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.
If you've ever tried to create something or solve a problem as part of a high-functioning team, you know that conflict is practically unavoidable. Add a looming deadline, a commitment to an important client, or a boss who just won't take no for an answer, and there's a lot of pressure to come up with a solution.
There are a lot of different ways to solve conflict - the Thomas-Killman Conflict Mode breaks it down into five key methods. Their model includes a matrix where one axis is assertiveness, and the other is cooperativeness. The four quadrants break down as follows:
What about compromising? Isn't that the best approach? Maybe not. And here's why.
Compromising sounds okay, for sure. It's fair, right? Well, it's fair - in both the good, and the bad sense of the word. It's a little like the difference between equity and equality. Compromise may seem like an acceptable solution, but often it is the solution that gives everyone exactly the same amount of sway, but ultimately provides a weak solution that leaves everyone disappointed.
So how do you Collaborate? Very carefully. It takes time. (Remember that point at the top about maybe there's a looming deadline?) Earlier models for conflict resolution also talked about the axes being people-driven, or time-driven. And while there's no right answer, suspending the time deadline does increase the likelihood of collaboration. Collaboration is arriving at a co-created solution, where everyone feels heard, their ideas are validated, and then, if they must back off their position, they feel that it was at least given careful consideration by the other members of the team.
If time really is of the essence, then the solution may not be to leave it up to consensus decision-making. You may have to rely on a decider, and then return to the collaboration table to discuss less time-sensitive issues. (This is why design sprints usually appoint a decider - someone who has the final say, if push comes to shove).
So the next time you have a group decision to make, if you know there will be lots of strong wills in the room, leave enough time for collaboration. If there isn't enough time, appoint someone to decide, and move on. In situations of critical importance, sometimes every kid doesn't get a valentine.
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 - including facilitating collaborative decision-making by teams, leading sprints, and helping them decide which framework best suits the kind of decisions they need to make. If you and your team need help doing that, send us an email, and let's set up a free call. Follow us on Twitter, Facebook, or LinkedIn, and for more news you can use to help you or your team to ask more questions in ways that will let them make better decisions, click the handy button, below.
Over the 18 years we've been in the management consulting business, we've been part of many change and transformation exercises. We've also been incredibly fortunate to have benefited from that old "your network is your net worth" adage. Once again this week, a friend's post begat another post. Here's what happened:
Our longtime friend, mentor, and collaborator Luke Hohmann (SAFe® Fellow and Principal Consultant) reposted a post from Em Campbell-Pretty, about making sure you have baseline metrics before you start an Agile Transformation. Now we don't know Em personally, but if she's in Luke's trusted circle, she's in ours. While some of our clients are Agile, some are not (although most are reasonably flexible). So this got me thinking about what metrics are needed for any kind of change or transformation. Steve and I have helped many organizations do that - ensuring that their teams were all on the same page, and running toward the same goals, if not always in the same direction. We also try to avoid having them run with scissors.
The fact of the matter is this: no matter what type of change or transformation you are trying to make, whether it's in your organizational structure, your product process, or your own personal career, there are three key questions you need to ask. If you don't, you might never get to your destination - or worse, you might arrive at "destination unknown". These are the questions:
No matter what system you're using, or how you measure, if you can find a way to measure each of these things, before you begin, it's much more likely you'll have a pleasant journey.
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.
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.
Everyone wants a bargain, even you. But think back to the last time you went shopping for something important, or where quality mattered. You probably looked for the best price, didn't you? Then you looked at other models or versions that would do the same job. Eventually, you may have even settled on something slightly (or a lot!) more expensive. Why? Because of value. There was something about that other version you eventually bought, that you valued more than low price. Low price is, and always has been, a race to the bottom. If you compete only on price, and not on value, someone will provide a solution that costs less than yours.
So what to do? In our 5x5 Sharper Focus Business challenge, we prompt participants to think about one strategic question every day, like what is the value you deliver, that will ensure your client or customer is willing to pay more for what it is that you sell? Bain and company studied the elements of value, to take the guesswork out of it. They found there was a pyramid of value, much like Maslow's Hierarchy of Needs. Customers want value in one of four areas:
Judging by the box room in our condo building, you'd think that everything was shipped by courier or post, but we have a saying around here: "It's hard to ship hot soup by mail". Whether you're starting a new business, or developing a new product or service for your existing business, one of the decisions you'll need to make, is what is the most effective channel to use, to deliver that product or service to your most valued customer. Taking a step back, Megann has been running a video challenge, and two things she's asked participants to think about are:
These questions don't stay static. They deserve regular review, no matter what your business. When we started consulting, we would have said the most valuable service was in-depth medical interviews, in situ in specialists' offices. And the customer who bought those was usually a pharmaceutical company with a very specialized product, like a cancer treatment. Now, the highest value services are consulting with companies who are entering new markets, on market selection, or facilitating strategic decision-making. And the clients are varied, but always scientific, technical, medical, or industrial B2B companies.
Once you have a good picture of the key product or service, and who buys it, it's time to think about how to get it to them. Are the clients remote, or local? Do they need to see you to receive the service? Can it be shipped? Must it be? Figuring that out can be a challenge, and it takes a lot of legwork to determine the most efficient and effective way. More than one channel may be needed. Determining it is a necessity, as it will be a critical part of your cost structure, as well as your value proposition. Are you the fastest? The most thorough? The newest? Each of these directly impacts your channel choice. Moreover, communicating to your customer which channel your using, may be relevant. You might think that those strategy facilitations are always in person for us, for example, but we have tools that let our clients gather together a team from around the globe, and make decisions as effectively as if they were in the same room. So keep an open mind, and find the channel that's just right for you and your MVC.
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We've said many times, that the best way to market is to find a customer, create a solution to a problem or a need for them, and sell it to them. We stand by that. While you're busy creating that solution or figuring out how to fill the need (the job to be done, to paraphrase Clay Christensen), someone else may show them the next best option. Also, if you want other people to sell your product or service for you, by describing it to their networks, you need to know what it is that you sell. So which comes first? Customer, or product?
The first truth is this: knowing your customer is absolutely critical. The second truth is this: you need money to have a viable, ongoing business. And the third: sooner or later, to get money, you're going to have to sell something - whether that something is a product or a service. Revenue is how you pay the bills, pay yourself, fund the work, even if you're a social enterprise or not-for-profit. Remember: not-for-profit doesn't mean, "doesn't bring in money".
So how do you figure out what it is that you sell? If it's a widget, a chicken, or an egg, you've got the beginning of a description. If it's more complicated, you need to be able to distill your product (or service) description down to something even your grandma or your five-year-old nephew could explain. Why? Simple: because the more people who know how to describe what you sell and why it's great, the more unofficial salespeople you can have out there in the world, for free, generating leads for you. So go ahead. Break all those rules we've told you about customer focus, and take some time to figure out the easiest way to describe what it is you sell. You'll be glad you did.
This morning one of our connections posted a reminder that we are at the end of the quarter. Now we're bracing for the inevitable. At least one client is bound to call or email today with a panicky-sounding voice, about how they need research or strategy work, because they've just realized we are at the end of the quarter, and they really, truly, meant to get started in January.
Does this sound like someone you know? If you're in the business of customer understanding or user insights, and this happens, it can be tempting to respond by taking your hard-won budget, and doing a study that answers all of their questions...at this point in time. Will that let you see everything you need to know?
Snapshots can be really helpful, it's true. It's worth considering, though, whether a time exposure might reveal something extra. Setting up a program that opens the aperture to your customers and lets data flow in over time, can reveal patterns in ways that a single study can't do (no matter how powerful). And sometimes it can be inexpensive to do this, by giving a "camera" to each of your customer-facing colleagues.
Setting up a story bank where their pictures and observations can be gathered and shared is a really useful way to do this. (Don't know how to start? Let's talk. We can help.)
How do you feel when something doesn't go as planned? Disappointed? Frustrated? Annoyed?
What about energized, excited, or enthusiastic?
Over the past few weeks, I've been working with a client to get ready for an important strategy session. They know there are big shifts looming on the horizon, and they want to be ready. They've done the right thing by taking a proactive approach, and they've been looking at data, exploring potential outcomes, and discussing "how might we" scenarios. Yet suddenly, in the midst of a session with outside partners, key team members, and even an advisor from head office, they weren't making headway. Someone said, "Let's change the focus entirely!"
Now there are times when this might just be a tactic to avoid hard conversations, but in this case, it was because they realized they were looking at the problem through the wrong lens. Their problem definition was out of whack, and they got clarity on this because they had everyone in the room, and because they weren't so married to the facilitation method they had chosen, that they kept trying to force-fit solutions to the wrong problem. Once they stepped back and framed the challenge in a new way, they were able to very quickly devine the realm of possible scenarios, determine how they could respond to these in their own favour, and what proactive steps they could take right now, to get ready for the most likely eventualities.
The change in energy in the room at the end of the day was palpable. And as a facilitator, it was a pretty spectacular ending for me, as well.
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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