Sign & Digital Graphics

May '19

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S I G N & D I G I T A L G R A P H I C S • May 2019 • 29 Don't Build a Better Mouse Trap I agree with Ralph Waldo Emerson, in theory, that if you build a better mousetrap, people will beat a path to your door, but only to the extent that you should constantly be trying to improve your product. Making it better is not the only way to achieve this. Making it faster, becoming the lowest cost producer of it (a.k.a. lowering your COGS), and engi- neering some other desirable character- istic into the offering are other ways to improve upon it. However, if you hesitate taking a product to market until you've perfected the "mousetrap", you will miss the opportunity to turn a profit today. Think of it this way. Let's say you're introducing a new product for the first time and haven't yet completed your unique pricing formula. You will either price it too high, too low, or just right— that is, you've hit the perfect balance of supply and demand. The latter case is also known as "dumb, blind luck." Now, what's the worse that can hap- pen if you launch the product at a price that is too high? No one buys it, your material suppliers and manufacturing labor will want their money, and you go broke and out of business. What's the worse that can happen if you introduce the product at a price that is too low? Everyone recognizes the sweet deal before them and orders for the product overwhelm your ability to produce and deliver it on time. If you miss too many deadlines, the orders will stop coming in—and, eventually you go broke and out of business. The lesson learned then is "why go broke… tired?" If you're undecided as to how to price your goods and services, err on the high side. You can always reduce the price if you have to, but it's much more difficult to raise the price on some- thing that was introduced at a steal just to get the ball rolling. Finding Price Nirvana There are many books and websites on the topic of pricing products to sell. Check out Larry Steinmetz's How to Sell at Prices Higher than Your Competitors—I consider it a classic, must-read busi- ness book. He presents a common-sense approach to fetching a profitable, yet fair price for your products and services that outperforms your business rivals. Also, consider providing training to your sales team on what exactly to do when a prospect says "How much will this cost?" and "Is this your best price?" Those instances are "moments of truth" and what a sales rep says, in response, is critical. Make your sales team the best at appreciating why your price list reads as it does and equip them with the profes- sional know-how to defend that list. Small Business Development Centers ( SBDCs: www.americassbdc.org) are sub- sidized by the U. S . Small Business Administration and most are located at many local colleges and universities. They will offer low-cost sales training throughout the year. Give one of them a try. Just remember that the price any- thing is sold for is directly related to the ability of that salesperson to sell. Usually sales people cringe when they hear that, but few argue its validity. Here are some quick tips to consider incorporating into your own unique pric- ing strategy: If you utilize a mathematical formula to determine selling price based on a desired gross margin, add a fudge factor to account for overhead costs. Collect a small amount on every job to defray the cost of salaried employees, rent, lease payments, utilities and all those other things that aren't part of COGS but must get paid nonetheless. Attract new clients that look, act, sound and smell like your best customers. Describe your best clients geo-demo- graphically and pursue prospective buy- ers that may be predisposed to do busi- ness with you as your best customers do. Implement customer loyalty pro- grams—such as frequent buyer rebates, discounts or rewards for referrals, and incentives for ordering early and during your slow periods—so that you can level out the peaks and valleys of your cash flow. Finally, another way to answer the challenge of "how to determine pric- ing" is to inspire passion in a profes- sional sales team. Arm them with dra- matic sales aids that vividly demonstrate exclusive features and benefits of your products. Support them in setting your products apart from the competition and addressing all your customers' needs. Just don't act shocked when your sellers sug- gest that you should raise prices because they're confident they could sell your product line for more. Good luck. SDG The Four Common Practices To Pricing Are: • Find the competition's price and match or beat it • Apply a desired gross margin to all products • Charge all the market can bear, or • Invent "the better mouse trap" and have customers beat a path to your door

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