The best way to make sure the long term customer knows you’re not taking them for granted is to make it a practice to continually sell them. Advertising works best when it’s presented constantly over time. The message and the medium are important, but the repetition of the message—the frequency with which a customer sees the ad—is paramount. Good customer relations are built the same way: continual selling.
As you practice continual selling, watch out for a few pitfalls. In most businesses, long-term orders are encouraged. A contract to deliver the product or service in increments over a period of several months is generally considered more valuable than a series of contracts to deliver the same volume written one month at a time. The security of the long-term contract is often so important that the vendor will grant a discount or other special terms to the customer who signs one. Salespeople recognize the value, too, because they know that it’s much more efficient to sell one contract than twelve.
But there’s a downside risk in long-term contracts, too. The salesperson often believes, either consciously or subconsciously, that they’ve secured all the business they’re going to get from that customer, so they stop selling them until contract renewal time comes around. In some cases (which are all too frequent), the customer won’t even hear from the salesperson again until it’s time to renew. This attitude not only impairs the relationship with that customer, but it blinds the salesperson to many good opportunities in the interim.
I’m sure that your company has a continuous stream of new products, repackaged lines, sales promotions, and maybe even a price change or two. The first place you should prospect to sell these is among your current customers. They’ve already shown their willingness to buy from you, so keep the boiler stoked by continually feeding it new fuel.
Your customer’s needs may have changed or new ones arisen since they signed that long- term contract. The contract itself may have left some money on the table or there may well be a “contingency fund” in the customer’s budget held back just for last-minute opportunities. You’ll never know unless you constantly offer them additions to their contract.
Another advantage of continual selling is that you are trying out new ideas on the customer all the time. That gives you frequent feedback on what the customer likes and doesn’t like, needs and doesn’t need. Whether you sell any add-ons or not, this is very useful information when it comes to renewal time.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for business owners and managers in the Dynamic Manager's Guides and Handbooks, a series of how-to books about marketing and advertising, sales techniques, and management strategy.
Friday, March 22, 2013
Friday, March 15, 2013
Customer For Life? Maybe!
Your goal for every customer should be to turn them into a customer for life, a popular concept that’s made the rounds in the last few years. Bowl them over with your service. Become such an integral part of their company that you have your own desk in their office. Know their needs so intimately that you develop solutions before the customers even discover the needs themselves.
Out of all your customers, you won’t have very many with that kind of relationship, but when you do, you’ll profit from it. I’ve been fortunate enough to have a handful of such customers with whom I’ve done business both when I worked for other companies and after I started my own. A few of them have represented millions of dollars in income over the years. You can enjoy the same kind of long-term relationship with your best customers if you practice just one thing: never stop selling them.
They may become your friends; in fact, I hope they do. They may come to rely on your service or products to the exclusion of all others. They may tell you that they’ll always be your customers and sign long-term contracts to prove it. But if you take them and their business for granted, you’ll regret it someday.
You’ll also be sorry if you rely on them as your sole or main source of income. Having one dominant customer is a dangerous situation because there are too many variables outside your control—and theirs. “For life” is a long, long, time.
Situations and people change. What was the foundation for a wonderful relationship two years ago may not mean anything today. Your relationship with your customer for life has to develop and change the same way your relationship with your spouse or significant other evolves over time. That’s the only way the relationship will stay vibrant, alive, and satisfying to both of you.
So never stop selling them. Every time your company comes out with a new product or service, pitch it to your current customers first. If it’s really a “new and improved” model, don’t you owe it to them? If there’s a limited supply, shouldn’t your best customers get first shot at it? That should be one of their rewards for being a loyal customer.
And always look for ways to add value to their current purchases from you. If your company sees fit to offer an inducement to new customers, shouldn’t your best current customers get the same deal? It’s a real slap in the face if they don’t. And if the new business incentive is a small price to pay for a new account, it’s an even smaller price to pay to keep a current one. That’s one of the management dilemmas behind sales promotions.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for business owners and managers in the Dynamic Manager's Guides and Handbooks, a series of how-to books about marketing and advertising, sales techniques, and management strategy.
Out of all your customers, you won’t have very many with that kind of relationship, but when you do, you’ll profit from it. I’ve been fortunate enough to have a handful of such customers with whom I’ve done business both when I worked for other companies and after I started my own. A few of them have represented millions of dollars in income over the years. You can enjoy the same kind of long-term relationship with your best customers if you practice just one thing: never stop selling them.
They may become your friends; in fact, I hope they do. They may come to rely on your service or products to the exclusion of all others. They may tell you that they’ll always be your customers and sign long-term contracts to prove it. But if you take them and their business for granted, you’ll regret it someday.
You’ll also be sorry if you rely on them as your sole or main source of income. Having one dominant customer is a dangerous situation because there are too many variables outside your control—and theirs. “For life” is a long, long, time.
Situations and people change. What was the foundation for a wonderful relationship two years ago may not mean anything today. Your relationship with your customer for life has to develop and change the same way your relationship with your spouse or significant other evolves over time. That’s the only way the relationship will stay vibrant, alive, and satisfying to both of you.
So never stop selling them. Every time your company comes out with a new product or service, pitch it to your current customers first. If it’s really a “new and improved” model, don’t you owe it to them? If there’s a limited supply, shouldn’t your best customers get first shot at it? That should be one of their rewards for being a loyal customer.
And always look for ways to add value to their current purchases from you. If your company sees fit to offer an inducement to new customers, shouldn’t your best current customers get the same deal? It’s a real slap in the face if they don’t. And if the new business incentive is a small price to pay for a new account, it’s an even smaller price to pay to keep a current one. That’s one of the management dilemmas behind sales promotions.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for business owners and managers in the Dynamic Manager's Guides and Handbooks, a series of how-to books about marketing and advertising, sales techniques, and management strategy.
Friday, March 8, 2013
Existing Customers vs New Prospects
Your current customers are your best single source of new business. They know you, they know your product, they have demonstrated their willingness to purchase. What’s more, you know them, you’ve learned about their needs, and you’ve invested a significant amount of your time in the success of their business. You should work to protect that investment and encourage it to grow the same way you manage your investment portfolio, making adjustments periodically to maximize the return on your investment.
Your current customers are also your company’s most profitable customers. The heavy start-up costs have been absorbed and written off already. The current customers have passed the credit checks, had their account data fed into your computer, been educated about your billing practices, learned how to use your customer support and service staffs, and otherwise incurred the typical back-office expense necessary to start doing business with a new account.
They’ve probably also passed the most expensive stage of incurring initial selling costs. You’ve used the get-acquainted offer, the short-term trial contract, and the sales promotion expense to bring them into the company. You’ve done your basic research, invested your time in preparing the initial proposals, tracked down the decision-makers, and made all the follow-up presentations to make the first sale. Once you’ve done these things, you generally don’t have to do them again. You can skip or abbreviate at least some of these time-expensive tasks.
You can concentrate on keeping the current customer happy and increase your business with them while you go about developing other new accounts. As you’ve probably guessed by now, you have to do both tasks to build a successful account list or territory. There is no rest in sales unless you decide you’re not going to grow your business both ways. And if that’s your decision, you’ll have plenty of time to rest—in the line at the unemployment office.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for business owners and managers in the Dynamic Manager's Guides and Handbooks, a series of how-to books about marketing and advertising, sales techniques, and management strategy.
Your current customers are also your company’s most profitable customers. The heavy start-up costs have been absorbed and written off already. The current customers have passed the credit checks, had their account data fed into your computer, been educated about your billing practices, learned how to use your customer support and service staffs, and otherwise incurred the typical back-office expense necessary to start doing business with a new account.
They’ve probably also passed the most expensive stage of incurring initial selling costs. You’ve used the get-acquainted offer, the short-term trial contract, and the sales promotion expense to bring them into the company. You’ve done your basic research, invested your time in preparing the initial proposals, tracked down the decision-makers, and made all the follow-up presentations to make the first sale. Once you’ve done these things, you generally don’t have to do them again. You can skip or abbreviate at least some of these time-expensive tasks.
You can concentrate on keeping the current customer happy and increase your business with them while you go about developing other new accounts. As you’ve probably guessed by now, you have to do both tasks to build a successful account list or territory. There is no rest in sales unless you decide you’re not going to grow your business both ways. And if that’s your decision, you’ll have plenty of time to rest—in the line at the unemployment office.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for business owners and managers in the Dynamic Manager's Guides and Handbooks, a series of how-to books about marketing and advertising, sales techniques, and management strategy.
Monday, March 4, 2013
Free Sales Training
Learn the secrets of making a sale on the first call....absolutely FREE!
One of the great myths of selling is that you must make a series of calls on a prospect to determine their needs before you can make a proposal. This is generally time-wasting nonsense based on a misunderstanding of consultive selling. Why wait? You’ll speed up the prospect’s decision-making process if you present an actionable proposal on the very first call. Here's how to do it.
For a limited time, this ebook in the Dynamic Manager Handbook series is available at no cost to Kindle owners or anyone with a device that can use the Kindle app. It's my way of saying thanks to all the readers of the Dynamic Manager series and an introduction to aggressive, progressive sales people who haven't tried it yet.
Dave Donelson distill the experiences of hundreds of entrepreneurs into practical advice for business owners and managers in the Dynamic Manager's Guides and Handbooks, a series of how-to books about marketing and advertising, sales techniques, and management strategy.
Friday, March 1, 2013
Getting Past The Flak Catcher To The Decision Maker
One of the most frustrating situations in sales is getting your proposal to a decision maker who is protected by an army of underlings or flak catchers who can't place an order but can shortstop your pitch. You can overcome this problem, if you approach it carefully but aggressively, following the steps I recommend in their exact order. If you try to jump ahead, you’ll suffer the consequences.
Step One: First, establish contact with Mr. Big, the real decision maker. Contact doesn’t have to mean a face-to-face meeting. In fact, in this stage you don’t really want a face-to-face. Put Mr. Big on your company’s direct mail list. Make sure he gets your newsletter, press releases, and new product announcements addressed to him personally and with a brief “FYI” note signed by you.
Step Two: When you present a proposal to the flak catcher or buying agency, follow it up with a “thank you” letter and carbon Mr. Big. Make sure the letter praises the flak catcher for their perception and professionalism during your meeting. Do the same if they somehow give you a little order. Lay it on real thick. It’ll make them look good to Mr. Big—and how can they object to that? That letter, of course, will also put your name in front of Mr. Big, establishing a human contact in your company he can call if he wants to. It’s also a good idea to send an actual, physical snail mail letter; they’re not only classier than email, but much less likely to get lost in Mr. Big’s spam folder.
These steps can’t be rushed. Together, they’ll probably take at least four to six weeks. You have to judge the time you need according to each situation, of course, but remember that the relationship has to evolve over a little time—weeks, not days—and work like water dripping steadily on rock. After enough drops have struck the surface, a hole will appear in the rock. It takes a lot of drops for that to happen.
Step Three: After you’ve laid the foundation, start to build the relationship. This step will probably require at least another four weeks. Now is the time to get some face-to-face contact with Mr. Big. Invite him (and the flak catcher) to any of your company functions where customers are welcome. If you don’t have any, think about staging one. Maybe you can throw a cocktail party to announce a new product or a buffet lunch in appreciation of past business.
If your company gives away any goodies—coffee mugs, T-shirts, caps with your logo—be sure to give one to the flak catcher and one to Mr. Big. Hand-deliver them if at all possible. Your goal is to put your face with that name Mr. Big has been seeing on correspondence for the last eight weeks. If you have to leave Mr. Big’s gift at the front desk, put a hand-written note with it.
Get your management involved, too. If your boss invites Mr. Big to dinner, the flak catcher can’t take it out on you, especially if the dinner is a purely social affair, which it should be at this point. Most top management recognizes the importance of these occasions and considers it part of their job.
Step Four: After you’ve established a pattern of contact with Mr. Big, he’s seen your name and face a few times and has been exposed to your company and its products, it’s time for the next step, which is to pitch an idea to him. Send a letter to Mr. Big much like your cold call telephone appointment pitch—promise him an idea and ask for 15 minutes of his time. Send a copy of the letter to the flak catcher. Then call the flak catcher and ask him if he’s available for that meeting assuming it happens. Don’t ask his permission—assume the close and invite him to the meeting. Then call Mr. Big to set the date and time.
The worst thing that can happen is that the flak catcher gets irritated by your end run. But what’s he going to do? Tell Mr. Big that he shouldn’t meet with that nice person who gave him all those gifts, invited him to dinner, and sent him that wonderful letter praising the flak catcher’s performance? It’s pretty hard for him to do that without sounding petty and defensive.
Is he going to tell you not to call Mr. Big? He can try, but if you remind him that you’re not going behind his back, in fact you’re inviting him to the meeting because you know how much Mr. Big values his opinion, he’ll have a tough time justifying his demand.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for business owners and managers in the Dynamic Manager's Guides and Handbooks, a series of how-to books about marketing and advertising, sales techniques, and management strategy.
Step One: First, establish contact with Mr. Big, the real decision maker. Contact doesn’t have to mean a face-to-face meeting. In fact, in this stage you don’t really want a face-to-face. Put Mr. Big on your company’s direct mail list. Make sure he gets your newsletter, press releases, and new product announcements addressed to him personally and with a brief “FYI” note signed by you.
Step Two: When you present a proposal to the flak catcher or buying agency, follow it up with a “thank you” letter and carbon Mr. Big. Make sure the letter praises the flak catcher for their perception and professionalism during your meeting. Do the same if they somehow give you a little order. Lay it on real thick. It’ll make them look good to Mr. Big—and how can they object to that? That letter, of course, will also put your name in front of Mr. Big, establishing a human contact in your company he can call if he wants to. It’s also a good idea to send an actual, physical snail mail letter; they’re not only classier than email, but much less likely to get lost in Mr. Big’s spam folder.
These steps can’t be rushed. Together, they’ll probably take at least four to six weeks. You have to judge the time you need according to each situation, of course, but remember that the relationship has to evolve over a little time—weeks, not days—and work like water dripping steadily on rock. After enough drops have struck the surface, a hole will appear in the rock. It takes a lot of drops for that to happen.
Step Three: After you’ve laid the foundation, start to build the relationship. This step will probably require at least another four weeks. Now is the time to get some face-to-face contact with Mr. Big. Invite him (and the flak catcher) to any of your company functions where customers are welcome. If you don’t have any, think about staging one. Maybe you can throw a cocktail party to announce a new product or a buffet lunch in appreciation of past business.
If your company gives away any goodies—coffee mugs, T-shirts, caps with your logo—be sure to give one to the flak catcher and one to Mr. Big. Hand-deliver them if at all possible. Your goal is to put your face with that name Mr. Big has been seeing on correspondence for the last eight weeks. If you have to leave Mr. Big’s gift at the front desk, put a hand-written note with it.
Get your management involved, too. If your boss invites Mr. Big to dinner, the flak catcher can’t take it out on you, especially if the dinner is a purely social affair, which it should be at this point. Most top management recognizes the importance of these occasions and considers it part of their job.
Step Four: After you’ve established a pattern of contact with Mr. Big, he’s seen your name and face a few times and has been exposed to your company and its products, it’s time for the next step, which is to pitch an idea to him. Send a letter to Mr. Big much like your cold call telephone appointment pitch—promise him an idea and ask for 15 minutes of his time. Send a copy of the letter to the flak catcher. Then call the flak catcher and ask him if he’s available for that meeting assuming it happens. Don’t ask his permission—assume the close and invite him to the meeting. Then call Mr. Big to set the date and time.
The worst thing that can happen is that the flak catcher gets irritated by your end run. But what’s he going to do? Tell Mr. Big that he shouldn’t meet with that nice person who gave him all those gifts, invited him to dinner, and sent him that wonderful letter praising the flak catcher’s performance? It’s pretty hard for him to do that without sounding petty and defensive.
Is he going to tell you not to call Mr. Big? He can try, but if you remind him that you’re not going behind his back, in fact you’re inviting him to the meeting because you know how much Mr. Big values his opinion, he’ll have a tough time justifying his demand.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for business owners and managers in the Dynamic Manager's Guides and Handbooks, a series of how-to books about marketing and advertising, sales techniques, and management strategy.
Monday, October 29, 2012
B 2 B Direct Mail Marketing Followup
Once you’ve done a few mailings, go visit the prospects on your list. Before you go, though, think through what you want to say to them. A short (three-minute) description of what you do and how you can help the prospect’s company make money will get you started. Once you’ve delivered it, ask them what you need to do to get their business, then shut up and listen. Nine times out of ten, they’ll tell you what you need to know as long as you use a professional approach and demonstrate a willingness to pay attention. Don’t be offended if you get a brush-off or two and don’t give up if they say they already have a preferred source for what you’re trying to sell. If that happens, thank them for their time and move on. Keep them on your mailing list, though, and visit them again next month—things change!
You should also have a leave-behind of some sort for every sales call. This can be a version of your latest direct mail piece, a fancier brochure, or even a coffee mug with your logo. And don’t forget to give them your business card. In fact, one of the best tactics you can adopt is to always hand out two cards at a time and ask the recipient to pass one along to anyone else they know who might be interested in your services.
Once you’ve established a relationship, build on it. There are all kinds of creative things you can do to keep your company at the top of the prospect’s list of preferred subs and vendors. Offer to sponsor a sales contest for the prospect for example, awarding a prize to the dealer’s salesperson who sells the most pieces in your line during a given period of time. Watch for the prospect’s own sales event, then have a pile of pizzas or a few boxes of donuts delivered with your compliments on their busiest day. If the prospect belongs to a civic group or supports a local charity, become involved with it yourself. The goal is to keep your name in front of the prospect all the time.
Your own vendors may help you with business-to-business marketing, too. Many manufacturers and distributors have co-operative advertising programs that pay part of the cost of your printing and mailing if you feature their products. Even if they don’t have a formal program, it doesn’t hurt to ask the next time you place an order. Others may have regional sales reps who would be available to go with you to make face-to-face calls. You should also ask if your suppliers do any lead generating of their own—trade shows, magazine advertising, etc.—that they can share with you.
Even with help from your vendors, marketing isn’t free, of course. A hundred first-class letters will cost you at least $100 for postage, envelopes, and computer printer ink. Imprinted coffee mugs aren’t cheap and even a supply of business cards will set you back a few bucks.
The biggest expense, though, is your time. Someone has to compile the prospect list, write the sales letters, and make the sales calls. In most small businesses, that someone is you. To control that particular expense (and to make sure the marketing gets done), dedicate a set number of hours every week to it, budgeting your time the same way you do your money.
Marketing is an investment from which you should expect a return. Fortunately, results from business-to-business marketing are usually easy to track. There is a finite prospect list, you know exactly how you’re marketing to each one, and you can easily identify the orders that you get from them. Make the investment in business-to-business marketing for a few months, then review the response. You might be surprised how much your company’s business has grown.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
You should also have a leave-behind of some sort for every sales call. This can be a version of your latest direct mail piece, a fancier brochure, or even a coffee mug with your logo. And don’t forget to give them your business card. In fact, one of the best tactics you can adopt is to always hand out two cards at a time and ask the recipient to pass one along to anyone else they know who might be interested in your services.
Once you’ve established a relationship, build on it. There are all kinds of creative things you can do to keep your company at the top of the prospect’s list of preferred subs and vendors. Offer to sponsor a sales contest for the prospect for example, awarding a prize to the dealer’s salesperson who sells the most pieces in your line during a given period of time. Watch for the prospect’s own sales event, then have a pile of pizzas or a few boxes of donuts delivered with your compliments on their busiest day. If the prospect belongs to a civic group or supports a local charity, become involved with it yourself. The goal is to keep your name in front of the prospect all the time.
Your own vendors may help you with business-to-business marketing, too. Many manufacturers and distributors have co-operative advertising programs that pay part of the cost of your printing and mailing if you feature their products. Even if they don’t have a formal program, it doesn’t hurt to ask the next time you place an order. Others may have regional sales reps who would be available to go with you to make face-to-face calls. You should also ask if your suppliers do any lead generating of their own—trade shows, magazine advertising, etc.—that they can share with you.
Even with help from your vendors, marketing isn’t free, of course. A hundred first-class letters will cost you at least $100 for postage, envelopes, and computer printer ink. Imprinted coffee mugs aren’t cheap and even a supply of business cards will set you back a few bucks.
The biggest expense, though, is your time. Someone has to compile the prospect list, write the sales letters, and make the sales calls. In most small businesses, that someone is you. To control that particular expense (and to make sure the marketing gets done), dedicate a set number of hours every week to it, budgeting your time the same way you do your money.
Marketing is an investment from which you should expect a return. Fortunately, results from business-to-business marketing are usually easy to track. There is a finite prospect list, you know exactly how you’re marketing to each one, and you can easily identify the orders that you get from them. Make the investment in business-to-business marketing for a few months, then review the response. You might be surprised how much your company’s business has grown.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
Monday, October 22, 2012
How To Succeed At B 2 B Direct Marketing
Advertising to other companies doesn’t mean running TV spots in the Super Bowl. It’s much more targeted than that, which means it’s much more economical. Direct mail is probably the single most effective medium to use; it’s intrusive and there’s very little waste circulation. There are three keys to successful direct mail: a good prospect list, a compelling message, and repetition. You can make up a short prospect list yourself if you spend a little time with the Yellow Pages. Just look up the dealers and other prospects in your market area, call them to get the names of the general managers, service writers, sales managers and buyers, and you’ll have a solid prospect list to work with. Keep it handy, by the way, because you’ll use it later when you start making sales calls.
The direct mail piece itself doesn’t have to be a four-color glossy catalogue. In fact, a one-page personal letter introducing you and describing how you can make money for the other company (in one form or another, that should always be your pitch) will be a good place to start. Every three or four weeks, send another one saying the same thing in different ways. You can announce new equipment or product lines you’ve added, quote a recently satisfied customer, or brag about any awards you’ve received. Address it to each individual on your list, keep it to one page, include a picture or two, and make sure you send something at least once a month.
A web site is a useful business-to-business marketing tool, too. If it has plenty of pictures of your work or products, testimonials from satisfied customers, and some information about your background and your company’s capabilities, it will give the prospect even more reasons to send business your way. Also make sure there is a working email link, phone and fax numbers, and keep it all up to date. You don’t need to hire a high-priced web designer, by the way; most hosting services offer perfectly good bare-bones templates. The site itself can cost less than $10 a month.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
The direct mail piece itself doesn’t have to be a four-color glossy catalogue. In fact, a one-page personal letter introducing you and describing how you can make money for the other company (in one form or another, that should always be your pitch) will be a good place to start. Every three or four weeks, send another one saying the same thing in different ways. You can announce new equipment or product lines you’ve added, quote a recently satisfied customer, or brag about any awards you’ve received. Address it to each individual on your list, keep it to one page, include a picture or two, and make sure you send something at least once a month.
A web site is a useful business-to-business marketing tool, too. If it has plenty of pictures of your work or products, testimonials from satisfied customers, and some information about your background and your company’s capabilities, it will give the prospect even more reasons to send business your way. Also make sure there is a working email link, phone and fax numbers, and keep it all up to date. You don’t need to hire a high-priced web designer, by the way; most hosting services offer perfectly good bare-bones templates. The site itself can cost less than $10 a month.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
Monday, October 15, 2012
Social Media Marketing Tips From The Pros
“You have to create a plan. I see many professionals and smaller businesses who haven’t looked at their objectives. Who is their target audience? What key messages are they trying to get out?”
--Stacy Cohen, Co-communications
“A great way to gain followers on Twitter is to Retweet what someone else has to say or to jump into their conversation and add your own perspective. Also ask people to retweet your links by adding the words ‘Pls RT’”
--Stacy Solomon, Internet Marketing Consultant
“If you are spending five hundred to a thousand dollars each month on marketing and take even one or two months of this and invest in setting up your social media, you can see a significant long-term gain for your business.”
--Gerald Stern, WOW Production Services
“One hundred high-quality followers easily equals one thousand so-so followers, because in the social media world you want people to constantly pass on the things you write, as well as send you material to post. Business people must avoid an overt ‘sales’ method—you’ll just turn people off and you’ll lose your following.”
--Chris Cornell, Westchester Social Media
“You should never expect social media to be completely cost-free. Someone must spend time staying on top of all those tweets, messages, Facebook updates and blog posts. Likewise, quick (if not instant) replies are necessary to maintain a reputation for responsiveness.”
--Kristen Ruby, Ruby Media Group
Whether they pay-it-forward or pay-as-they-go, more and more business owners and managers are turning to social media networks for very good reasons. “In the current economic downturn business owners must go above and beyond to promote themselves,” says Rye NY Chamber of Commerce Secretary Sally Wright. The organization received dozens of requests for a repeat of its recent social media seminar. She adds, “Social media is one great way to accomplish that.”
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
--Stacy Cohen, Co-communications
“A great way to gain followers on Twitter is to Retweet what someone else has to say or to jump into their conversation and add your own perspective. Also ask people to retweet your links by adding the words ‘Pls RT’”
--Stacy Solomon, Internet Marketing Consultant
“If you are spending five hundred to a thousand dollars each month on marketing and take even one or two months of this and invest in setting up your social media, you can see a significant long-term gain for your business.”
--Gerald Stern, WOW Production Services
“One hundred high-quality followers easily equals one thousand so-so followers, because in the social media world you want people to constantly pass on the things you write, as well as send you material to post. Business people must avoid an overt ‘sales’ method—you’ll just turn people off and you’ll lose your following.”
--Chris Cornell, Westchester Social Media
“You should never expect social media to be completely cost-free. Someone must spend time staying on top of all those tweets, messages, Facebook updates and blog posts. Likewise, quick (if not instant) replies are necessary to maintain a reputation for responsiveness.”
--Kristen Ruby, Ruby Media Group
Whether they pay-it-forward or pay-as-they-go, more and more business owners and managers are turning to social media networks for very good reasons. “In the current economic downturn business owners must go above and beyond to promote themselves,” says Rye NY Chamber of Commerce Secretary Sally Wright. The organization received dozens of requests for a repeat of its recent social media seminar. She adds, “Social media is one great way to accomplish that.”
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
Monday, October 8, 2012
Pricing For Profit - Step Two
Once you know how much the merchandise or job costs, you mark it up to provide a profit. One way is to use what’s known as “keystone” pricing, which simply means doubling the cost to arrive at the selling price. This provides a 50% gross profit margin. That’s why retailers can put goods on sale for 40% off and still make a profit. It works fine, but it isn’t always the best choice.
You can also use manufacturers’ suggested retail pricing, which even further simplifies the calculations. Nationally uniform prices, of course don’t reflect local market conditions, much less the individual business owner’s costs of doing business. Remember, too, that they’re designed to help the manufacturer move more merchandise, not necessarily help you make more money.
Using a standard markup sounds simple, but that’s really only the beginning of sound pricing strategy. You also have to be sure that the gross profit is large enough to cover your overhead, or the indirect costs of operating your business, and still leave a net profit. Whether you’re marking up merchandise or deciding on a labor rate, you’ve got to build in something to cover the rent—and all those other bills you pay every month.
Every business has indirect expenses (not related to the cost of a piece of merchandise or a particular employee’s labor on a job) that have to be paid. The obvious ones include your building and what it costs to operate it (utilities, maintenance, taxes, insurance), your fixtures, tools, office equipment, vehicles and other fixed assets (their cost on an annual basis is your depreciation expense), your salary and benefits (especially health insurance), not to mention the office manager and other general employees. Don’t forget to add in your property and casualty and liability insurance premiums, accountant’s fees, advertising and marketing expenses, office supplies, telephone, and so on and so on. While you’re at it, make sure you include an annual contribution to your own retirement plan, be it a 401-K, SEP-IRA, or whatever.
Finally, add something for net profit. That’s the whole point of running the business, right? The net profit, by the way, is not the same as your salary as the manager or owner. Your salary is payment for your labor managing the business. If you’re the owner, the net profit is the return on your investment and the compensation your receive for the risks you take. There’s a big difference.
The total dollar amount of your shop’s gross profit, the figure that has to be larger than your overhead expense, is also dependant on how much merchandise you sell or how many jobs you complete. These are determined, at least in part, by the prices you charge. If your prices are too high, customers will run away, so it can be a vicious circle. Cost-based pricing is all well and good, but ultimately, the prices you charge are determined by what your customers are willing to pay. That’s where a whole raft of other factors comes into play.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
You can also use manufacturers’ suggested retail pricing, which even further simplifies the calculations. Nationally uniform prices, of course don’t reflect local market conditions, much less the individual business owner’s costs of doing business. Remember, too, that they’re designed to help the manufacturer move more merchandise, not necessarily help you make more money.
Using a standard markup sounds simple, but that’s really only the beginning of sound pricing strategy. You also have to be sure that the gross profit is large enough to cover your overhead, or the indirect costs of operating your business, and still leave a net profit. Whether you’re marking up merchandise or deciding on a labor rate, you’ve got to build in something to cover the rent—and all those other bills you pay every month.
Every business has indirect expenses (not related to the cost of a piece of merchandise or a particular employee’s labor on a job) that have to be paid. The obvious ones include your building and what it costs to operate it (utilities, maintenance, taxes, insurance), your fixtures, tools, office equipment, vehicles and other fixed assets (their cost on an annual basis is your depreciation expense), your salary and benefits (especially health insurance), not to mention the office manager and other general employees. Don’t forget to add in your property and casualty and liability insurance premiums, accountant’s fees, advertising and marketing expenses, office supplies, telephone, and so on and so on. While you’re at it, make sure you include an annual contribution to your own retirement plan, be it a 401-K, SEP-IRA, or whatever.
Finally, add something for net profit. That’s the whole point of running the business, right? The net profit, by the way, is not the same as your salary as the manager or owner. Your salary is payment for your labor managing the business. If you’re the owner, the net profit is the return on your investment and the compensation your receive for the risks you take. There’s a big difference.
The total dollar amount of your shop’s gross profit, the figure that has to be larger than your overhead expense, is also dependant on how much merchandise you sell or how many jobs you complete. These are determined, at least in part, by the prices you charge. If your prices are too high, customers will run away, so it can be a vicious circle. Cost-based pricing is all well and good, but ultimately, the prices you charge are determined by what your customers are willing to pay. That’s where a whole raft of other factors comes into play.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
Monday, October 1, 2012
Pricing For Profit - Step One
When it comes to prices in your business, how much is enough and how much is too much? How do you set your prices? Buy low and sell high is the obvious answer, but for many companies, especially those with a mixture of retail merchandise and services, bricks-and-mortar and online competition, and customers driven one day by a penny-pinching budget and the next by the lust called gotta-have-whatever-at-any-price, there aren’t any easy answers.
Setting prices requires that even the most experienced manager or owner take a few moments every once in a while to dust off the calculator, get the accountant on the phone, and do some serious figuring. It’s tempting to just mark all merchandise up by a fixed percentage and figure labor at a flat rate comparable to what your competitors charge, but that’s not managing for profit, it’s hoping for one. There are several factors that you should consider.
Start with the cost of goods sold. That’s the amount you pay the manufacturer, wholesaler, or whomever for the merchandise you sell, whether at retail or as part of a service job. But it also includes the cost of acquiring those goods (shipping and handling), carrying them in inventory (interest expense), and allowances for returns and defective merchandise. If you pay any salespeople a commission or spiff, that needs to be taken into account, too.
For service work, you have to cover your direct labor costs on each job. These include not only an appropriate portion of your technicians’ annual salaries, but also their benefits, payroll taxes, unemployment insurance, worker’s compensation insurance, etc
What about the cost of your time? Whether you are a one-person business or simply provide indirect supervision of your staff, your time is a cost that has to be covered. One way to approach this is to divide what you expect to personally earn on an annual basis (including those items above but not your profit from the business—I’ll talk about that later) by 2,000, which is roughly the number of working hours during the year. Let’s say your “salary” plus benefits is $100,000. Your hourly labor cost is $50. Multiply that number by the hours you estimate you’ll personally spend on the job, add in the other worker’s costs, and you have your direct labor costs.
These aren't the only factors, so check next week for more guidelines on pricing for profit.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
Setting prices requires that even the most experienced manager or owner take a few moments every once in a while to dust off the calculator, get the accountant on the phone, and do some serious figuring. It’s tempting to just mark all merchandise up by a fixed percentage and figure labor at a flat rate comparable to what your competitors charge, but that’s not managing for profit, it’s hoping for one. There are several factors that you should consider.
Start with the cost of goods sold. That’s the amount you pay the manufacturer, wholesaler, or whomever for the merchandise you sell, whether at retail or as part of a service job. But it also includes the cost of acquiring those goods (shipping and handling), carrying them in inventory (interest expense), and allowances for returns and defective merchandise. If you pay any salespeople a commission or spiff, that needs to be taken into account, too.
For service work, you have to cover your direct labor costs on each job. These include not only an appropriate portion of your technicians’ annual salaries, but also their benefits, payroll taxes, unemployment insurance, worker’s compensation insurance, etc
What about the cost of your time? Whether you are a one-person business or simply provide indirect supervision of your staff, your time is a cost that has to be covered. One way to approach this is to divide what you expect to personally earn on an annual basis (including those items above but not your profit from the business—I’ll talk about that later) by 2,000, which is roughly the number of working hours during the year. Let’s say your “salary” plus benefits is $100,000. Your hourly labor cost is $50. Multiply that number by the hours you estimate you’ll personally spend on the job, add in the other worker’s costs, and you have your direct labor costs.
These aren't the only factors, so check next week for more guidelines on pricing for profit.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
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