What’s the value?

Getting paid

Although the recession is officially over, it is still difficult to get financing and customers in most sectors continue with their belt tightening exercise. With further government cuts on their way, anyone who deals with the public sector in particular, have found life increasingly hard.

So what can you do to ensure your business survives, and even flourishes, in this environment.

I think that for anyone who sells their expertise – business coaches, accountants, lawyers, web companies etc. – the key is VALUE. What value do you give your clients? How do they perceive the service you offer?

If you can identify what your clients really value, and ensure you really deliver in these areas, they will love you and tell all their friends. The problem for many of us is to determine what that is. It may often not be what we think is the most important part of our service.

Take an accountant, for example. If you talk to some accountants they believe that their USP is that they do a cracking good job of preparing a set of accounts. If you talk to accountants’ customers they take it as read that they will get a cracking good set of accounts. What adds value to them is having their accountant available to discuss their business issues with (without getting over charged!) and for this key advisor to be interested in them and their business.

It you just offer the service your competitors do why would your customers stay with you? They would be better off going for a cheaper option if the service they will get is the same!

If you really connect with your customers so  they see you as an integral part of their team,  and recognise the value you bring to their business, why would they go elsewhere? And how do you find out what is really important to your customers? TALK TO THEM!!

I am probably preaching to the converted, but I know that many business owners are not asking their clients exactly what they value. The reasons are complex. We Brits are not very good at talking money, let alone putting ourselves on the line by asking our customers what they think of us. However, the act of doing so shows our customers that we care what they think. That we want to provide the right service for them.

Getting to grips with the value proposition can ensure you don’t have to drop your prices to win work, or retain customers.

One last thing, we all know it is much cheaper to retain a good customer than to win a new one. So I see spending time with my customers to cement the relationship as part of my marketing activity.  It’s a win win situation! They get an advisor who is interested in their business, available to discuss their concerns when they need to, and some one they are confident knows them and their business well. I get to better understand my customers businesses so I can give them the best service I can.

Fiona 🙂

The price is right!

Pricing is an area many businesses struggle with. It is part science, part art and part psychology. Confident pricing is as much about how we feel about our business and our product/service, as it is about rules and processes.

Many businesses will stick to a cost plus method of pricing. They will add up all the components of a job and add a percentage for profit – job done (?). However, this approach takes no account of the market in which they are trading or the value of their product/service to the customer.

If you don’t know enough about your market you run the risk of overpricing by using the cost plus pricing method. If other suppliers are providing the same product/service as you and charging less than you, you need to know! If you constantly loose work it may be that you are pitching to the wrong type of customer for you.

Alternatively if you don’t understand the value of your product/service to your customer, you could be regularly underpricing. Take, for example, an instance which happened to me a couple of months ago. We had just had new carpeting through out the upstairs of our house. You know how it is, for a micro second everything looks great until… the cat gets trapped in one of the bedrooms and rips up the carpet in front of the door!

I phoned our lovely carpet guy who came along and patched in some of the offcut left over from the original fitting. He did such a good job that we cannot actually see where the join is. Obviously for me this job had a good deal of value because our carpet is pristine again. But he priced on a cost plus basis and so only charged me £15! He probably left over £80 on the table because the job was worth at least £100 to me.

Now cost plus as a starting point is not bad, because at least you ensure you get the minimum price you need to cover your costs – as long as you have a very good idea what those costs are. But relying on it alone will mean that you undercharge clients for whom the value you provide is more than the costs of providing it (plus profit).

For effective pricing you need to do your homework. You need to understand the market you are in; who your ideal customers are and what they value; and you need to have a very clear idea of what you need to achieve to make a profit.

Fiona 🙂