Better pricing gets higher profits. This seminar for Downtown Austin Alliance provided information for retailers, bakeries, and art venues on how to price for Platinum Profile customers, handle objections, strategy and considerations. Also includes some financial and administrative issues that should be considered. Recommended reading list.

1. With Jan Triplett, Ph.D. CEO, Business Success Center #DAA Pricing Better Pricing for Higher Profits ©Business Success Center, Austin, TX 2011. All rights reserved.

3. Providing guided growth strategy to achieve success since 1982

4. Sales, marketing, & financial management focus

5. Clients from hospitality, retail, manufacturing and professional services©Business Success Center, Austin, TX 2011. All rights reserved. 2

6. Your Focus? Mostly B to C? Some B to B? Better to be P to P .)(. (Belly Button to Belly Button) ©Business Success Center, Austin, TX 2011. All rights reserved. 3

7. “The purpose of business is to create a customer. Marketing is the distinguishing, unique function of the business. It is everything seen from the point of view of the customer.” ©Business Success Center, Austin, TX 2011. All rights reserved. 4 Marketing Defined Peter Drucker, Mgmt “Guru”

8. Find Acquire Reinforce Retain THE BEST CUSTOMERS © Business Success Center, Austin, TX 2011 All rights reserved. 5 Think FARR, Go Far

9. What is Pricing About? ©Business Success Center, Austin, TX 2011. All rights reserved. 6 Profit Image Positioning Resources available for marketing and promotion. Recouping your investment Ability to penetrate a new market Price is only constrained by two variables: breakeven point and your preferred customer’s “flinch point”. What & how you price affects all the above.

10. Your Biggest Concern about Pricing What keeps you up at night? Losing too many customers. Not being competitively priced. Leaving money on the table. Not being profitable enough on each sale. Afraid I am not accounting for all my costs (missing something). Breaking the law with my pricing policies. When to talk about price or show pricewithout scaring customers away. None of the above. © Business Success Center, Austin, TX 2010 7

11. Pricing Objectives ©Business Success Center, Austin, TX 2011. All rights reserved. 8 Meet or Prevent Competition Stabilize Price and Profit Margin Capture Market Share Profit Optimization Growth in Sales Return on Investment

12. New Approach: “Shopper Marketing” Assumes shopper and consumer are not the same Marketing aimed at shopper instead because stats show: 70% of brand selections made at the store; 68% of buying decisions unplanned ©Business Success Center, Austin, TX 2011. All rights reserved. 9 Customers usually can’t remember within 10% of cost what they paid. 25% of shoppers consider price less important than time. 20% of shoppers price-driven.

13. Consumer Price Index & Consumer Confidence Index What’s keeping customers up at night? The Cost of Living in the US • Consumer Price Index for All Urban Consumers (CPI-U) increased 3.6 percent over the last 12 months. Month increase 0.1 percent prior to seasonal adjustment. (Next CPI release Sept. 15, 2011) • Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 4.1 percent over the last 12 months. Month increase 0.1 percent prior to seasonal adjustment. • The Conference Board Consumer Confidence Index®, which had declined in June, improved slightly in July. The Index now stands at 59.5 (1985=100), up from 57.6 in June. The Present Situation Index decreased to 35.7 from 36.6. The Expectations Index rose to 75.4 from 71.6 last month. The proportion of consumers anticipating an increase in their incomes rose to 15.7 percent from 14.1 percent. (Cutoff for data July 15, 2011 next release Aug. 30, 2011) ©Business Success Center, Austin, TX 2011. All rights reserved. 10

14. Pricing Considerations ©Business Success Center, Austin, TX 2011. All rights reserved. 11 Pricing is an emotional issue for you, your employees, & customers. Buyer reaction to price is unpredictable. Shoot from the hip & you’ll end up shot in the foot or worse. One price strategy usually doesn’t fit all products/services. Controlling costs can make a business more profitable than raising the price. Stay alert: pricing laws & regulations change.

15. What You Need to Know about Pricing Pricing should be… Pricing will… ©Business Success Center, Austin, TX 2011. All rights reserved. 12 An attention getter and qualifier. A way to position your business. Perceived by your Platinum-preferred client as a benefit not just a feature. Make you rich or at least comfortable or just sick and tired. Affect the success of all areas of the business. Require that you don’t just set it & forget it.

16. Pricing Competitors ©Business Success Center, Austin, TX 2011. All rights reserved. 13 Real To you To your customer Ghosts DIY (Do It Yourselfers) DNAA (Do Nothing At Alls) Daily Deals & Other Coupons

17. Your Price is NOT Right for Everyone It’s all about: Getting the right customer Keeping the right customer Considering their perceived risk Knowing your true total costs Identifying the top value you bring Accounting for long & short term goals THEN Pricing Right & legally! ©Business Success Center, Austin, TX 2011. All rights reserved. 14

18. A Quick Word About Laws © Business Success Center, Austin, TX 2010 15 Two key laws to be familiar with: DTPA (Deceptive Trade Practices Act) — illegal to “bait & switch” or any of the many other ways that are used to mislead customers. Applicable to sales to businesses and consumers.http://www.statutes.legis.state.tx.us/SOTWDocs/BC/htm/BC.17.htm Clayton Act (Robinson-Patman Act Amendment) — illegal to discriminate on price (except in some instances), tie or bundle purchasing contracts.

19. What Customer Do You Want?Set Your Prices Based on Them. Platinum & Gold — create stabilitySilver —has potentialBronze — uncertainLead — a time waster Concrete — a business killer & never satisfied Radio Active Waste a long-lasting reputation & confidence destroyer © Business Success Center, Austin, TX 2011 16

20. Platinum Profile™ customers are… • Visionaries See situation as you do See value of your solution • Adventurous Confident in you Trust you • Decisive Hassle-free or less hassle ©Business Success Center, Austin, TX 2011. All rights reserved. 17

21. Who’s Your Best Downtown Customer? ©Business Success Center, Austin, TX 2011. All rights reserved. 18 List your external customers. (These are those who are not part of your business.) List your internal customers. (These people have an impact on the potential of a sale and are connected to your business in some way.) How do your external and internal customers affect your pricing decisions?

22. What Do Your Customers Want? • More than a solution or something fixed. There are 6 Situational Outcomes™ they value. Reduction, Elimination, Prevention, Create Opportunity, Use Opportunity, Status Quo (More at ownersview.com: http://bit.ly/gtdaVP) There are 5 personal risks they are willing to take to get what they value at the price charged: Social, Psychological, Functional, Physical, Financial • Set your prices based on your ability to deliver that outcome and reduce their risk. © Business Success Center, Austin, TX 2010 19

23. Price to Match Your Customer’s Attitude Positive — Seeking Opportunity Negative — Been Burned, Dissatisfied Status Quo — Maintenance, Same as I bought elsewhere How would you choose to price? High, Low, Competitive, None of the above, All of the above? ©Business Success Center, Austin, TX 2011. All rights reserved. 20

24. Price Acceptance ©Business Success Center, Austin, TX 2011. All rights reserved. 21 Which is best? Sell more for less or Less for more? Pricing used to justify the purchase. Willingness to accept a given price depends on conditions of the buyer Impulse buy Credit Alternatives Perceived Value Affirmation made the right decision

25. Pricing Right Includes both financial and marketing decisions Has administrative implications Sets up present and future health of the business (Legacy Pricing™) Who should you price for? (Hint: not just customers) Make a list. ©Business Success Center, Austin, TX 2011. All rights reserved. 22

27. Easiest SaleWhich do you focus on in pricing? • Yes • No • Maybe ©Business Success Center, Austin, TX 2011. All rights reserved. 23

28. Seller’s Financial Decisions MSRP True Total Costs™ • Development Cost (Create/Design) • Acquisition Cost (Purchasing Choice & Customer Choice) • Retention Cost (Vendor and Customer) • Hassle Factor • Overhead Profit Contingency Books & Record Keeping Issues ©Business Success Center, Austin, TX 2011. All rights reserved. 24

30. Stock up

31. Repeat buy

32. What else?©Business Success Center, Austin, TX 2011. All rights reserved. 25

33. Seller’s Marketing Decisions Choice of Customer Goal: acquire (new or steal), retain, resell, upsell Competitive Advantage Positioning ©Business Success Center, Austin, TX 2011. All rights reserved. 26 The issue of sales and discounts

34. The Big Debate Cost vs. Value ©Business Success Center, Austin, TX 2011. All rights reserved. 27 What value do you offer to justify your price? What does your staff think?

35. A “Fair” Price Customers want: To get good value, pay a fair price. Sellers want: To give good value, get a fair price. What do your customers value? How do you know? Features, Advantages, & Benefits. Make a list of the most appropriate. ©Business Success Center, Austin, TX 2011. All rights reserved. 28

36. Customer Concerns about Fairness Risk (functional, physical, financial, social, psychological) Reward (features, benefits, and game) • Features = Facts • Benefits = Reinforce A, I, O,V, L (emotions) • Game = Winner (social, small biz, big biz, government, non-profit, university, political) Flinch Point/Reservation Point Every purchase is really based on emotion, not logic. ©Business Success Center, Austin, TX 2011. All rights reserved. 29

37. Dealing with Pricing Objections ©Business Success Center, Austin, TX 2011. All rights reserved. 30 Downtown too pricey; small stores more expensive than big Choosing the right customer Emphasizing the right benefits with corresponding features Too tough to get there Demonstrating added value Not worth it Presenting price at the right time and place (Placing pricing in the right place — clothing, website, boxes, retail items) Improving your sales process so price not first thing people hear or see

38. Seller’s Administrative Decisions Who to hire • Experience selling at this level • Their philosophy and perspective • Avoid the defenders and apologizers How and when to train • How price can help sell • How to keep people informed and in the loop The danger of change • Too often & sales people confused, customers mad ©Business Success Center, Austin, TX 2011. All rights reserved. 31

39. Best Practices in Pricing • Price what you’re worth. • Use KISS pricing system. • Account for profit, contingency & hassle-factor. • Price for positioning. • Monitor & adjust. ©Business Success Center, Austin, TX 2011. All rights reserved. 32

40. Worst Practices in Pricing • Undervaluing your benefits. • Under-estimating costs. • Not considering your Platinum customer’s “Flinch Point”. • Blindly following competition. • Inconsistent pricing. • Violating laws - DTPA ©Business Success Center, Austin, TX 2011. All rights reserved. 33

41. Good & Bad Pricing Examples Charging low price to get started Having regularly scheduled sales Using customer loyalty cards Your examples? ©Business Success Center, Austin, TX 2011. All rights reserved. 34

42. Worth Reading • Beating the Commodity Trap by Richard D’Aveni • Co-Op Advertising by Bob Houk • Shopper Marketing by Marcus Stahlberg • Strategy & Tactics of Pricing by Thomas Nagle ©Business Success Center, Austin, TX 2011. All rights reserved. 35

43. Pricing Practices Action Items Make sure you have accounted for your true total costs. Know the value of what you sell. Ensure your pricing reflects your preferred customers value outcome, your preferred positioning, meets legal requirements, includes profit and contingency as well as costs. © Business Success Center, Austin, TX 2010 36 For a copy of BSC’s Pricing Terms & Concepts Glossary or additional questions, please email me at triplett@runitright.biz.

44. Homework Check your pricing. Make sure all costs, profit, contingency, positioning and value are considered. Make sure staff know how pricing is determined. If you have apologizers, defenders, or complainers retrain or rehire. Do market research with your best customers. How valuable do they think you are to them? High, can live with or without you, low, no opinion. If you get many who do not say “high”, rethink your benefits and features with input from your Platinum Profile™ customers. ©Business Success Center, Austin, TX 2011. All rights reserved. 37

45. Here’s to your success! Jan Tripletttriplett@runitright.biz Jan Triplett Blog:ownersview.com (512) 933-1983 Please call if you have questions, would like to discuss this seminar or your homework, or meet. No charge. Sales & Financial Management Services August 23, 2011 ©Business Success Center, Austin, TX 2011. All rights reserved. 38