What you believe your product is worth, isn't always what the customer wants to pay, and especially if they're a multinational corporation, and you're...not.
It's often tempting for service businesses to think of their pricing as simple units of money by time, for example, and that's what the purchasing people would like to believe. It makes it easy for them. And to be sure, someone will always price their services that way. But in a knowledge-based business, clients are also paying for your experience - your ability to understand the situation from a specific perspective, or as Steve Pulver, the speaker at last night's #Medventions session at Sunnybrook Health Sciences Centre described it, your ability to "see around corners". That's why you need to build a value story that they can understand. You need to avoid the price spiral. It's the same thing if you are building a complex new technology, or a medication. "Cost plus" is not the right model for either of those things.
So how do you decide how to set your price? There are a few simple rules of thumb. You do still need to start with costs. What does it cost to produce the product or service (raw materials, manufacturing, time researching, meeting, writing reports)? What are your overheads or fixed costs (rent, salaries, keeping the lights on)? Beyond that, you will need to look at competitors. Their pricing will give you a good idea of what the market will bear, unless your aim is to be much cheaper (because you've found a way to do that) or faster (there should be a premium for that) or higher quality (maybe, just maybe the customer will pay for that). Those are all good places to start, if there's a known benchmark. What if there's not? What if you're doing (or you've invented or discovered) something completely new?
Then you need to start with the costs, above, and begin to think more abstractly about your value proposition, what the product is worth, and what levers you can work with. If you have a medical device, for example, start by thinking about other similar medical problems that are addressed in terms of the incidence and prevalence of the issue, the number of patients impacted, the cost of not treating (the "opportunity cost"). You'll need to use some triangulation if there isn't readily available data. Then the real work begins.
Consider these questions when you're setting your price, and thinking about what customers will pay...
How serious is the pain? Is it more like an annoying itch, or is it a raging migraine? Thinking about how serious the pain is, will allow you to think about how much the customer will pay to solve it.
What is the consequence of not solving the problem? (How big is the risk to the customer? If it's a medical problem, can it be fatal, or permanently disabling?)
How far in the future will the consequence occur? (It's really hard to get someone young to understand why they might want to pay for life insurance)
And lastly, how often do they have the pain? If it's episodic, occurring at regular intervals, but never really going away, they may not pay as much (in between, they can live with it). If it's chronic and severe at the same time, they'll keep paying and paying for relief (in which case, maybe a subscription model is a good idea). And if it might only occur once - but the risks of not solving it are extreme, you need to make all your money at once, and they just may be willing to pay a premium.
It's not always dollars by time. Pricing is a much more complex story than that. But it's worth spending time to figure out. In fact, your business depends on it.
I'm Megann Willson and I'm one of the Partners here at PANOPTIKA. We help our customers in complex businesses to see everything they need to know to make better decisions, so they can build and grow. You can also find us on LinkedIn, Twitter, and Facebook. Or you can sign up for regular news you can use, with the handy button below.
Entrepreneurs and salespeople love opportunities. (Us included). We love hitting targets, self-imposed or otherwise. We're always looking around, discovering new ways to do things, meeting people, and creating solutions.
What's wrong with that? It's that it can make us unfocused. If you want to hit a target, you need to take aim. But where, when there are so many choices? Also, what if you've got a whole gallery of people giving you advice or direction? The customer wants one thing. Your boss wants another. Your colleagues have (in their mind, at least) a better idea. Your quota says you want something different. So if you've got a whole line of targets in front of you, how do you focus? Shouldn't you seize every opportunity? When it comes to choosing which product to work on, or which new customer, focus is where the magic happens. Otherwise, when you let loose that arrow (your effort), there's a chance it won't hit any of the targets, and will just sail on by. Or that your effort won't be sufficiently powerful to even get you to the targets in the first place.
Here are five time-tested methods for improving your focus, whether it's on a finishing one of your projects, getting a new customer, or choosing which idea to develop. Start by making a list of all the things you could focus on to achieve your goal. Then do any one of these (all five are useful, but if you've read this far and you want to improve your focus, you might as well start practicing).
Now that you've found your focus, I'll share a little secret. No one can focus 100% on anything. But follow the Pareto Principle, and you can get there. Find those 20% of your targets that will give you 80% of what you want, and give them 80% of your effort. Then you can feel free to give the other 20% of your time and resources to the remainder, in good conscience.
I'm Megann Willson, and I'm one of the Partners here at PANOPTIKA. We work with clients to help them use customer-centricity to focus their efforts and their strategy where they can make the most difference. You can also find us on Twitter and on Facebook, and for ongoing news about topics like this one, click the button below.
It's the Friday before a long weekend. A deadline is looming. You only have today to make a decision about your big launch. And goodness only knows no one wants to be working on Labour Day. Fortunately, the usual naysayers didn't make the meeting - they've already headed to the cottage. Everyone at the table has been carefully selected because they're committed to getting the work done. You've set the end time for 3pm so you can submit the recommendations and all be on your way. What could possibly go wrong? Here are some last-minute checks to make sure you get finished on time.
First, congratulations on the time constraint, maybe. Time constraints do signal that this is not the time for endless discussion. But they can also mean that people who need a lot of time to express themselves, may simply shut down or acquiesce, instead of giving valuable feedback.
Does everyone know the purpose of the meeting? If you haven't set a clear agenda stating that this is a decision-making meeting (as opposed to an information/status update meeting or an idea-generating meeting, even the best people can arrive with the wrong idea, dragging out the conversation because they feel like they weren't heard at the last meeting.
Do you have as much information as possible, readily at hand? Save time by running around looking for data or feedback you've already gathered in advance. Make sure it is already assembled in one place, and that a copy has been forwarded to the attendees in advance of the meeting, in case they need more time to process.
Did you gather that information collaboratively? In the video on Mind the Product's blog, Tricia Wang points out that you are not the voice of the customer. None of you. And while we try not to use never, always, all, none, and everyone in a collaborative environment, we're with her on this one.
Did you appoint a decider? The thing about urgent decisions, is that they must be made. Sometimes, even in the face of indecision. There may also be someone who can ultimately overrule whatever you decide. They need to be in the room. If they can't (sound of screeching brakes), you may just have to push out the deadline.
If you've done all this, and someone is still arguing, filibustering, or sulking in the corner because they're not being heard, it's time to step back and start over. And if the team can't agree that this is a decision-making meeting, that decision may just have to wait for Tuesday, because you've got bigger problems to solve.
I'm Megann Willson and I'm a Partner and CEO here at PANOPTIKA. I'm also a researcher, strategist and facilitator who works with clients to help them hear the voice of their customer, figure out how to use what they've learned, and make better decisions. You can also find me, and my partner Steve Willson, on Twitter or LinkedIn. Want more News You Can Use delivered right to your inbox? Click the handy button, below.
Earlier this week, one of our LinkedIn connections posted about a video from SAP about experience management. Agency folks were all over it, how moving and motivating it was, how it should be nominated for a Cannes Lion (puppy?), and so on. This reminded me about how I learned when I first studied copy-writing, that desperate marketers who couldn't find anything distinctive to say about their product just had to use a photo with girls in bikinis, or a puppy. Yes, sorry, that's what we learned, and yes, they called us girls, and, well, none of that really matters so much as the fact that these tired tactics still persist, and I got annoyed. Sigh. Stay with me. There's more to the story.
On the advice of someone I know, I have been re-reading Ann Handley & C.C. Chapman's Content Rules. So here I am at lunchtime, reading along, and I come to a part where the book talks about Eloqua's "The Conversation" series, and how the video begins after a visitor indicates that she works in marketing. "Obviously I'm not going to be able to use any of the typical marketing tricks on you (sex!), so allow me to just be direct (puppies!)." The version of "The Conversation" that's online now isn't quite the same, but it is still a great example of interactively drawing someone into a conversation about your product with engaging humour, even if you have a serious B2B product.
That's a useful thing to learn, for sure. But the lesson is not, "use a puppy".
There's a bigger and more useful lesson here. And here it is: when we see something that excites us, makes us laugh, or riles us up (have you guessed which one applies to me, when I see a puppy ad that isn't actually selling something directly related to puppies?), the emotion sticks with us. And then, we may start seeing that thing that excited, amused, or enraged us, wherever we look. It's a bit like the "frequency illusion" - our heightened awareness of that thing means that the frequency with which we see it seems to go up, even though in reality, this type of confirmation bias may be causing our brains to just confirm what we want to believe - that we are seeing those puppies everywhere. We unconsciously start looking for them, so we can prove to our brain that our theory is right.
So the next time your team gets a great idea about what your customers want, and you start seeing evidence everywhere, take a step back. Try using one or all of these tools to check your bias:
1. Ask the customers directly how they feel about your platform (or puppies).
2. Look at the data - have they ever shown an interest in puppies before?
3. Run a test to validate (or invalidate) your hypothesis.
I'm Megann Willson and I'm one of the Partners at PANOPTIKA. We work with our clients to help them see everything they need to make better decisions - using better data, a better approach, or better metrics. If you need help deciding which metrics will work best for you and your team, so that you can find, serve, and keep more customers, we can help. You can also follow us on Twitter, Facebook, or LinkedIn. For more news you can use to help you or your team to make better decisions, click the handy button, below.
According to psychology there are three types of Empathy; Cognitive, Emotional and Compassionate. My brother, the PhD Psychologist, could explain this better than I can, but here goes…
Cognitive is about perspective, knowing what another person is feeling or thinking. It lacks the emotional component of the other two types and so is easier for us rational humans to understand and use.
Emotional empathy goes a layer deeper and is that sense you have about feeling someone’s pain or suffering. It’s the feeling you get when you see the advertising for starving children or displaced persons, then you go on with your normal activities.
The final layer is Compassionate empathy, where we not only feel the pain, but are compelled to act upon it. Mother Teresa is a model we could use to demonstrate the extreme of compassionate empathy.
Look around you these days and what you see is a whole lot of self-interest, a zero-sum attitude, in order for me to win you must lose. Empathy is the tool you can use to escape this destructive cycle and create a space for abundance.
So, in business, which of these empathy models do we want to employ? To steal a phrase from “A League of Their Own” and mangle it: “There’s no crying in business”.
When preparing for a meeting or negotiation, employing Cognitive Empathy will allow you to explore the thoughts, constraints and motivations of the other person. Ask yourself and your team questions such as:
What constitutes success from the customer’s perspective? Who do they need to influence to get a decision made? How can you empower them in a way that creates value for them with little or no cost to you?
This is a different way of thinking, so you may need some help along the way. At Panoptika we have the experience and the frameworks to help you and your team develop these skills and create more wins.
We feel for you!
I'm Steve Willson and I'm one of the partners in PANOPTIKA. We help clients to see everything and make better decisions.
You can also connect with us on Twitter, on Facebook, on LinkedIn and on Fridays we share news you can use with our community.
Last night, I was at an incredible power networking and launch event for women in healthcare here in Toronto. Congratulations to #HBAToronto on such a successful kickoff! I did have one thing that troubled me, though. One of the speakers was talking about all the guilt, remorse, and feelings of unworthiness that we sometimes deal with.
Don't get me wrong: we all need to take time to be vulnerable; my friend Anne Day expressed this so well in her Company of Women blog. What we don't need to do, is focus so much energy on what we feel is wrong with us. We can be vulnerable without feeling any of those terrible negative emotions: simply say, "I need help with...". I would also add to this, that experience has shown me that most women have had enough training and conditioning to focus on weaknesses, and we can spend too much time on fixing them. Weak spots don't need us to look at them; indeed, to mend them, we must firmly attach them to something much stronger. So if you have a weak spot you're worried about, instead of spending all your time looking for how to make it "not weak", find a strength you have, that you can use to bridge the thin spot, repair the crack, or patch the hole. You'll find if you repeatedly do this, it will not only repair the weaknesses; your attention to what is strong, whole, and resilient will reinforce those parts of you as well.
I'm Megann Willson and I'm one of the partners in PANOPTIKA. We help clients to see everything and make better decisions. If you're an entrepreneur and you'd like to register for my next Free 5x5 Sharper Focus Business Challenge, go to that tab when you leave here. Put yourself at the front of the line for the Challenge, and other coaching offers we're planning over the next few months. Stay strong!
This week I was struck by the number of conversations I was part of, where business people (or entrepreneurs-in-waiting) minimized their ideas because they seemed too big, too audacious, or too outrageous. They had things they wanted to do, or to try, but they thought it would be better if “someone else did it first”. They wanted to create lists, and accountability check-boxes to go with them. They also had experienced failure before, or they were nervous about taking a risk, or making a mistake. Reflecting on this, I realized that there were three things that were consistently at the root of the problem.
The first issue was wanting accountability, instead of taking responsibility. I can’t explain this any better than Seth Godin already did in his blog, here.
The second was that even if they did set goals, they weren’t SMART goals. I’ve known about SMART goal-setting for a long time. Such a long time, in fact, that I am consistently surprised when someone fails to use this approach. Simply put, your goal needs to have each of the following elements:
See how the language became more focused and positive? This is how we can make things happen.
Lastly, a number the people I interacted with, were willing to let themselves “dream small”, because they could only see the big audacious goal, but didn’t know how to break it into small, manageable, do-able steps. “Every journey begins with a single step” may be a cliché, but in every old adage there is truth. My top tip of the day for this is to begin by imagining you’ve achieved the goal, and work backwards to see the steps you need to get there. It’s much easier to figure out the path, if you have in your mind that the success is already yours.
What's standing between you and your big, hairy, audacious goals? Would you like more inspiration and accountability for your business? Stay tuned for announcements about upcoming webinars, courses, or coaching programs by subscribing below.
Pricing. We can't tell you the number of times we've heard business owners or product managers wrestle with the question of how much to charge for what they sell. This can be especially difficult if you are in a service-based business, where, even if you've created packages, you're ultimately selling your time. What if the client takes longer to make decisions than you thought? What if they aren't good at deciding what they want, and their brief to you is terrible? What if they expect unlimited, time-consuming phone calls...for free?
Like every facet of your strategy, pricing decisions are ultimately on you. With a physical product, you can look at the costs associated with producing or acquiring the product, storing it, selling it, and shipping it to the customer. It's worth looking at "product you" the same way. One big mistake we see with new consultants or service providers, is that they charge an hourly rate that sounds high enough...if they're working 40 hours a week, for 40+ weeks a year. If you're a solopreneur, this simply isn't realistic. You need time to run your business, doing bookkeeping, accounting, and paperwork, or meeting or conversing with partners who do those things for you. You need time to sell to your customers (or you need to make enough on your service to pay a sales person to help). You get the picture. So how do you know the appropriate rate to charge? What if the client schedule has slippage or they delay the start of a project, so the dates when you thought you would be making the income are "missed"?
First, think about your costs - whatever overhead you have, whether it's rent, your cellphone bill, professional associations, networking meetings...the list could be endless, if you let it. Then consider how much you want to make every year, net of fees or taxes. Add it up. How much vacation will you take? How much selling time will you need? (A good rule of thumb is that you, or someone, will probably need to spend at least five hours selling for every hour you deliver, especially with new clients). Divide this by the number of hours you realistically expect to spend delivering the work. That's your charge-out rate.
What about cost overruns? You can have a series of up-charges for clients who have scope creep every time they come with a project. Truth be told, though, in most cases you want to avoid this, because the aforementioned newcomers to the market will bend over backwards for very little money, in an attempt to build their client base. Your client may come back to you after they've been stung by these inexperienced competitors, but they'll have spent their budget, and you can't get that project back. Instead, build in some wiggle room that you can live with. In our own case, we let new clients know that we have standard pricing that we apply to projects, and we estimate the scope according to their brief. When we have more experience working together, and they become a repeat customer, we will consider more favourable pricing, but we never discount out of the gate. We also explain at the start that the pricing we charge is adjusted for their second project - if they turn out to have an issue with scope-creep, we'll raise the rate we charge them in future. This means we can stand firm on the charge-out rate, and make it up on the honour system, later. Of course if there are costs that have been incurred, like space rentals, that had to be paid twice, we expect them to cover those costs.
Explaining why a price has gone up for project two isn't always easy. When you need to do this, consider using the airline seats discussion. Although they may get their weekly or monthly paycheque no matter what, as a service provider, you get paid when you work. If you have blocked time and turned down other clients for that time period, you can't "sell that seat" to someone else. The risk is that they will go elsewhere, to someone who is willing to under-charge for the work involved, but wouldn't you rather have that, and search for a client who's willing to pay what you're worth?
If you're finding it hard to make time to think about strategic questions like these, because you're so busy working in the business, that you can't work on your business, why not join our 5x5 Sharper Focus Business Challenge? One question, 5 days a week, for 5 weeks, and you'll be on your way to making better decisions. Just click the link at the top of the page!
Today I was reading a cautionary tale about restaurant ownership, and one of the issues was the problem the owner had run into with pricey real estate and long-term leases. For sure, there are some businesses where you absolutely must “be there” – where space is important – and in these cases you should push for the best you can afford, as soon as possible. For most businesses, though, when you think about the “where” of your business, you’ll be stronger in the long run if you build flexibility into your plan.
Let me give you an example. One consultant we know (we’d say “headhunter”, but he wouldn’t) had lots of corporate clients, back in the days when businesses like his usually had large, pricey offices in the financial core of their city. Those kinds of businesses often relied on the prestige of real estate to convey a message of reliability, dependability, and success. Our friend got into the executive shared office space in its very early days. No one knew that his Bay Street address was only a mail-drop and answering service. After all, he went to the clients. But since people still wrote letters for business back then, his address looked very impressive on business cards and letterhead. Fast forward to today, and you’ll find that many businesses have no physical space at all. Consultants, coaches, advisors and more, have found that they can carry out their business very well in the virtual space, or by going to where their clients are. On the rare occasion when they need to host a meeting, they can do it in a rented-for-purpose location like a hotel meeting room or a co-working space. This doesn’t just apply to knowledge workers, though. Think about all of the direct-selling operations that don’t have storefronts, but sell through home parties. Or online businesses. And what about our restauranteur? What about catering with a rental kitchen, or food pop-ups, or other creative locations?
When you’re planning your business, ask yourself what the space signifies to the customer, and whether you can achieve that signal in another way that’s less costly, and that ties up less of your resources. We’ve spent so much time making remote work possible for employees of large organizations, there’s no reason you can’t build this into your own business, as well.
Excellent news! You’ve found the key to your customer’s “job to be done” with your product our service. You’ve focused on only the prospects who have proven they want to invest time, money, and effort in doing the job. So, what could possibly go wrong?
Although we’d all like to believe that our service, gizmo, or gadget is the only choice our customer will ever need or want, the truth is, there are very few cases where that’s true. More often, we have to compete with something, or someone. This is the tricky bit. When it comes to describing why that service, gizmo, or gadget is better, our mindset can be a real barrier. This goes double if wat we’re selling is our own talents and capabilities. Where is the line between confidence, and over-confidence? How do you know the difference between “my way of doing this is better”, or “my product/shop/invention is better”, and “I’m better”? Reconciling the tension between innovator and impostor is often what will make or break the sale.
How can you make sure that tension doesn’t “snap” the sale? First, write down the story you’re planning to tell (whether that’s your pitch to a new boss, or to a new client). What are the advantages you’re describing? Are they real? Are you confident you’re telling the truth? If not, where isn’t it working? Fix the facts, not the adjectives. If the facts are true, but your discomfort has to do with feeling boastful, or bragging, ask yourself whether it would sound true, if your biggest supporter was saying it. If it would, then you’ve got some work to do, because the problem is you.
When you feel like an impostor or a liar when you tell your story, this feeling is transmitted to the person watching or listening, even if you don’t realize that. It’s fine to be humble. It’s not fine to be modest. New business people often confuse the two, especially if they don’t have much selling experience. Humble means unassuming – not taking too much for granted. Modest can mean that, too, but it also means shy, or uncertain. And who would be confident buying something that even the salesperson isn’t not certain of? No one.
So, the next time you’re preparing to make a sale, give yourself time in advance to practice. Write the story so you’re sure it’s true. Check your facts. Read it in the voice of your biggest supporter. Use the adjectives they would use. Then say it out loud until you’re confident, and make sure your own fear of the spotlight isn’t standing in the way of your success.
Megann and Steve, Partners in PANOPTIKA, are working for our clients every day to help them see everything they need to know to make better decisions in their complex business environment.
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