In this episode we get more tactical we will look at some of the many pricing strategies that are available to you and help you understand which strategies are appropriate for your business. You will likely use a combination of strategies to maximize your profitability Competition-Based Pricing Strategy Competition-based pricing is also known as competitive pricing or competitor-based pricing. This pricing strategy focuses on the existing market rate or going rate for a company’s product or service. Businesses who compete in a highly saturated space may choose this strategy since a slight price difference may be the deciding factor for customers. There are several problems with this strategy. It is reactive, you are following your competitor’s lead. If they reduce prices you may also have to reduce your price. It does not take into account your cost to produce the product or service. Matching the competition can lead to very thin profit margins that may not be sustainable. Finally, if your product or service has a benefit beyond your competitors which you do not recognize, you maybe be leaving money on the table Cost-Plus Pricing Strategy A cost-plus pricing strategy is based on the cost of your product or service to which you apply a mark up to achieve a targeted profit or margin. This is the fall-back strategy of many companies because it does guarantee a gross profit on every unit sold. Unfortunately, it is not the ideal pricing strategy for most industries except maybe retail where it is used to set a base line. The advantage of cost-plus strategy is in its simplicity. The disadvantages include that it does not take into account the other overheads of the business – Factory overhead, selling expense, R&D, General Administration. A useful tool is to look at how many units you need to sell to breakeven. If the product you sell for $100, yields a gross profit or gross margin of $40. If your Factory Selling R&D and G&A expenses total $400,000 you will need to sell 10,000 units to break even. But the biggest failure of cost-plus pricing is that it does not take into account the price the consumer is willing to pay for your product. In our example maybe the customer would be willing to pay $120 or $140. In which case you are leaving money on the table. Or maybe they only value your product at $90 in which case your sales maybe zero. Sadly, many organizations, even those that claim to use value pricing default to cost plus pricing. Business managers when setting pricing still revert to cost plus pricing. Part of the reasoning is that business are generally measured by external parties like business analysts by three key metrics. The size of the business, its earnings and the quality of the business or its gross margin or profit percentage. So, a product that might deliver excellent sales and profit fails because it is overpriced to protect the businesses gross margin %. Freemium Pricing A combination of the words “free” and “premium,” freemium pricing is when companies offer a basic version of their product for free hoping that users will eventually pay to upgrade or access more features. Unlike cost-plus, freemium is a pricing strategy commonly Apps such as Runkeeper. They choose this strategy because free memberships offer a “peek” into a software’s full functionality — and more importantly also build trust with a potential customer With freemium, a company’s prices must be a function of the perceived value of their products to enough customers to make the business viable Prices must present a low barrier to entry, preferably free, and grow incrementally as customers are offered more features and benefits. Note a relatively small price for premium service can be a solid pricing strategy. For example, I mentioned RunKeeper early.

Episode 17. The fundamentals of pricing strategy, what you need to know for market success Pricing Strategy is a model or method used to establish the best price for a product or service. It helps you choose prices to maximize your objectives, while considering consumer and market demand. Getting pricing right is not easy, price too high and you will not generate many sales, price too low and you are leaving money on the table. Especially when starting out in business your pricing strategies may change as your company grows. You may start with a penetration pricing strategy then move to a profit focus. It is essential that if this is the approach you intend to adopt that you plan ahead and plot the change in strategy in advance, Questions to ask yourself: Do I need an income from my business? How much? And When? Will I borrow money? Seek funding? Or bootstrap my business? What is company’s position in the marketplace? Premium? Mass Market? Your preferred growth curve? Faster growth requires more resources – capital and people Are you in this business for the long haul? Or is this a “proof of concept” business?

You can cater to the rich, and I’ll take the rest; the good Lord made more of them. Kemmons Wilson founder Holiday Inn

People only buy from you for three reasons: You save them time You save them money You make them feel good Understanding the reasons people are, or will be, buying from you will be invaluable in setting your pricing strategy. You may be able to deliver two out of the three. You could save people time and make them feel good. Know your customer’s reasons for buying from you.

Tags: How to start a business; Achieve start up success, Pricing Strategy, Pricing for profitability, Pricing objectives, The successful entrepreneur, business common mistakes small business start-up; avoid these common mistakes of business, mistakes in business, IBGR.network, Jeremy Gray, Practical Solutions to Difficult Problems

Episode 16 – Research shows that stage presence is the leading predictor of success when pitching to investors. Improve your stage presence with these 6 tips ​ Research published in the September/October edition of Harvard Business Review found that stage presence was the leading predictor of success in gaining funding from investors. Sadly 75% of people suffer from Glossophobia or the fear of public speaking. And if you are nervous your stage presence will not be ideal. But it can be improved with these ideas. Solid preparation of what you want to say will improve your confidence, be sure of your facts, Practice Practice. but this alone may not be enough to deliver a strong stage presence. Think like your audience, if you come on stage, go behind the podium and stand rigidly – the signal to the audience is that you are uncertain. If you come on the stage in a confident manner, without notes and an open body language this conveys confidence and competence. Do not be static. Move around when presenting. How much you move depends on the size of the audience. If it is a large room you should move from one side of the stage to the other in a smooth flow, stopping at times, the objective is to engage the entire audience. Not to have their heads snapping from side to side as if watching a tennis match. Use the stage as a prop to your talk. The back of the stage is to deliver the big picture, the facts, the background setting the scene. The middle of the stage is for the main content of your pitch, the why investors should be interested in what you have to say. The front of the stage is the area of greatest intimacy with your audience. This is where you make the ask, will you invest in my business and here is why you should. If the area is limited, TED speakers are told that they have to stay on a little red carpet on the stage. Consider how effective most TED speakers are at conveying their message. If you have limited space decide where you will stand and use gestures to convey your enthusiasm When presenting live your first impression is not made when you start speaking, it starts when you enter the stage. Plan your entrance, know where you will stand. This will make our entrance confident and purposeful.

Episode 14 Production costs too high? Find the best way to reduce your costs. ​ Cost is usually a balance between good, fast and cheap. You can have two of the three but not all of them. If you find that your variable costs are more than your customer is willing to pay but you still believe in your idea what options are open to you? Continue regardless in the belief that at some point sales volume will reduce your variable cost below the price point and profitability will follow. This is a viable option if you have the funding. Amazon is a prime example. But if you cannot afford to wait for profitability, consider these options: Find someone who can manufacture your product for you. A toll manufacturer. A toll manufacturer is a company who takes raw materials supplied by you and converts them into finished goods. Could be an option if your products do not require specialized manufacturing processes. Quality control needs to be maintained. You will not be the toll manufacturer’s only customer. Accounting for materials can be a challenge. Your marginal costs are likely to be higher than making it yourself, but your fixed costs will be much lower. This may bring your variable costs below the expected selling price. White labeling is another option to explore. This is similar to toll manufacturing but the producers purchases and uses the materials required to make the product. This is likely to be more expensive than toll manufacturing but is more friendly to your cash flow. Supplier may ask for take or pay contract. These are not second-class strategies, they are used by huge MNCs such as IKEA and Skype Use a modified form of sustaining engineering. Used by existing companies to reduce the cost of the products to improve profitability, match competitors pricings or drive volume. Do further research to identify lower cost sources or alternative materials which are less expensive. Look at all costs – an alternative form of packaging could deliver savings. Negotiate with potential suppliers. Guarantee 100% of your needs will be bought from them. May not get you much but at this stage every percent counts. Give them a reason to reduce their prices to you Value engineer your product. In your enthusiasm for your product you may have over designed it. Look at your features incorporated in your design? Do some add only marginal benefit? Will some only be used by a niche customer? Scope creep is a common failing. Turn this into a positive. Your stripped-down version can be your initial offering, the original design maybe your 2.0.

Episode 15 – Launching a B2C business? Why you should be thinking about your customer loyalty programs now. ​ Why should I be thinking about a customer loyalty program even before I launch my business. I am not ready to give discounts and I don’t even have any customers yet. This is an understandable reaction. Many companies have loyalty programs. Why? Do they like giving away money? Loyalty programs are huge profit generators. Airlines make billions of dollars from their loyalty programs. But even if you are not an airline Keeping an existing customer costs up to five times less than winning a new one. It’s easier to persuade a customer who already knows you to buy again and/or buy more from you. 20% of customers are typically responsible for 80% of a company’s revenue. Your most loyal customers will be your most profitable. With each additional year of a relationship, customers become less costly to serve. Over time, as the loyalty life cycle plays out, loyal customers even become business builders: buying more, paying premium prices, and bringing in new customers through referrals. Your early customers will likely be the customers who believe most strongly in your product or service. It resonates with them so strongly that they are willing to take a bit of a gamble in doing business with a company with no track record. So doesn’t it make sense to take steps to ensure their loyalty from day one.

Somethings to consider when designing your customer loyalty program: What incentive are you going to offer? Points? Cash back? Gifts? Starbucks uses points that can be redeemed for free drinks, food, discounts – provides flexible options. Surprise gifts can be a great builder of loyalty. What behaviors are you trying to drive? If you want customers to interact via an App, reward them for using the App. Regular purchases? Consider a higher reward for those customers who repeat a purchase within a certain time frame. Think of your ideal customer and personalize your loyalty program for them. Sephora’s loyalty program has a three-tier program. You can join for free and as you get more points you progress up the tiers you get access to better rewards. Give back to the community in a way that is meaningful to your customers. Patagonia, the outdoor clothing company, gives 1% of its sales to environmental causes. If you are selling books you could give to literacy charities.

Episode 14 Production costs too high? Find the best way to reduce your costs. ​ Cost is usually a balance between good, fast and cheap. You can have two of the three but not all of them. If you find that your variable costs are more than your customer is willing to pay but you still believe in your idea what options are open to you? Continue regardless in the belief that at some point sales volume will reduce your variable cost below the price point and profitability will follow. This is a viable option if you have the funding. Amazon is a prime example. But if you cannot afford to wait for profitability, consider these options: Find someone who can manufacture your product for you. A toll manufacturer. A toll manufacturer is a company who takes raw materials supplied by you and converts them into finished goods. Could be an option if your products do not require specialized manufacturing processes. Quality control needs to be maintained. You will not be the toll manufacturer’s only customer. Accounting for materials can be a challenge. Your marginal costs are likely to be higher than making it yourself, but your fixed costs will be much lower. This may bring your variable costs below the expected selling price. White labeling is another option to explore. This is similar to toll manufacturing but the producers purchases and uses the materials required to make the product. This is likely to be more expensive than toll manufacturing but is more friendly to your cash flow. Supplier may ask for take or pay contract. These are not second-class strategies, they are used by huge MNCs such as IKEA and Skype Use a modified form of sustaining engineering. Used by existing companies to reduce the cost of the products to improve profitability, match competitors pricings or drive volume. Do further research to identify lower cost sources or alternative materials which are less expensive. Look at all costs – an alternative form of packaging could deliver savings. Negotiate with potential suppliers. Guarantee 100% of your needs will be bought from them. May not get you much but at this stage every percent counts. Give them a reason to reduce their prices to you Value engineer your product. In your enthusiasm for your product you may have over designed it. Look at your features incorporated in your design? Do some add only marginal benefit? Will some only be used by a niche customer? Scope creep is a common failing. Turn this into a positive. Your stripped-down version can be your initial offering, the original design maybe your 2.0.

Whatever type of business you are in you will have production costs. Whether you are manufacturing a physical item, providing a service, or selling software

Until you understand your cost of production you cannot be sure your business will be profitable. 

Episode 36 Scenarios, Sanity Checks and Sources of Funds. How to get the most out of your financial plan.

The best-laid plans of mice and men often go awry

Your plan is finalized, as you have used a financial planning software the numbers should tick and tie. You are ready to present to potential investors who will be blown away by your financial skills. Maybe not so fast. The plan can do more for you, if you take a little extra time.

Why you will win and make money! ​ You are eliminating unknowns Following the steps, we discussed last week you have confirmed that there is a demand for your product. It may not have been your original concept, but it is a product or service that people will buy You now have a good understanding of your competitors and weaknesses and what you can do better than them You are showing the tenacity needed to conduct the research required to reduce the chances of unpleasant surprised You can now start out developing your business strategy

Tags: How to start a business; Achieve start up success; How to assess your competition; The successful entrepreneur; business common mistakes; small business startup; avoid these common mistakes of business; mistakes in business; IBGR.network Jeremy Gray; Practical Solutions to Difficult Problems

I am committed to helping entrepreneurs succeed. I can bring the experience of 30+ years of experience at the C-Suite level in an MNC from Europe, North America, and Asia. Combine this with seven years of helping a diverse range of businesses and I can provide you with practical solutions to any difficult problems you may be facing.

Please do not hesitate to contact me for chat via the following links: mailto:[email protected]

Or schedule time via Calendly: https://calendly.com/3-continents-consulting

​My websites include: https://business-in-asia.org/ https://thedentistscfo.com/

My LinkedIn URL https://www.linkedin.com/in/jeremy-gray1

Find your perfect market penetration strategy? Speed of penetration Unless you are lucky enough to have a product or service that goes viral faster market growth costs more money Penetration pricing High customer acquisition costs Capacity build Loss of prestige Go with a big bang? Or fly under the radar? Use your minimum viable product to test concepts What if you must grow fast – Product offering value is based on the number of users. Or there are high switching costs. What if there are low barriers to entry? Regional or National? You may have to adapt your strategy based on the resources available to you, both financial and people

​Tags: How to start a business; Achieve start up success; How to assess your competition; The successful entrepreneur; business common mistakes; small business startup; avoid these common mistakes of business; mistakes in business; IBGR.network; Jeremy Gray; Practical Solutions to Difficult Problems