Peter Meyer

Peter Meyer

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Can you use price as both a cost based calculation and a tool to define your market? Do you need to discount to get a deal? Let’s step back and think about how to use price as a tool to define and then create a new market.

This is not about market disruption (for more on that, please see http://www.meyergrp.com/index.php/articles/growing-your-revenue/86-building-a-disruptive-business). This is about market creation. Sometimes the best way to compete is not to compete. Instead it is to create a new space, one where you are the only supplier and your customers are very focused on getting a solution that only you offer.

Your price is always part of positioning your product. Sometimes you want the sense of value to be high, where you get the image and get increased margin. The question is: Can you get both of those without losing sales?

 

Yes, you can raise prices and still gain sales. The key is to solve the right problem.

The answer is: Yes, you can raise prices and still gain sales. The key is to solve the right problem. The good news is that the right problem to solve is not your price.

Choosing the right problem sets up your success in twists and turns in business. You set yourself up to choose the right view and then hold that line. It is like driving into turns when you cannot know where the turn comes out. If you want to succeed, you can either slow down (and how likely is that in this market?) or you can set yourself up for success before you enter the chicanery. How you set up the turn defines how well you can come into and out of the unknown.

 

Pricing Internal and External Views

Fundamentally you have two price views to consider -- one internal, the other external. In the internal view of pricing, you price to cover fixed and variable costs with a bit of profit. This process is internally focused, defined by the needs of your business and your strategies.

In the external view, your price is a tool to define your market and position yourself around your competitors (if you have any.) When you price in one range, you may find that you will compete in the existing market. However, if you set your price at a significantly higher or lower level you may create a market where none existed before. As paradoxical as it may seem, pricing higher may increase your volumes and your margins.

Looking internally when you decide to compete in an existing market you may need operational excellence to keep costs low and margins acceptable. For example, if you choose to enter the market for over-the-counter painkillers, your ability to stay within a certain price range is important. The good news is that you know the price point before you start. The downside is that so does everyone else and this usually leads to thin margins.

If you choose to sell into a space where there is little competition, margins may be easier to maintain. If you choose to sell into a space where there is no competition, then your price and margin can be set by how important your solution is to a customer. In other words, you get rewarded for the quality of your solution even more than the quantity of your operational excellence.

 

When you choose the right external problem, you don’t need to be excellent to get rewarded with high margins.

Put more starkly, when you choose the right external problem, you don’t need to be excellent to get rewarded with high margins. You can still get growth by sloppily solving the right problem. In the external pricing view, you price according to the value of your solution as the customer sees it. And how the customer sees that is going to be dependent on her view of the problem instead of how you might wish she sees another problem

 

The Problem Isn’t Yours

In the internal view, all the problems are yours. If things go well, your customers will buy according to how well you help them sense the problem. Your price should reflect the intersection of where you make money and customers still buy.

In the external view, you find the right problem. What is right? The critical problem that your customer will pay to solve. The problem isn’t yours, it is theirs. And if they feel that it is a highly pressing problem they will pay extra to solve it. Your job is not to make it seem urgent, it is to uncover what is truly urgent.

We all have more than one problem on our desk. If I turn to you and offer to fix problems 11, 12, and 13, you may pay attention. If I offer to fix just one problem, but it is one of your top three, you may pay much more attention. And you will probably be willing to pay more to have it fixed.

 

When the problem is the customer’s and it’s truly pressing they will invest to solve it.

To be clear, the payment for fixing a top problem isn’t just about money. If the problem seems very real to the customer, they will pay in time and people as well as money. The key is that when the problem is the customer’s and that it’s truly pressing they will invest to solve it. That is when you want to be right there with a good solution

What problems tend to be truly pressing? When my firm asks they are problems about time (as in time to market or time to production) or people (as in “I need to clone my best people.”) The third level problem is cost. Cost is always in last place.

However every customer says that they want to save money. As you know they do not act that way. Most of us invest in gaining competitive advantage. Time and people are key to that.

 

Inside the Curve

When you drive well you set your turn up before a curve. The right starting line for a turn makes a faster and safer turn. The same is true here. How you set up your pricing around a strongly held problem defines how you will enter and exit a difficult and perhaps invisible turn in business.

What is the best set up for the turn? The one that gets you closest to the problem as the customer sees it.

How does this affect your price? You don’t enter the turn (set your price) until you know that your customer agrees on a value on the solution. If the problem feels very real to the customer, she will invest time and people for this.

If the problem is one of the top few for your customer she will assign a value that is much higher than if it is number 10. Your assignment is to price to that value.

Then drive your solution to match her sense of value. The worst case is that you will have to bleed some speed (price) because of an issue that you didn’t expect. The most likely case is a smooth turn and a strong exit to set up the next turn. And more sales at high margin.

If you set your price based on internal costs and spreadsheets, it is like entering the turn while looking at spreadsheets on your phone. You know what is going on in your own world but you do not know what is going on in the turn.

If you set your prices based on the customer’s sense of value of their most important problems you will be using external views. This does not guarantee your success, but it certainly improves the likelihood of exiting that turn at full speed with a smile on your face.

 

Driving the Price

What drives the price that you will charge? How well you understand a key customer problem, and then how well you set up your solution. If you do both well before you enter the turn you will give yourself a chance to command a price that feels fair to your customer and that rewards you. And you can keep up your speed and your success.

You manage people and events. Does that make you an example? Can you be an example of responsibility and practicality at the same time?

I have a real case for you -- Joe the CEO of a Midwestern services firm. Talking to his employees, Joe emphasized the value of integrity in the workplace. He was very careful to make it clear that it was everyone’s responsibility to do what it takes to win and to always do it ethically. Joe evangelized values frequently and publicly. He bought supportive books for his employees, his key suppliers, and his customers.

At the same time Joe’s Vice President of Sales presented several candidates to fill a senior sales role. One prospect had a wonderful pedigree, great previous results, and a position with one of Joe’s key rivals. That candidate also offered also to bring the competitor’s current internal database of customers.

The decision was clear: Take a great candidate and get the forbidden list or to walk the talk. This was a chance to weigh responsibility against practicality. The “talk” that Joe had been giving would bring him to say no. The temptation to get a great sales person and a treasure of great data would bring him to say yes.

Joe hired the candidate. Within days, Joe’s employees all knew. His image inside his own firm was significantly tarnished.

The Meyer Group has done studies, and you have read others. They tell us what we intuit, most people prefer to do what is right and they want the same from others. They shun acquaintances (and bosses) who do and feel less than good. They avoid purchasing from businesses that fail that very personal standard.

It goes further. The best people tend to leave companies that feel less than responsible. Sometimes they check out emotionally, sometimes they quit and go elsewhere. No business can grow and excel when that happens. Keeping good people engaged is part of your job. What you do becomes part of that equation.

The eyes are on you. But what gives you the right to set standards of responsibility? Who made you a deity? And what do you do about it?

Control vs. Govern

Most successful executives value independent thought and action. Very few successful managers want to be controlled. Very few of us really want to control the thoughts and actions of others. So what do you do? Instead of control, what about governing? Setting the right example is part of that.

Try these three steps:

Step 1 - Inspect Visibly

This is not about transparency, this is about acting. Start with visibly inspecting what you consider to be important. When you look at periodic updates from your team, do you request and measure ethical activity? The CEOs who succeed here make it a point to systematically ask how their team members are applying the company’s principles. One or two hits on this each month take little time but are wonderfully visible. This is good governance.

Step 2 - Do

Here is where transparency matters. You can talk about corporate citizenship, you can give money, but your strongest statement will be when you visibly do something like take a half day and volunteer with Habitat for Humanity. Another option: Many local schools use business people to guest teach once a fortnight. The point is to do something visibly, and to do something that any employee could emulate.

Step 3 - Encourage

When you see people in your team making good choices for your business, thank them personally and immediately. A note on your stationary will do more than a company program or an award. Nothing speaks louder, and the successful CEOs don’t delegate this.

When you act visibly on responsibility, the community and business both benefit. So do you, you get to keep your job as part time deity and full time executive.

Wednesday, 14 February 2018 02:14

Growing Your Time by Giving Grace

Can giving grace be a way to help grow your own time and your people? Yes.
Here’s an example for you.

Let's start with the problem. When Paula took a new middle management assignment she found that it included an employee who hadn't been performing for a long time. The employee reported to Bethanne who now reported to Paula. Before Paula got the assignment, Bethanne had been told not to do anything to penalize or remove this employee because "We’re all family. We help the weak ones."

"We’re all family. We help the weak ones."

Sometimes we make the kindly decision to support one person’s weakness over the needs of the organization. Often, we don’t like it but just accept this and let the situation continue. It leads to dysfunction. It saps your time and the respect of people on whom you rely. In an organization with extra resources, this might be acceptable. However, how many of us have extra resources these days?

So how did Paula both generate growth and support people who needed help? This solution for growth comes from:
— Starting from the right place
— Engaging with people but releasing the work
— Giving grace

1. Starting From the Right Place

You already know that one of the fastest ways to engender resentment in employees is to try to please everyone. It is tempting to want to help people feel better and to do that we sometimes define ourselves by how others see us.

However, executives who succeed at sustainable growth don't define themselves from an external standard. Those who consistently make growth work are the ones who define themselves from what they know is right.

These successful executives lead from their own core values. Those are what drive their decisions. Often, not always, it drives the culture in that business. It is always key to successful growth.

Paula chose to start from what she knew in her core was the right way to act and not react. She chose to improve her organization even if it meant releasing the employee who wasn’t performing. Prioritizing performance might not seem common in her company, but it is core to her values. And acting instead of reacting is another key value for her. She chose to combine these into a plan to engage but not do Bethanne’s work.

2. Engaging But Not Doing

The choice to shelter either the employee or Bethanne didn’t feel right for Paula. Sheltering is often a reaction, and one based on fear. You stifle growth when you let fear guide your choices. We and our businesses don't grow from fear; we grow from stretching to fulfill our potential. We don't grow from protecting; we grow from expanding our current abilities.

We don’t grow from protecting. We grow when we act, not react.

That feels intuitively correct, but how do you manage people to grow them and your own access to time? Instead of hands off management, you can:

- Provide meaningful problems for them to solve
- Engage with individuals as they solve these themselves
- Get out of the way as they own the issue, make mistakes, and learn

Engaging with employees is not protecting them. Engaging starts with actively choosing the challenge they will face. It continues with actively guiding learning and growth. It is acting to stay available and present for the work but not doing the activities for your people. This is hard work.

Growth happens when you are present, engaged, and managing the growth but not the activity.

Paula wanted to give this employee a full chance to make things work. Bethanne "Did that, but after another 90 days we just knew that he could not do the work." Paula could have terminated the employee herself, and done it faster than delegating that task. However, she decided to structure this to become a doable learning experience for Bethanne.

"Having to deal with the bureaucracy and political burden of having to move somebody out of the business” was not new. Firing someone in a Fortune 100 company where poor performers do not get moved out of the business “that was the hard work. From me she got the encouragement. I told her that this is the right thing to do.” But telling her was not enough. “I provided the grace to do this."

3. Giving Grace to Get Growth

What does Paula mean by “providing grace?” This is how she explains it: “I recognized that this was going to be a demanding activity for Bethanne.” The employee could be valuable elsewhere in the company, so this move had to be executed excellently and with real sensitivity. For Bethanne to do this and to grow, she needed relief from some of her everyday urgencies. That is the “grace” that Paula wanted to give.

It feels like a luxury to give someone time to think this all through, to research the right answers, to work out the details. For Paula that meant a conscious decision to reduce her workload in an environment where workloads were increasing. Paula chose to make Bethanne's development a more important priority than any one project. She prioritized the organization’s growth ahead of both Bethanne’s normal workload and ahead of the employee’s comfort.

Paula looked at the best way to help Bethanne do this right and changed her workload for several months. "There were some assignments that I would have had go to her. I didn't."

Bethanne knew that Paula was involved and was investing in her. She also knew that Paula was not doing the work for her. Bethanne felt supported but also knew that she had full responsibility to get this issue right. Bethanne acted in the way that Paula hoped. “She responded to that by doing a complete job.”

This was was the reverse of normal delegation. In order to give Bethanne space to work this process, Paula had to take on more work for herself. Paula was was putting out more effort, not less.

However, there is self-interest here. “It is important to me as her manager; she becomes more valuable to me. It is important to Bethanne because important skills are expanded, it is important to the corporation because (we) have one more skilled manager.” No matter whether your team is small or large, having a skilled manager is going to be an advantage.

You don't assemble skills like this; you grow them. You owe it first to yourself and then to your business and team to grow good managers. “Giving grace” is part of nourishing growth and growing your business.

Fostering Growth for Your Organization

Do you choose to make growing people one of those important contributions to your business? Paula made that choice here. “Investing in (Bethanne) was the right thing to do. She was a good manager on the verge of becoming a great manager. What more important managerial job do I have? That is the top of the game for me.”

“What more important managerial job do I have? That is the top of the game for me."

Growth starts with working from your internal strength and values. The bad news is that you can't rely on anyone else to get it. The good news is that you don't need to rely on anyone else.

More good news: If you choose people well and let them learn, your team members don't need to rely on you. You can let them supply their own strength if you can give them the grace, sense of values, and engagement to do so. Doing this grows your own access to time.

People will make mistakes, but progress is a changeless law. If you hold to your core values, and ask them to do the same, you will foster growth. Giving grace is a way to turn a problem into growth for your organization. And growth for your time as well.

Saturday, 27 January 2018 05:43

Growing Your Business - Better Negotiation

You want to succeed at negotiation, but is it strategic for your business growth? How can you make this an advantage inside as well as outside your company? 
 
Many of us were trained to approach negotiation with spreadsheets and margins and then add game theory. It’s a start.
 
However, is your business just about numbers? Not a chance. Don't you use negotiation throughout your day, with people on whom you rely? Let’s look at a way to integrate all this to help foster growth.
 
 
Your Start
 
You may know Chris Voss’ book on negotiation (“Never Split the Difference”) as a discussion of very high stakes. He was a top hostage and terrorism negotiator for the FBI. Despite his personal aggressive style and the hard people and situations he faced, he suggests that you negotiate with “unconditional personal regard.”
 
If you sit down with someone and just assume that they are nothing but good, Voss holds that you will have an advantage in the negotiation.
 
This does not mean that you assume that they are right or that you should give an inch. You just assume that they are good. This works. It’s grounded in research. 
 
“Unconditional personal regard” comes from work done by Carl Rogers back in the 50s, where he applied it to therapy. I’m not suggesting that good business negotiation is therapy. It’s an ongoing process to get agreements that work for you while you improve relationships that matter to you and your business.
 
 
Don't Split the Hostages
 
When you start with unconditional personal regard, two things happen. One is that you are relaxed and able to use that to build and hold a position. The other is that you telegraph your ease. That can help the other person trust you. And maybe trust themselves more. 
 
The title of the book, “Never Split the Difference,” refers to how Voss succeeded. Using unconditional personal regard as a start, he never chose to say: “You have 4 hostages, I’ll take two and you keep two and we’ll split the difference.” He went for everything. He usually got it. 
 
So what does that have to do with your results? It means that while you hold to your position, both you and your opposite feel comfortable that you are held in regard. You strengthen your relationship even as you get the results you came to get. 
 
 
Unconditional Personal Regard
 
One of the keys to Rogers is that he let his patients feel that they were capable of doing their own work. Instead of the therapist fixing the problem, doctors who use this take the position that the patient inherently has the tools and just needs to be guided to use them. 
 
In business, this would be like saying: “You have what it takes to make this happen, I’m comfortable that you can. Now go do it.” Isn’t that how you like to be managed?
 
This is not about negotiating transactions anymore. This is about how people feel about working with you. Do they feel like there is a constant need to defend themselves? To be on their toes just in case?
 
Or do they feel that they can work with you over time? Do they feel that while you may not support all their actions or results you will always hold them with unconditional personal regard? 
 
If you start that way, you have a good chance of ending that way.
 
Voss uses unconditional personal regard when he negotiates. He usually gets everything. But for a growing business this is about more than negotiation. It is about making a business grow. 
 
On that subject, I want it all and so should you.

This is going to be an odd question, but could be a very useful one for you. If you try it, you’ll clearly differentiate yourself with customers. You may learn a lot about them and they about themselves.

At the same time, if you ask the people on whom you rely some will increase their respect for you. Some may think that you are crazy. Consider yourself warned.

Oh, many people you ask will want to know your answer, so you’d best have an answer for yourself. So the question is:
     Why did you wake up this morning?

Of course there are no wrong answers. When I have asked over the past week, the replies include “To urinate,” “Get going for a meeting,” “To sell” and “To find more ways to grow myself today.”


What Is In This For You?

Consider these three benefits you can gain:

1 - If you ask a potential candidate for a hire, you’ll probably get information that can make your decision easier. It’s a great interview question.

2 - If you want to get a customer to reflect (instead of just hammer you on price or product) this can be a great question. You may find it hard to ask. However this question helps you to move from a commodity image to a more thoughtful one.

3 - Some people will take this as an aha moment. They will start to change their day based on the answer. With luck, you will benefit as they do.


My Own Answer

Yes, I’ll answer this as well. Of course this varies day by day, but in the past few weeks my own answer has been consistent. I was surprised by what I discovered.

I expected the answer to be around gratitude for my own ability to write and work. I was wrong.

When I’m just plain honest with myself, the reason I woke up this past few weeks is to do more today than I did previously. It is sort of about pushing my envelope, growing into new areas. As soon as I ask, it is really obvious to me.

I’m happy with the answer but I am even happier with the idea that I was wrong before. I think that we all want to learn, especially about ourselves. And I did. Using this question can help generate learning. With it, you can be a positive influence.


Benefits to You

Any time that you help a key person, or a customer, or yourself learn more you are differentiating yourself and your business.

- In commodity markets, this helps you to differentiate your business.

- In high service markets, this help you to show why you should be the vendor of choice.

- And when you want to attract and retain great people, this might help them see you as the person with whom to work.


Give it a try, ask the next person to whom you talk: “Why did you get up this morning?” You may both learn a lot. You may change the ground rules for your year. You will probably get a grin.

Three practical questions for you:

- Do you make gratitude?

- Is now the right time to do it?

- Does it help grow revenue, your access to time, and the people on whom you rely?

The answers to all three are ‘yes.’ As you start the year, let’s look at quick hit ways to make that work for you.

 

Do You Make Gratitude?

This is both obvious and not. You know people who are good at expressing gratitude, and you also know people who just don’t seem able to express it. It isn’t about what you do for her or him. It’s about how they choose to act, is it not?

And isn’t that true for you? Are you a person who looks for reasons to be grateful? It could be gratitude with customers, employees, suppliers or anyone else significant in your life. More important, it could be to you. You can choose to do this, you need not wait.

You are always the best place to start, and when you do you set an example that others can follow. Some will, and then you will benefit.

 

Is This the Right Time?

If you’ve not been known for expressing or promoting gratitude, the start to the year may be the exact right time to start. Whenever you change behavior, people assume that it is temporary and that perhaps it should not be trusted. If you do it at the times of highest pressure (for example, at the end of a sales period) many folks will just ignore it.

This week is the right week, when you may have been out of sight for a little while. You can come back and say “I have been reflecting. I plan to practice gratitude a lot more this year, starting now.” Then you can start. Until you display it, nobody will believe it. And why they should they?

 

Does it Help Grow Revenue? Time? People?

Each of the key people in your business life has a choice of where they focus their time, energy, and best effort. If you are the one who expresses gratitude, you can expect more of their best work. And you will have earned it.

Post holiday is a great time to think about and express gratitude. Not about for what you are grateful from the past year. This is the time to do it to create a new standard for yourself, and then for others to emulate. Your business, and daily life, will do better for it.

Today is the right day to start.

 

Thursday, 28 December 2017 05:10

Setting Up the New Year for Growth

New Growth for the New Year

This is also in response to a request: Do you have a good process for setting up the new year for growth? Not just to do the same we’ve done already, but to grow?

I’m going to reply with something simple but not easy. It looks a lot like a formula, and I guess it is. If you get the people on whom you rely to focus here it will help you to grow into the future instead of just repeat the past. If you go with this, you can increase revenue and get more things done in early 2018.

 

The Formula

First, what is the formula? My answer:

1 - Try new stuff

2 - Pay attention

3 - Repeat.

It looks simple. It is simple. And it works.

 

Why Three Steps

When we actually try new stuff and review it we are exploring and learning, moving into the unknown. We automatically improve. The key is getting started.

One of my axioms is that all of us enjoy growing and learning. It is true for all of us.

 

Why Three Steps?

Have you ever seen projects that get launched and then abandoned? It happens all the time. Projects and programs get chartered, launched, and then ignored. Not much learning or productivity comes from that. So doing something new should be followed with “Pay attention” to what happened.

Ask the people on whom you rely to examine what happens. This is your chance to gain as they learn and improve.

 

What Will Everyone Learn? Will it Be Enough?

We never know what we might learn. It is a step into the unknown. Many will avoid it, deflecting the risk.

However, most of us will be willing to try to define the unknown if the chance of failure seems less than the joy of exploration. If we knew what we were about to learn it would not be new, would it? If you want to start the year with a sense of growing, that means moving into the unknown. Getting folks to accept that is not always easy.

A key is not to request large jumps. Take small steps instead. Promote the sense that any small growth is a good step. You can help people to enjoy the taste of success. Instead of asking your team to think large, ask them to try new things that they can do with comfort. Reduce the risk and stress of experiments, go for incremental success into the new instead of single big steps.

 

Pay Attention

Be obvious about looking at what happened.

The most common next step after a new idea is to ignore what happened and start something else. The second most common in many organizations is to look for what went wrong.

Instead of a “why did we fail” meeting to review an effort ask yourself, and the people upon whom your rely, to look at what they learned and can use again. Pay attention to what worked and how. Use that to focus on the transferable skills that you want to encourage.

 

Repeat

You may learn, but you can be sure that there is more. So the third step is to repeat the first two. If you are taking small steps, and getting satisfaction, this is easy. More important, if people are enjoying the learning, this is easy to promote. When you get it rolling, it can be difficult to stop. That is a good thing.

 

Make It Happen

As you prepare yourself, your team, your customers for 2018, ask yourself how you want them to see you. Do you want them to see you as you were in 2017? Or as progressive and growing and helping them grow in 2018?

As you lay out the start to your year, don’t just talk about what you did and what they can do to extend it. Ask them how you can help them do new things. Then ask them to take small steps, try new things, pay attention, and then repeat.

And you should do the same. You will get more grins per week, and why not do that in 2018?

Wednesday, 27 December 2017 20:14

Encouraging Last Minute Revenue

Do You Want to Encourage Last Minute Revenue?

This is in response to a request: “Have you got a strategy to encourage the last bits of revenue from the calendar year?” So let’s consider something you can do this week. Let me start with three thoughts.

First: Most of my clients and business friends are looking to get as much revenue as possible in the next few weeks. If that is you, keep reading.

Second: The traditional path is to discount deals and add pressure to the sales team and customer. This works some of the time, but you know that there are deals where it won’t work. Everyone knows the game, and your customers are often resistant to it. They think of end of year revenue as our problem, not theirs. And they are usually right aren’t they? So we try to buy or pressure their help.

Third: Most people, under pressure, return to old habits. The more pressure we apply, the more they work from history. In other words, under pressure most people hunker down to what they used to do.

Is that what you want?

If pressure and discounts are not working, consider reversing the pressure. Two options for you:

1 - Go to the prospect and say that you are done trying to pressure him/her. Ask what they would want that would add value instead. If you have a $500K proposal on the table, instead of discounting another $25K, ask what service you could provide that is not in the proposal that would help them this year or next. If you can do it for less than $25K, just make it part of the deal. They get something they didn’t expect, you get to hold your price at $500K.

The point is not that you are giving them a discount in another way. The point is that you are letting them define value as they see it and you are delivering it. You are releasing pressure and changing the conversation. When the customer relaxes, she or he can see other solutions. You gain as well.

2 - Back off the pressure, start talking about 2018 plans and goals. Ask what she or he wants to get done next year, and just let them talk about that. You’ll learn about what your future deals can be. Just as likely, if they are budget constrained (pressure from their own organization instead of you) then see if you can help them do some of that in this year’s budget. You become part of the solution to their problem. You might wind up modifying your offer to be part what you had in mind and part what they had in mind, but still book a deal this year.

The point is not that you are backing off. The point is that you are engaging them to help them get something done that matters to them. You are releasing pressure and changing the conversation.When the customer relaxes, she or he can see other solutions. You gain as well.

It may be hard in December, but take a breath. Help your customer take a breath. Let both of you move from hunker down to a two way conversation. You might just book some good 2017 business as you do.

By the way, if you are asking where I have been, thank you. I spent a large part of the past few months intensely experiencing our health care system. I’m fine, getting stronger, and working again. And now I’m blogging again as well. My mind is going full speed, spin me some questions and requests!

Can Offering the Customer Safety Increase Your Business' Revenue?

When you consider how to increase your revenue, start with your own buying preferences. Why might you choose to pay a premium for a product? Does that apply to others as well? Specifically, consider three questions:

1 - Would you pay more if you got a guarantee of satisfaction?
2 - Does guaranteeing your work say something about you?
3 - What is a guarantee's total cost compared to the revenue?

The first two of these questions are tightly interrelated. When I buy on line or in person, I tend to shop where returns are easy. Lands End and Boure Bicycle Clothing are great examples. Each company flatly guarantees that I can return purchases or gifts with no questions asked. Does this mean that their clothes or bags are automatically better? No, but their service is. Their guarantee makes my purchase safer. The guarantee is a statement of their values. I bring my business back to them because of that. For me, questions 1 and 2 are important reasons to choose my supplier.

You can use this to substantially boost your margins. Customers come to you with questions to resolve. Answering those questions in a way that makes you the safe choice can increase your sales price and reduce your risk at the same time.

Consider what you already do to differentiate your product. If you sell tires or roofing materials, do you want to just sell prepared chemicals? Or do you want to deliver safety on the road and in the building? Is your product a combination of ingredients that anyone can buy, or is your product the way that you deliver those materials to individual customers?

To command a higher price, make the offering you deliver a mixture of two things. First, start with your ability to get the problem and success criteria defined up front. When you do this with your customer before he or she buys, your customer is more likely to get the solution that they tell you they want.

That allows you to deliver the second part of the mix comfort. A guarantee is part of that sense of comfort. Combining your understanding with comfort for the customer will lead to increased margins. Negotiating success criteria in advance shows your customer that you value their uniqueness. It also allows you to know exactly what you should guarantee.

Increasing Margins by Doubling Your Price
Start by looking at what you value. Would you pay a premium to get a satisfaction guarantee for something important to you? How true is it for others? We asked over 100 executives if they would pay a premium for a guarantee, and how much. They said ‘yes.' The average increment that they were willing to pay was 100 percent.
Not only would they pay more for the safety of a guarantee, they would pay twice as much. It's a strong statement.
A guarantee is an expression of your values. That value is attractive. It is also a commitment to protecting the customer. That's also attractive! Those mean higher value to your customer. With that value, you can and should collect additional margin from every customer. It is worth it to you to be worth it to them.

The Satisfaction of Delivering Satisfaction
Increasing revenue is only part of the reason to offer a guarantee. Because you are going to do the work right, you get the privilege of your own satisfaction. Do you feel good about delivering quality and value in your business and personal life? One of the main reasons to deliver satisfaction is that this is how you want to perceive yourself. When you are working to your own greatest satisfaction, you are working from your internal compass, from what you are as essence. It feels good.

Satisfaction with your business starts within you. Your sense of quality comes from within you, not from an external source. You may measure the level of quality by comparisons, but your ability to recognize that you deliver quality comes from inside you.

When you deliver from there, it's clearly part of your product. You do what you would feel proud to do, and that shows. You want it to show, and you probably show it now.

To put this in perspective, consider:

If a customer is unhappy with what you have done, would you turn your back?
Or:
Would you work to craft a solution?

The answer seems obvious. Consider the statement you are making. “Yes” to that question is a statement that you deliver quality work, end of story. You want to do that, and you want to be known for that. You are working from your internal guidance, from your sense of what you want to be and how you want to see yourself.

That commitment to “Yes” is a key part of why your customer should buy from you. It is as much a part of your product as tires or roofing materials or billable hours.

Your guarantee that you will take care of the customer, that you are offering to guarantee their satisfaction, is the clear statement from within you to them. One of the best reasons to offer that statement is because you are telling them about what you and they both mean to you.

When you act from what you are, you will make an effort to find ways to make your customer happy. You'll get satisfaction from delivering satisfaction. You are going to do what is right.

Your customers value your focus on the problem as much as they value the hardware or software. When you focus on their problem, you are going to do what is right for them. If you give them that focus, and show you mean it, you will double your margins and more.

If you are going to do what is right, why not tell your customers that this is how you operate? Why not collect the additional margin that they will pay for that commitment to their satisfaction?

Reducing Your Risks
Can we afford this level of guarantee? It's a discussion of revenue versus cost. The revenue can be forecast, but the risk can seem enormous and incalculable. When you offer a satisfaction guarantee you run the risk of a customer telling you that you have failed, and then having to make it right. It raises questions.

The first question should be:
Do you want to know when you have failed in the customer's eyes?
For most of us, the answer is ‘Yes.'

The second question would be:
- Are you going to fix the problem anyway?
My guess is that when you look within yourself, you will find that you want to do what is right for the customer if you can. ‘Yes,' you'll find a way to make it right.

If so, why not ask to be paid for your commitment to excellence in every transaction? In several decades of consulting projects in our firm, we have gotten very good at asking for definitions of success criteria from large companies and small ones.

We've always been good at meeting our commitments. We deliver good work, and we guarantee it. How often do we have to pay out? In the 20 plus years, we've refunded money one time. Just as important, we have increased our sense of doing what is right for each customer.

You can manage your risk by ensuring success. The biggest tool to ensure customer success is how you communicate with the customer before the project is started. Success Criteria are your tool for margin, delivering value, and reducing risk.

Together you and your customer have the opportunity to define success for a project. If you want to make sure that you will both feel satisfied that you delivered satisfaction, make an opportunity to define success before you start.

Before you do price negotiations, ask for an understanding that you will be successful if X and Y are done, and that you have the ability to negotiate changes if both parties agree. It sounds pretty obvious, but how many projects do you start without a clear and common agreement on how you will know that you have finished? Success Criteria help you and they help your customer.

Once you agree on that definition, you know your targets to deliver satisfaction for you and the customer. You know what you can and will do to satisfy your own internal drive for quality. You know your capability to satisfy your commitments to the customer. And you know that you can ask a premium because you asked for the Success Criteria and then promised to meet them.

In other words, your risk goes down. Your margins go up.

The essence of the risk changes as well. Before you were concerned with issuing a refund. Now you are more concerned with making things right. Again, wouldn't you do that with or without a written guarantee? Isn't that what you stand for? If so, what is the risk of the guarantee? There is very little risk and a lot to gain.

Over the years we have clearly gotten revenue that might not have come to us. Why? We display the commitment to satisfaction. I know this because customers have told us.

What risk would be unacceptable to me as an owner? The risk that I would say no to supporting a paying customer, or the risk that I would not work to understand a customer's needs in advance. Working from my core, my internal compass, I won't accept the risk. I want to treat my client in a way that I enjoy being treated.

The biggest risk for me? Going home thinking that I did not do the right thing for the customer or myself. Since I won't accept that risk, this is the argument that keeps me offering a satisfaction guarantee. The additional revenue is the happy side effect.

Choosing to Guarantee
The arguments to offer a guarantee are:

- Increasing revenue to more than cover what you will pay in claims

- Keeping the focus of a transaction on the work that you are doing instead of the price of doing it

- Presenting the same sense of quality that you strive to be

- You are going to fix things that go wrong anyway. It is one of your strengths.

You might as well get paid for one of your best qualities. Peter Drucker put it well when he said: “The single most important thing to remember about any enterprise is that there are no results inside its four walls. The result of a business is a satisfied customer.”

A significant part of your product is your value, and the core of your value is what comes from within you, not from what you produce. That is good news; you can produce more value by focusing on that, and by generating more from your source. The benefits to you, your customers, and your business are great. You just have to figure out how to do it.

Remember that a guarantee is a contract with your customer, and both parties are involved. So start with asking to jointly define success before any important transaction that you will guarantee.

Do you want your customer to feel comfortable buying from your business? Do you want clients to respect how you do business? If the answer is yes, then guarantees can be a low cost way to help customers buy.

In the end, your guarantee of customer satisfaction is not about the hardware or software or service. It is about the statement that you are making to your customer and to yourself. The benefits include higher revenue, but the chief benefit may be how you and your customer see your value, and your values.

(This posting is based on the book: Growing Your Revenue, People, and Time which I am still writing. It has appeared in a similar form in the Business Quest, the journal of the Richards College of Business. If you have comments or suggestions, please let me know!)

 

Friday, 09 June 2017 03:32

Hunker or Grow:

Is It Time to Hunker Down or To Enter the Revenue Stream?

The economy still seems challenging. If you own or manage a business that sells to other organizations, you have a choice.

- Do you opt to hunker down and ride out the difficulties?

- Or do you find ways to get proactive and create opportunities?

More than ever, our ability to know what to do is clouded. The lessons we so painfully gained in the past lessons don't seem quite as relevant. Yet, commerce is clearly still happening. People are still buying.

This is two blog articles. In the first, published this week, you’ll find suggestions about whether to hunker down or to seek opportunities and take advantage of them despite the current disruption in the economy.

In the second, to be published soon, you’ll find strategies to take quick advantage of disruption. You can make disruption your ally.

Hunker or Grow?
As a manager do you hunker down and ride out the current economic difficulties? Or do you choose to get proactive and find and make use of new opportunities?

Many managers are acting in shock. They are not taking the initiative because they cannot predict the immediate future. Your ability to know what to do based on past lessons is challenged. Doing nothing feels safe, acting feels risky.

With all that, it is easy to forget that commerce is still happening. Companies are looking to take steps to make as well as save money. Governments are continuing to invest in services. It is easy to forget that things are still being sold and that customers want to buy more of them.

If you own or manage a business, you have a choice. One option is to bide your time during the disruption. You can wait for the revenue to appear. Many managers will choose this.

Another option is to move into unknown areas to create revenue projects. The unknown is not the easy choice for many, but some will choose to try to create opportunity. The good news for the latter managers is that this disruption is creating opportunities that never existed before. This is a time when new products and services can take hold.

You face risks when you move into the unknown. Many projects you propose to customers may fail. However, if only a quarter of the new projects happen, that is a major opportunity that other companies may miss. You have an opportunity that your business will miss if you wait out the recession.

When you talk to your sales teams, remind them that there is a continuous river of spending. Although the rate of flow rises and falls, the river never stops. The economy changes and takes odd turns, but the river of spending never dries up.

Some times you stand on the side of the river of revenue opportunity. You point at it and discuss how much larger it was last spring. You watch it and wonder what next spring will bring. Perhaps you walk along, looking for the right place in which to dip a toe. Sometimes you step into the river of revenue and get thoroughly immersed in it. Right now that might be appealing.

Getting the Sales Team Into a
Revenue Stream

For your sales team to take advantage of the stream may require that they take a different view. You may want them to look at customers a bit differently. Consider:

- There are businesses to which you sell that are withdrawing and hiding and hunkering down, hoping to survive. They provide trickles of revenue.

- There are also customers who are looking to thrive and grow their own revenue. These businesses are part of a fuller and fast stream.

The key here is that your sales team may not realize that these trickle and fast stream customers are often people who work in the same company. In many businesses, managers hoping to survive are in staff roles like human resources (HR) and information technology (IT.) The ones planning to thrive and grow are in line positions on the revenue side of the same business. It is time to ask:

- Do your sales teams call on the staff or the line?

If not both, they may be missing the stream of revenue.

You can take real advantage of this in a competitive marketplace. This is because some of your competitors are in survival mode; so they appeal to the hunker-down folks in staff roles. This works to your advantage when you work both the staff and the line in your sales strategies.

Fewer of your rivals are stepping into proactive mode. They differentiate themselves by talking about revenue. They appeal to the managers and executives who want to grow their businesses. They are in the faster stream; you may want to join them in that stream. As late as it is in the calendar year, their are still new deals to be had in this stream.

Your fastest path to the quickly growing your revenue stream this year is going to be found with the line managers of customer companies, people who also need revenue this year. Every company has managers who want to find ways to get things done and are willing to break budgets to make revenue happen. At this time of year, they are more frustrated and more willing to work with a new supplier. That is an opportunity for you.

Approaching Your New Customer – Three Practical Considerations
The economy isn’t an object to which you are prey. The economy is an average, a line defined by mathematics. There are companies and people below that line, and companies and people above it. No one of us is average; each has a choice to be above or below that line. You control that choice.

Customers aren’t monolithic. Each company or municipality is a combination of buyers and decision makers with different agendas. This is a good time for your sales team to take advantage of the difference between those taking the survive path versus those looking to thrive.

For example, you might rely on the news to say that Cisco Systems is gathering cash to retire debt and buy businesses at a discount. You could say that General Motors (GM) is unable to spend money, a poor place for you to invest sales time this year.

But these generalizations hide important truths. Cisco is cutting back at the same time the company is investing in growth. Their non-revenue departments are looking to avoid spending. At the same time, GM is spending substantially in tools, consulting, and, of course, new technologies for cars.

Even saving money is expensive. Closing plants requires a substantial investment. GM will do it. On the revenue side, GM is building the cars of the future. That requires a substantial investment and creates a revenue stream. At GM, you will find top managers focused on revenue. There is a stream there for someone to tap.

To gain an advantage for your business, you need to ask your sales team a question:

- Do you call on cost control departments or revenue generating departments?

For most, it is cost departments. There is nothing wrong with doing that and building long-term relationships, but this may not grow your business this year. Your goal is long-term profitability, but can you also have the short term? Can you increase your market share today while your competitors hunker down? You can.

Start by designing sales strategies that bring value to the revenue oriented groups at your prospective business customers. That means adding value as the customer sees it, not as you want him or her to see it. Letting the customer define value can be uncomfortable. So is reaching high into executive offices that are not familiar to your sales team. On the other hand, if there was ever a time to get uncomfortable, it is now. This is a high leverage period because other companies are withdrawing from competition.

The good news about this being a blog is that if you want help you need only send over a note. I’m an author, I love it when you read what I write and ask questions. Drop me a note at Peter @ MeyerGrp.com

A practical step to locating your revenue stream is to segment each customer company into individual buyers, focusing on whether the individuals directly contribute revenue. Some of those buyers are on the cost side of the company. Some are on the revenue side. Don’t let your sales teams miss either side.

It is not just companies that have revenue-generating departments. So do governments, medical centers, and nonprofits. Governments have tax collection and economic development groups. They are quickly creating revenue streams this year. Have you allocated some of your sales resources in that stream?

The second practical answer? Make it easier than ever for the revenue managers at your new customer to make a decision to go ahead.

Ask:
- Can you make it easier to for your customers to buy in small bites?

- Can you make it lucrative for your sales teams to sell small deals to new customers?

- Can you help your new customer ease into the relationship with you?

- Are you compensating your sales people to prospect for this kind of business?

- Can you offer bonuses for new customers? Even if located within in companies you sell to?

As the economy rebounds and a customer grows, to whom will the revenue managers turn? It will be companies and people that focused on selling small and easy to absorb projects during the recession. Why not make your company the preferred source?

If your team is not used to talking to customers’ revenue generators, the third practical step to take is to take a leadership position. Show them by doing it. That requires time and attention, but it is likely to be the best investment you can make this year.


Conclusion
As you guide your business, you have the option to hunker down and let things get better. Or you can take advantage of the opportunity to get a larger market share and add new customers. The best way to focus your sales teams on obtaining new revenue is to recognize that potential new customers include individuals inside businesses. Point your teams toward managers who generate revenue for your prospect.

One of the key investments is your own energy. If you want your team to be proactive with customers, you will need to act that way. If you combine your leadership with the right product and service packaging, you are likely to get revenue for your company that others will miss. As Intel’s spokesman said when announcing the $7 billion building plan: "You never save your way out of recession. You invest your way." Will you invest in a revenue stream? Will you make it work for you?

This posting is from the upcoming book: Grow Your Revenue, Time, and People. It has appeared in a slightly different form in BusinessQuest, the journal for the Richards School of Business.

 

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