with bacon.Hamburgers Salad
Peanut butter sandwich
3 Egg omelet
A 12 ounce Steak with a sunny side up egg
A cheese pizza
Grilled cheese sandwich
Any subway sub
Cream of anything soup
Chocolate, yes chocolate covered bacon exists A 17 ounce sugary soft drink. Especially enjoyable when consumed inside the city limits of New York
Have a great week.
Before I delve into today’s topic, I am going to tell you the story behind the story. On January 12th I went on a bike ride since it warmed up to 74 degrees. On my bike ride I turned into the parking lot of a church that is very large and a great place to add-on a few miles to my ride while avoiding traffic. On the ride that day as I was about halfway into the first lap when I looked ahead and saw Wilson and it stunned me. For those of you who do not know who Wilson is, and I assume that is small number, it was Tom Hanks’ friend and sounding board while he was stuck alone on an island in the movie Cast Away.
Why was “Wilson’s” appearance; from seemingly nowhere, so stunning to me? I have business associate and friend that acts as my “Wilson” and I serve as his “Wilson”. What do I mean by that? Well, as a solo entrepreneur many times you can feel as if you are on an island. About a year ago I began meeting with him on a regular basis for coffee and to discuss ideas and happenings in our businesses. It was not my idea but; have found it to be a very valuable pursuit. I have given advice and received advice during our meetings and always find it helpful even if it is blowing off steam to someone who can relate to my frustrations. The nice thing about this is I can vent to someone else rather than my wife and she appreciates that. My “Wilson” is a good fit for me as he has a similar type of consulting business which is complimentary but not competing.
I have been in groups in the past and currently am in a group that acts my informal board of directors but having someone to confide in that is in a similar business who understands exactly what issues you face is invaluable. If you are in business by yourself, you should consider having a “Wilson” to keep you from going crazy on that lonely Island you live on.
Have great week.