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Stampedes and shootings: Just another Black Friday

It’s hard to imagine why big national retailers continue to play the fools game, thinking that by discounting their prices 40-50% or more they’ll increase their profit.

Perhaps they think they’ll make it up on volume.

When you cut prices, the first thing that you give up is a piece (or all) of your profit.

Retailers who spent the weekend falling all over themselves catering to an upscale clientele don’t have this problem, especially if they’ve cultivated and groomed the relationship with that clientele all year long.

They didn’t have to go to the home of an employee and explain how a young employee was trampled to death, simply by having the misfortune of being the guy who unlocked the front door to his employer’s store.

When price is the only way you have to differentiate yourself from your competition, you deserve any pain you feel on your financial statement at the end of the quarter.

Is that the only competitive edge that you can find? If so, you aren’t looking hard enough.

Is there a Wal-Mart in Pamplona?

Another “competitive edge” – one that contributed directly to last weekend’s trampling death and injuries at a Long Island WalMart – is the special sale that starts at 0-dark-thirty in the morning and offers limited items at the special pricing. 2010 update about stampede.

Our store is better because we can get our people to the store before yours. Woooo, impressive.

If your competitors’ move their start time to an hour before yours, when does it end? Do you start a Cold War over who can open their doors first? In an ultra-competitive environment, is that really how you want your clientele to choose who their vendor is?

Do you really have to stir up a frenzy over one (or 10, whatever) $299 plasma screen TV to get people into your store? Is that the only edge you have?

Don’t get me wrong. I’ve told you to read Cialdini and will again. We’ve discussed scarcity and will again. However, we’ve also discussed common sense. Hopefully, we don’t have to discuss making sure your staff and clients leave the store alive.

Is it really worth having 300-400 people stampede over your staff and each other as if their survival depends on it? This isn’t the first time it has happened. Human behavior is not a surprise in these circumstances.

Yeah, sure. You can blame a small percentage of morons for this ridiculous behavior, but it isn’t just the customers in that store who were in the wrong. But… big retail, in their typical lazy way – they continue to confuse the customer with the sale as the most valuable part of their business.

All this focus on creating temporary insanity among your prospects for one transaction on one day illustrates the lousy, if not non-existent, relationship that most large US retailers have with the buying public.

That’s where the problems really lie. When you commoditize your marketplace by competing solely on price, you’re one of two things: Wal-Mart or crazy.

Wal-Mart can afford to do these things. Their entire business – and the systems that drive it – is built around that premise. They have the logistics, automation, buying power and mammoth size to make it happen.

If you aren’t Wal-Mart or crazy, you have to do something different and better. I don’t mean to suggest that you can just double your prices, do nothing else and expect all to go right with the world.

You can’t.

Remember, Business is Personal. Build the relationship. Deliver the value. When nothing else matters, they’ll shop on price.

Make other things matter.

[audio:https://www.rescuemarketing.com/podcast/StampedesAndShootingsBlackFriday.mp3]
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Marketing Positioning Pricing Sales Small Business Strategy

Comcast: Choosing the wrong way

Comcast appears to feel that it’s a problem that their customers actually use their service. OK, that’s a little vague.

More accurately, they have a problem with that small percentage who use their service *a lot* despite doing so within their (current) terms.

Their new solution to this “problem” is to cut off that customer and probably motivate them to avoid being a Comcast customer forever. I don’t imagine that this sort of action will contribute to good word of mouth marketing by former Comcast customers.

While their bandwidth limits seem rational, history has proven that customer needs will expand beyond that – and quite often more quickly than Comcast would respond with policy changes or additional billing options.

In contrast, Time-Warner is testing tiered pricing. The more you use, the more you pay. That makes sense, particularly beyond a certain level.

In every group of customers, there’s a percentage of high-use customers.

You have two choices

  • Cut them off. Tick them off. Run them (and probably their friends) off.
  • Find a way to bill them that reflects their use and the value you’re delivering.

Think about that for your business. There’s probably a small percentage of high profit customers (or potential high profit customers) who might benefit from an additional level of service.

Running off the customers who need your products and services the most seems a little crazy, doesn’t it?

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Competition Creativity ECommerce Entrepreneurs Management Marketing Media Motivation Pricing Small Business Strategy

Quitting for the wrong reasons

Sometimes, it’s necessary to make the decision to close a business. It isn’t easy and it isn’t something that is done without pain and suffering in some form.

Yesterday in Small Business CEO, I read a story about a small business that was calling it quits due to “high oil prices and the economy” (my paraphrase).

A couple of comments in that blog post really rubbed me the wrong way, mostly because the owner appeared to be stuck in a mental trap about the state of the economy (more on that in a minute) and the economic conditions that she felt forced her to close up shop.

A poisoned mind

The first quote was the most poisoned thing I could think of that a business owner could get stuck in their head:

Small home based businesses like mine really donâ??t stand a chance in the current market.

Horse hockey.

In the Great Depression of the 1930s, more than 25% of Americans were out of work. On the other hand, 75% were employed and continued to buy. While that doesn’t make life easier for the 25%, it does mean that the market didn’t simply disappear, even in times as bad as that.

For every stock broker who leaped from his Wall Street office window, there was at least one who did well, and the same for investors.

The reality is, a lot of businesses got started back then. In the so-called worst of times. In fact many of today’s most successful businesses had their roots in those “bad” days. Krispy Kreme, Saab, T. Rowe Price and many many more local businesses. Try Googling for “founded in 1930”, “founded in 1931” and so on. Tons of new businesses that exist to this day that were started during that period, more than SEVENTY years later.

They didn’t give up or quit because of their state of the economy. They saw opportunity in it.

BUT, thing is, the state of the economy really isn’t the point. Your market, your products, your clients and your prospects are. Your focus, your marketing, your creativity of thought and action. Those are far more important than the state of the market.

Raise prices or quit?

The second quote wasn’t much better, but I do have to admit that I have heard this from other businesses this year – from restaurants to craft-type businesses like this one:

Forced with the decision of either raising my candle prices sky high or temporarily closing, I chose the latter of the two.

The problem with this isn’t a lack of concern for the client, it’s that she is projecting her own mental limitations about her pricing onto her clientele. In other words, she’s saying “No” for them without giving them a chance to consider their purchase.

First of all, everyone understands that prices have gone up with fuel prices, either due to shipping, due to petroleum-based ingredients, or just because those two things roll downhill to the buyer. By making the decision to stop producing items because one of the component prices went up 40% assumes that the clients don’t feel the items are still worth that much without even asking them.

While these are primarily mental issues, there are also practical ones. Because I am tangentially involved in a business that uses beeswax, this isn’t armchair quarterbacking.

Due to Colony Collapse Disorder, I’ve seen 40-50% increases in the price of (among other things) beeswax over the last several years. In fact, prices have done so more than once. What was $3 something a pound is over $5 a pound. Not to mention that beeswax is dense. It’s heavy. Yes, Virginia – it costs a lot to ship.

Yet the clients who buy those beeswax-based products not only haven’t complained, but they’re buying more than ever. We didn’t make the decision for them, we simply raised prices to reflect the economics of the product line and let them decide. They decided to keep buying.

Sometimes quitting is the right thing to do. Just don’t do it for the wrong reasons. Don’t let the pundits, the media and Presidential candidates poison your mind.

Make decisions for the right reasons. I hope she decides to get back in the game for the right reasons as well.

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Marketing Positioning Pricing Small Business

Why do prices end in .99?

Today’s guest post from the UK offers more insight on why prices with .99 work in the US and UK and why .88 works in Asia.

There are long-standing rules of thumb that advise how to set prices, but the wise business owner knows to test everything, including pricing.

The only results that count are the ones you see from your clientele.

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Corporate America Hospitality Management Positioning Pricing Small Business Southwest

Chipping away at your clients – Bad idea

During our stay in Missoula for the granddaughter’s arrival, we had the pleasure of spending the night at the Missoula Comfort Inn.

When I arrived at the front desk to get a receipt for the visit, the bill came with the now-obligatory $1.75 charge for using the safe in the room.

The buck seventy five isn’t the point.

It’s the annoyance of constantly having to be vigilant so that you aren’t the one getting taken by the corporate hotel chain management group who thinks that slipping this little charge (or some other little fee) by the majority of their clients is going to  make their profit numbers.

And maybe it will, but it’s a bad idea.

Yes, I’m well aware that you know that most people are too timid to say anything about it. Heaven forbid that we get pissy about a 1.75 fee on the bill. It might make us look cheap or chintzy to the desk clerk.

It’s not just the timid.

It’s the busy or inattentive clients who don’t notice it.

It’s the express checkout clients who never see the receipt.

Your defense is limp. It really makes no difference that you notify us at the front desk (via a sign) that you will charge $1.75 per night and that it can be removed by asking at the front desk. This is particularly so since it is automated and can only be removed at checkout, NOT at check in time.

The point is that chipping away at your clientele with sneaky little charges like this – particularly for services that they rarely use – is a bad idea and leaves your clients with a bad taste in their mouths about your business.

Is that what you really want?

If that extra $1.75 is necessary for your business to reach the necessary profit margin to pay the front desk staff minimum wage, then just do it. Add it to the room fee. These days you could call it a fuel charge. At least that is believable, when it floats with the cost of fuel.

Do you really think your guests are going to choose another motel because you charge $125.75 instead of $124?

Answer: Only if you do it by Post-It noting it onto the bill at the end.

Not only do you waste your guests’ time by forcing this little “please remove it from the bill” exercise, but you also slow down the checkout process and waste your employees time.

You aren’t tricking anyone. You’re just ticking them off.

Your little $1.75 fee – and really not even the fee, but the act of how you tried to get it, regardless of how common this technique may be – is the one tiny little negative aspect of a trip to Missoula to meet my first grandchild.

Just because everyone else does it doesn’t mean it’s a good idea.

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Competition Entrepreneurs Ethics Leadership Management Marketing Positioning Pricing Public Relations Small Business Strategy The Slight Edge

Would you buy $34MM for $5MM?

One of the industry-specific discussion groups that I belong to was recently discussing a $5 million fee (for three years of effort) paid in exchange for bringing $34 million worth of value to an organization.

Just so there’s no mistaking the result: we’re talking about the receipt of $34 million dollars in funds.

Oddly enough, it was felt by some that this fee was out of line, and several considered this fee patently unethical simply because of the amount, regardless of the circumstances.

If you own a business and have employees, you probably pay them by the hour. If so, I suspect you are aware that “paid by the hour” thinking is not the road to success, though it can get the bills paid.

Most people don’t start a career with a big audacious goal of “I want to get the bills paid”, or “I want to make $17 an hour”.

That kind of thinking will get you nowhere financially in the long term.

Generally speaking:

  • Successful people get paid substantially more than whatever is “normal” for their expertise, training, investment in themselves, experience, ability to deliver and value delivered.

That’s a major reason why we talk about stepping way beyond the value delivered by anyone else in your business by thinking harder and being creative and innovating in how you think about what you do for other people or their businesses.

You want people to believe – in fact, KNOW in their hearts – that you can deliver that $34 million (because you have in the past, repeatedly) and as a result, they’ll gladly line up to pay the $5 million to get it, and they’ll feel like they got a deal in the process because they were confident of your ability to deliver value that (possibly) no one else can.

Likewise, if you know you can deliver that sort of value more often than not, you’ll fully guarantee the fee and charge nothing if you don’t deliver.

That’s positioning you – and your clients – can take to the bank.

If I told you I could deliver $34 million in sales to your business, what’s that worth to you?

$50 or $75 or $125 an hour is the wrong answer.

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Competition Corporate America Customer service Management Marketing Positioning Pricing Small Business Southwest Strategy systems

Southwest: Something simple in the air

Yes, it’s a play on the now-untenable “Something special in the air” that American Airlines used to use – back when they really were special.

Southwest Airlines announced changes in their business model that are easy for any air traveler to understand.

Click the image below to see the entire graphic from Southwest.com:

Now I had to admit that flying Southwest used to make me nuts because there was so much difference between the cattle car experience and what everyone else did.

Since those days year ago, they’ve made boarding changes to make things far more normal, and given that everyone else has cut service to the bone, now the other guys are the cattle cars.

Rather than follow the industry – Southwest has always tended to take a page from Earl Nightingale, that is, watch what the mainstream airlines do, and do just the opposite.

That’s just where this is coming from.

Instead of making their business complicated, they’ve made it simpler.

That’s not exactly news. They’ve done simple all along – such as using the same model of airliner across the entire company.

They do simple for a reason: They understand that eliminating all this complexity makes it easier for their staff and their passengers, but that isn’t the real “secret” to all this simplicity.

The key to this latest simplification move isn’t just making the other airlines look like idiots (as if they need help), but that it allows Southwest to chip one more little piece away from their turnaround process (land, deplane/unload, clean, board/load, takeoff) without slowing things down to check for paid tags, or capture a credit card or make change, and so on.

Plus it’s a heckuva lot less annoying to the passenger.

Result: More on time departures, faster turnaround, more flights, less planes, happier customers who met all their connections, and far lower expenses for feeding/housing travelers stranded by their inability to manage their on-time arrival.

Southwest is the Apple Computer of the airline business – except perhaps in price.

Simple is better.

What can you do to simplify YOUR business?

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Competition Corporate America Ethics Pricing Small Business

Transparent economics. Are yours?

Last Friday, we talked about the surging rate of fuel surcharges for ocean-going containerized freight and how it will soon affect the price of imported goods.

As you might expect, fuel surcharges aren’t just going up for seagoing freight customers.

It’s hitting air travel customers as well.

This Times UK article talks about the recent, substantial increase in per-ticket airline fuel surcharges. On the flight they checked, the fuel surcharge was about 218 Pounds Sterling for a London to San Francisco flight. That’s $424 using the exchange rate on June 5, 2008.

$424 per seat? Man, I must have packed on a few pounds lately. Let’s look at a little rough math and see what impact this fuel surcharge has on the airlines.

Assuming that a Boeing 767ER (Extended Range, often used for long international flights) flies this route and uses every drop of fuel that a 767ER can carry, the price for that flight’s fuel is $91603.60. That’s 23980 gallons at $3.82 per gallon for Jet A as of May 30 2008, per IATA.

A 767ER’s range is 12,200 kilometers or 7580 miles, according to Boeing. Assuming that means a full tank, then we get 3.16 gallons per mile (rather efficient, aren’t they?) or a current fuel-only cost of $12.08 per mile to fly 7580 miles. Given that we have a couple of hundred people on the plane, that’s not bad.

The trip from London to San Francisco is 5357 air miles, according to InfoPlease.com.

According to Boeing, a typically configured 767ER holds 224 people in a 2 class configuration, IE: coach and first class. 224 people paying a fuel surcharge of $424 add $94976 to the gross receipts for that flight if it is full (as most planes are these days).

Unfortunately, even that $95k of fuel surcharge isn’t covering the 90% increase in Jet A fuel prices in the last year. Not even close. If that flight is full, you aren’t paying for the difference in fuel prices since 2000 (what the IATA calls their baseline or “100 points” price).

You’re paying the entire fuel bill for the flight.

Presumably there has always been a fuel cost component of the airline ticket. Apparently that is no longer the case.

Only thing is, you only flew about 5400 miles. Remember, a full tank flies the 767ER about 7600 miles. A little more rough math means that we left 883 gallons of $3.82 Jet A in the plane upon arrival at the gate in San Francisco (about $3000).

But I’m a generous guy. We’ll call it even for the $3000, assuming that extra 883 gallons over the average gallons per mile fuel efficiency is burned during taxi and takeoff. And we need to keep in mind the safety margin to have the fuel to steer around storms and/or circle incessantly because of delays caused by weather and Presidential candidates using the same airport.

Finally, you might want to lay off the donuts and pack lighter clothes. The airlines are also allegedly considering a weight-based fee.

If there are any airline pilots reading this that have better numbers on fuel, I’m all ears. I’m sure YOU aren’t seeing any of that extra money.

Are the economics of your business this transparent? What would your clients say if they could do this kind of math on your fees? Are you delivering so much value that they don’t even think about it?

The airlines aren’t. You had better be.

Related articles:

NY Times article about steps airlines are taking to make planes more efficient. Smart stuff. Kudos to them for looking at everything, but not just cutting for the sake of cutting.

Quoting from the article:

â??Our fleet is over 500 airplanes,â? said Beth Harbin, a Southwest spokeswoman. â??If you can make a difference on one airplane on one flight, and multiply that by 500, in this day and age that is significant.â?