DAA Retail Pricing Seminar for Higher Profits Aug 2011

With Jan Triplett, Ph.D. CEO, Business Success Center

#DAA Pricing

Better Pricing for Higher Profits

©Business Success Center, Austin, TX 2011. All rights reserved.

Your Passion, BSC’s Expertise

• Our Mission: to help you find your way• Providing guided growth strategy to achieve success since 1982• Sales, marketing, & financial management focus • Clients from hospitality, retail, manufacturing and professional services

©Business Success Center, Austin, TX 2011. All rights reserved.2

Your Focus?

Mostly B to C?Some B to B?

Better to be P to P

.)(. (Belly Button to Belly Button)


“The purpose of business is to create a customer. Marketing is the distinguishing, unique function of the business. It is everything seen from the point of view of the customer.”


Marketing Defined

Peter Drucker, Mgmt “Guru”

1. Find2. Acquire3. Reinforce4. Retain

THE BEST CUSTOMERS

© Business Success Center, Austin, TX 2011 All rights reserved.5

Think FARR, Go Far

What is Pricing About?


ProfitImagePositioningResources available for marketing and

promotion.Recouping your investmentAbility to penetrate a new market

Price is only constrained by two variables: breakeven point and your preferred customer’s “flinch point”. What & how you price affects all the above.

© Business Success Center, Austin, TX 2010

Your Biggest Concern about PricingWhat keeps you up at night?

1. Losing too many customers.2. Not being competitively priced.3. Leaving money on the table.4. Not being profitable enough on each sale.5. Afraid I am not accounting for all my costs (missing something).6. Breaking the law with my pricing policies.7. When to talk about price or show price without scaring

customers away.8. None of the above.

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Pricing Objectives


Meet or Prevent CompetitionStabilize Price and Profit MarginCapture Market ShareProfit OptimizationGrowth in SalesReturn on Investment

New Approach: “Shopper Marketing”Assumes shopper and consumer are not the sameMarketing aimed at shopper instead because stats show: 70% of brand selections made at the store; 68% of buying decisions unplanned


Customers usually can’t remember within 10% of cost what they paid.

25% of shoppers consider price less important than time.

20% of shoppers price-driven.

Consumer Price Index & Consumer Confidence Index

What’s keeping customers up at night? The Cost of Living in the US

• Consumer Price Index for All Urban Consumers (CPI-U) increased 3.6 percent over the last 12 months. Month increase 0.1 percent prior to seasonal adjustment. (Next CPI release Sept. 15, 2011)

• Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 4.1 percent over the last 12 months. Month increase 0.1 percent prior to seasonal adjustment.

• The Conference Board Consumer Confidence Index®, which had declined in June, improved slightly in July. The Index now stands at 59.5 (1985=100), up from 57.6 in June. The Present Situation Index decreased to 35.7 from 36.6. The Expectations Index rose to 75.4 from 71.6 last month. The proportion of consumers anticipating an increase in their incomes rose to 15.7 percent from 14.1 percent. (Cutoff for data July 15, 2011 next release Aug. 30, 2011)


Pricing Considerations


Pricing is an emotional issue for you, your employees, & customers.

Buyer reaction to price is unpredictable.

Shoot from the hip & you’ll end up shot in the foot or worse.

One price strategy usually doesn’t fit all products/services.

Controlling costs can make a business more profitable than raising the price.

Stay alert: pricing laws & regulations change.

What You Need to Know about Pricing

Pricing should be… Pricing will…


An attention getter and qualifier.

A way to position your business.

Perceived by your Platinum-preferred client as a benefit not just a feature.

Make you rich or at least comfortable or just sick and tired.

Affect the success of all areas of the business.

Require that you don’t just set it & forget it.

Pricing Competitors


RealTo youTo your customer

GhostsDIY (Do It

Yourselfers)DNAA (Do Nothing

At Alls)Daily Deals &

Other Coupons

Your Price is NOT Right for EveryoneIt’s all about:1. Getting the right customer2. Keeping the right customer3. Considering their perceived risk4. Knowing your true total costs5. Identifying the top value you bring6. Accounting for long & short term goals

THEN Pricing Right & legally!



A Quick Word About Laws

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Two key laws to be familiar with:

1. DTPA (Deceptive Trade Practices Act) — illegal to “bait & switch” or any of the many other ways that are used to mislead customers. Applicable to sales to businesses and consumers.http://www.statutes.legis.state.tx.us/SOTWDocs/BC/htm/BC.17.htm

2. Clayton Act (Robinson-Patman Act Amendment) — illegal to discriminate on price (except in some instances), tie or bundle purchasing contracts.

http://www.statutes.legis.state.tx.us/SOTWDocs/BC/htm/BC.17.htm

http://www.statutes.legis.state.tx.us/SOTWDocs/BC/htm/BC.17.htm


What Customer Do You Want?Set Your Prices Based on Them.

Platinum Gold Silver

Bronze Lead Concrete/Radio Active Waste

Platinum & Gold — create stabilitySilver — has potentialBronze — uncertainLead — a time wasterConcrete — a business killer & never satisfiedRadio Active Waste a long-lasting reputation & confidence destroyer

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Platinum Profile™ customers are…

• VisionariesSee situation as you doSee value of your solution

• AdventurousConfident in youTrust you

• DecisiveHassle-free or less hassle


Who’s Your Best Downtown Customer?


List your external customers. (These are those who are not part of your business.)

List your internal customers. (These people have an impact on the potential of a sale and are connected to your business in some way.)

How do your external and internal customers affect your pricing decisions?


What Do Your Customers Want?

• More than a solution or something fixed.There are 6 Situational Outcomes™ they value.

Reduction, Elimination, Prevention, Create Opportunity, Use Opportunity, Status Quo

(More at ownersview.com: http://bit.ly/gtdaVP)

There are 5 personal risks they are willing to take to get what they value at the price charged:

Social, Psychological, Functional, Physical, Financial• Set your prices based on your ability to deliver that outcome and reduce their risk.

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Price to Match Your Customer’s Attitude

Positive — Seeking Opportunity Negative — Been Burned, DissatisfiedStatus Quo — Maintenance, Same as I bought elsewhere

How would you choose to price? High, Low, Competitive, None of the above, All of the above?©Business Success Center, Austin, TX 2011. All rights reserved.20

Price Acceptance


Which is best?Sell more for less or Less for more?

Pricing used to justify the purchase.

Willingness to accept a given price depends on conditions of the buyerImpulse buyCreditAlternativesPerceived ValueAffirmation made the right

decision

Pricing Right

Includes both financial and marketing decisionsHas administrative implicationsSets up present and future health of the business (Legacy Pricing™)

Who should you price for? (Hint: not just customers) Make a list.


What’s Your Desired Pricing Goal?

Attract paying customers who are:• Most Lucrative• Easiest SaleWhich do you focus on in pricing?• Yes• No• Maybe


Seller’s Financial DecisionsMSRPTrue Total Costs™• Development Cost (Create/Design)• Acquisition Cost (Purchasing Choice & Customer Choice)• Retention Cost (Vendor and Customer)• Hassle Factor• OverheadProfitContingencyBooks & Record Keeping Issues©Business Success Center, Austin, TX 2011. All rights reserved.24

Price For What You Want Customers to Do

Examples:• Try it• Stock up• Repeat buy• What else?


Seller’s Marketing Decisions

Choice of CustomerGoal: acquire (new or steal), retain, resell, upsellCompetitive AdvantagePositioning


The issue of sales and discounts

The Big Debate

Costvs.Value


What value do you offer to justify your price?What does your staff think?

A “Fair” PriceCustomers want: To get good value, pay a fair price.

Sellers want: To give good value, get a fair price.

What do your customers value? How do you know? Features, Advantages, & Benefits. Make a list of the most

appropriate.©Business Success Center, Austin, TX 2011. All rights reserved.28

Customer Concerns about FairnessRisk (functional, physical, financial, social, psychological)Reward (features, benefits, and game)• Features = Facts• Benefits = Reinforce A, I, O,V, L (emotions)• Game = Winner (social, small biz, big biz, government, non-profit, university, political)

Flinch Point/Reservation PointEvery purchase is really based on emotion, not logic.


Dealing with Pricing Objections


Downtown too pricey; small stores more expensive than bigChoosing the right customerEmphasizing the right benefits with

corresponding featuresToo tough to get there

Demonstrating added valueNot worth it

Presenting price at the right time and place (Placing pricing in the right place — clothing, website, boxes, retail items)

Improving your sales process so price not first thing people hear or see


Seller’s Administrative Decisions

Who to hire• Experience selling at this level

• Their philosophy and perspective

• Avoid the defenders and apologizers

How and when to train• How price can help sell

• How to keep people informed and in the loop

The danger of change • Too often & sales people confused, customers mad

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Best Practices in Pricing

• Price what you’re worth.• Use KISS pricing system.• Account for profit, contingency & hassle-factor.• Price for positioning.• Monitor & adjust.



Worst Practices in Pricing

• Undervaluing your benefits.• Under-estimating costs.• Not considering your Platinum customer’s “Flinch Point”.• Blindly following competition.• Inconsistent pricing.• Violating laws - DTPA

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Good & Bad Pricing Examples

1.Charging low price to get started2.Having regularly scheduled sales3.Using customer loyalty cards

Your examples?


Worth Reading

• Beating the Commodity Trap by Richard D’Aveni• Co-Op Advertising by Bob Houk • Shopper Marketing by Marcus Stahlberg• Strategy & Tactics of Pricing by Thomas Nagle



Pricing Practices Action Items1. Make sure you have accounted for your true total

costs.2. Know the value of what you sell.3. Ensure your pricing reflects your preferred customers

value outcome, your preferred positioning, meets legal requirements, includes profit and contingency as well as costs.

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For a copy of BSC’s Pricing Terms & Concepts Glossary or additional questions, please email me at [email protected].

Homework1. Check your pricing. Make sure all costs, profit,

contingency, positioning and value are considered.2. Make sure staff know how pricing is determined. If you

have apologizers, defenders, or complainers retrain or rehire.

3. Do market research with your best customers. How valuable do they think you are to them? High, can live with or without you, low, no opinion. If you get many who do not say “high”, rethink your benefits and features with input from your Platinum Profile™ customers.


Here’s to your success!

Jan [email protected]

Jan Triplett

Blog:ownersview.com

(512) 933-1983

Please call if you have questions, would like to discuss this seminar or your homework, or meet. No charge.©Business Success Center, Austin, TX 2011. All

rights reserved.38

Sales & Financial Management Services

August 23, 2011

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DAA Retail Pricing Seminar for Higher Profits Aug 2011

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Transcript of DAA Retail Pricing Seminar for Higher Profits Aug 2011