How do you go about pricing your products and services? It’s been said that if customers are the heart of your business, then income streams are the arteries. The easy formula to pricing is this:
Profit + Expenses = Price
In other words, you must consider what it will cost you to produce your product or service, determine what you need to make in profit after expenses, and that will determine your price.
This unfortunately is not how many small businesses create their pricing, and their lack of cash flow is evidence. The most likely reason you undercharge for products and services is fear and insecurity. You fear that customers will consider your prices too high and go somewhere else. You are insecure about the value you offer and don’t believe you deserve to make a profit. If either of these issues is true, go back to the March 20 post on Value Proposition and work through the questions there until you are clear that you have proof that you offer a true value, in demand, that only you can provide.
What are your customers willing to pay for your offer? What are they currently paying? How are they currently paying? How would they prefer to pay? What other income streams (additional products or services) are they willing to pay for? Bottom line: ask them! Survey your customers to find out the answer to these questions and you will be able to creatively price your products and services in a way that is more attractive to customers.
Struggling with pricing your products or creating revenue streams that create profitability? Contact me for a complimentary strategy session and a free template at firstname.lastname@example.org.
In this series on the 9 Bricks to Build Your Fastest Path to Profit, you’ve read about ideal customers, value propositions, and delivery systems. All too often business owners stop here, and fail to create raving fans. Raving fans are the result of strong customer relationships. When a customer has an amazing experience, they want to tell friends and family about it and become your best marketing agent. You have solved their problem and created undeniable proof— and your raving fan will do three things for you:
- Raving fans stay with you. It is much easier to sell subsequent products and services to an existing customer than to find new customers. Repeat business is cost-effective and profitable.
- Raving fans buy more from you. Not just the original product or service, but the next level you have on offer. This is called up-selling, and when you have created a raving fan, you have uncovered the next need they are experiencing. It is easy to do.
- Raving fans bring new business. Customers who are happy with their experience with you and your products and services buy more, buy higher priced items, and they bring new customers into your business.
There are a number of ways you can create an incredible customer experience and raving fans. Depending on your offer and your customer’s needs, consider how you can create personalized service, self-service, or automated services. Take a look at whether you can build a community where your customers offer mutual support and exchange information, essentially becoming your advocate. You might even enlist customers in co-creating new offers as they share their experiences and ideas with you about new and improved products.
What kind of relationship do you want to have with your customers, and how do you plan to create raving fans? Need help? Contact me for a complimentary strategy session and free template at email@example.com.
In finding your fastest path to profitability, we have covered your ideal customer and the value proposition you offer to them. Value propositions are packaged and delivered to customers through a variety of means. It is essential to know how your customer wants to be reached and which systems work best for you. This component of your Proven Profitable Business Model relies heavily on communicating with your customers. You will use your delivery system to
- Raise awareness about the Value you have on offer
- Help your potential customers evaluate the Value you offer
- Make your products and services available in a way that is cost-efficient and effective
- Deliver the products and services
- Provide support after the purchase has been made
You bridge the gap between your products/services and your customer when you raise awareness of the offer you have available. Some call this marketing, but truly it is an education campaign. And while you are educating customers about the Value on offer, you give them opportunities to evaluate whether that offer is right for them. Your goal is not to convince your prospect to buy, but to help them come to a clear “yes” or “no” as to whether this is the right purchase for them at this time. Once the decision has been made, you need to have a simple process for customers to make their purchase safely and for you to deliver that product in a timely manner. If your Delivery System is broken at this point, you will never create repeat business or word of mouth referrals. Finally, you must consider how you plan to support your customer once the purchase has been made. The higher the price of the product, the more a customer expects in the way of guarantees, customer service and on-going support.
Create a clear, clean Delivery System and you are well on your way to the fastest path to profitability!
Is your Delivery System broken somewhere? Need help in creating a way to deliver your value to customers? Contact me for a complimentary strategy session and a free template at firstname.lastname@example.org
A Value Proposition is the reason why customers turn to one company over another. In a Proven Profitable Business Model, one key component for ensuring cash flow and marketability is your Value Proposition. To determine the true value you offer your customers or clients, you want to consider three key areas:
- How much do your customers want your offer?
- How hard is it to find the solution you are offering?
- How much proof do you have that you can deliver?
When you make an offer of a product or service to your customers, make sure you are offering a solution to a problem they really want solved. The more acute their need, the higher your product or service will be in demand. Neurosurgery is a good example of an acute need a customer might have. A neurosurgeon has to do very little marketing and can charge almost anything they want if they can relieve the customer’s need for brain surgery. At the other end of the spectrum, Chia pets do not create much demand. They have to be marketed heavily and prices are low. Profits depend on volume sales. You might not be a brain surgeon, but you can research your customer’s needs to uncover the pain or problem that needs solved and create an offer that specifically addresses that need.
You also want to consider how much competition there is in your market. How easy can your potential customers find the solution they need? How can you make your offer stand out as being more uniquely aligned with your customer’s values and what they want?
And finally, create proof. Proof is not just your credentials or basic testimonials, although these help. Creating proof requires that you have measureable results to go with those testimonials. If you are launching a new product or service, offer it initially at lower price point than you plan to sell it and create a beta-test. Ask customers about their needs or problems before they purchased and then collect results after they used your product. If you can, get video recordings of testimonials to go with your quantifiable results, and you will have the beginning of a marketing campaign based on undeniable proof that your product or services work, that you have value on offer.
Bottom line, a profitable business has life changing value at its foundation. How does your offer make a difference in your customer’s lives? In their communities? In their world?
Need help with identifying your Value Proposition or in creating proof for your offer? Contact me for a complimentary strategy session and a free template at email@example.com
A truly profitable business model begins and ends with the customer in mind. This isn’t a new concept. You’ve heard about target markets and customer segments, but how closely have you been paying attention to your ideal customer? How well do you know who they are, what they want, and why they would choose to do business with you? The more clarity you have in answering these questions, the more you will be able to charge, create repeat business, and turn customers into raving fans.
You know you have defined your ideal customer if you have answers to these seven questions:
- What is broken in their world? What is the problem they need solved?
- What is the solution that only you can offer with your unique combination of skills, experience, products, and services?
- What are they willing to pay for this solution?
- How do they want the solution delivered? In person? Online? Audio or video? What type of package?
- What do you have in common with your customer? What makes the two of you “click”?
- What do you want your customer to expect from you? How do you want to show up?
- Who do you need to be to serve the customers you want to serve?
Are you struggling with clarity on your ideal customer? Knowing your ideal client is the first brick on your fastest path to cash. Contact me for a strategy session and get a free template that will help you map out and target the perfect customer for your business: lisa@VanAllenCoaching.com
I’m not a fan of New Year’s Resolutions. They don’t work. Instead, I believe in having a focus or theme each year because putting our attention on something makes it stronger. If you want better health, you can put your focus on adding superfoods to your diet. If increased cash flow is something your business needs, you might start every week of a new year with the question, “What is my fastest path to cash?” and doing whatever comes to mind. I’m actually doing both of these things and benefitting from them, but my focus for the year is on REST and RE-CREATION.
This theme of REST didn’t sneak up on me quietly. It was like everyone everywhere had conspired to send me the same message. I took a class at my church and discovered a Sabbath retreat was part of the curriculum. I attended a conference and the keynote speaker diverted his talk to focus on our need to recharge. My mom had a stroke and watching her recovery made me recognized the frailty of my flesh and the potential limits to what I can accomplish, especially if I don’t take care. Shortly after this my mentor coach Andrea J. Lee spent the better part of a session convincing me that the profitability and health of my business was intertwined with the generosity of my self-care and the focus I place on my personal health. Time to rest, recuperate, recharge, and re-create is a key focus for me in my life and my business this year.
We can’t assess where we are and where we want to go until we stop doing. Constant activity can seem productive, but all that productivity will have diminishing returns if it is not focused and strategic. The best strategy comes from quiet contemplation. The best ideas come when I get away from my work and get involved in something that requires very little conscious thought. I love letting my mind wander while showering, drawing, driving, walking, sewing or cleaning. New approaches to problem solving appear and fresh ideas begin to emerge. The elegant simplicity of this strategy should not be missed. It is a paradox: making time and space for rest increases your productivity and profitability.
We’re about a quarter into 2014 and I’ll bet most of your New Year’s Resolutions have faded away. What would it look like if you were to spend the rest of the year focused on caring for the Golden Goose in your business: YOU!
How did you decide on your business model? Did you do much research or did you follow the path created by a successful entrepreneur? How confident are you that your model is working and creating the cash flow you desire? How well does your model fit your values, mission and vision? I’ve been researching business models and find that they can all be boiled down to 9 basic components. The magic is how you mix and match those components, how they are defined and where you put your focus.
This blog series is designed to help you find and define those nine basic components and lay them down like brick pavers that creates the fastest path to profit.
We need to start with my definition of business profitability. It may not be what you expected! The Merriam-Webster dictionary defines profitability as that which “produces good or helpful results or effects”. When you look for profitability in a business, you want to look at more than cash flow. Revenue is a very important element, but not the most important element. Without positive cash flow you don’t really have a business, you have a hobby or worse, a waste of time and resources. If your business is truly profitable, you are:
- generating income
- creating value
- making a difference
- using your gifts
- caring for your soul
- nurturing your relationships
I’m sure you know of a number of businesses that generate cash but do not offer profitability in these other areas. How does your business measure up? Is it truly profitable – to you, your family, your community, your world?
Watch for upcoming posts on how you can create a truly profitable business model, whether you are just starting out or have been in business for years!