Small Firms & Pricing: Questions to Consider – Part 2

8 Jul

by Joel R. Evans and Barry Berman

This is the second in our series of six columns on hints for price-setting by small firms. How would you respond to these questions?

  • Do you have an overall pricing philosophy? What is it? These are company positioning questions to get you to reflect on your competitive niche; all other pricing decisions are tied to this philosophy. With a high-end pricing philosophy, a firm believes that prices can be set at above-market levels due to a posh atmosphere, distinctive products, super customer service, etc. With a low-end pricing philosophy, a firm stresses below-market prices due to low operating costs, special buys, tight controls, etc. With a medium pricing philosophy, a firm treats prices as a non-factor in the competitive strategy; this means at-market prices and more attention to store hours, location, product assortment, etc. Regardless of approach, the key is that it is CONSISTENT with the other parts of a retail strategy (people won’t pay high prices to “me too” firms).
  • What are the characteristics of the people who shop with you? For what reasons do they shop with you? Is this consistent with your pricing philosophy? Shoppers may segmented as: Economic consumers – They view competing brands as similar and want low prices. This segment has grown in recent years. Status-oriented consumers – They see competing brands as dissimilar from each other. They are lured by prestige brands and customer services more than price. Assortment-oriented consumers – They seek firms with big assortments and want fair prices. Personalizing consumers – They go where they are known and are personally attached to employees and the firm. They’ll pay slightly above-average prices. Convenience-oriented consumers – They shop if they must. They like online shopping, nearby sites, long hours, and catalogs, and pay above-average prices. Consider where your customers fit and whether you are acting accordingly?
  • How do you compute prices? In setting prices:
    1. You should look at industry data to get a sense of typical markups for your retailer type. Data are available via Dun & Bradstreet’s Key Business Ratios and other sources.
    2. Suppliers should provide average markup data for specific products.
    3. You should use selling price = 100% calculations, with selling price = cost of goods sold/unit + operating costs/unit + desired profit/unit = 100%. The toughest item in the equation to compute is operating costs/unit. So, here, is a simple tip: (3a) Add up all of your operating costs; (3b) Estimate your total sales; (3c) Divide (3a) by (3b). This sets operating expenses as a percentage of selling price, and that number can be inserted in the formula.
    4. Check out competitors to be sure that your prices are consistent with your pricing philosophy.
  • When setting prices, do you take all operating costs into account? Sometimes, these factors are not taken into account in setting prices; they should be: owner’s earnings, family employees’ earnings, the portion of rent going for stockroom space, equipment and store repairs, the costs of processing credit-card transactions, the costs of business services (such as accounting and legal services), advertising costs, insurance premiums, etc. Ask your accountant to help identify all your operating costs. Low prices are proper only if you can actually make a profit with them!

 

Small Firms & Pricing: Questions to Consider – Part 1

7 Jul

by Joel R. Evans and Barry Berman 

One of the most crucial areas of decision making for small firm is pricing. Yet, we have found that small firms often do not have well-conceived pricing plans. And many such firms seem to panic (or ignore the problem) when large discount-oriented firms enter their trading areas – or become more aggressive. This is not necessary; small firms CAN prosper in today’s more discount-oriented environment, as long as they have a good understanding of their niche in the marketplace.

With this in mind, we have prepared a six-part series on pricing. We offer a number of tips to help you improve your pricing decisions. In this article, we begin with several questions for you to consider. When you address these questions for your firm, always ask yourself the rationale behind your answers:

  • Do you have an overall pricing philosophy? What is it? (high-end, medium, or low-end)
  • What are the characteristics of the people who shop with you? store? For what reasons do they shop at with you? (for low prices, for convenience, for service, etc.) Is this consistent with your pricing philosophy?
  • How do you compute prices?
  • When setting prices, do you take all of your operating costs into account? (including your own salary)
  • How does your firm use manufacturer suggested list prices?
  • Are your prices “fair” to the customers who shop with you? What does the term “fair” mean to you?
  • Do you or one of your employees research competing firms to check on their prices? Do you check competitors’ ads for prices? If you do check competitors’ prices, how does your firm react to what you learn?
  • How often do you change prices? Does this vary by product category?
  • How often do you run sales? Does this vary by product category?
  • Do you plan for stock shortages (due to shrinkage and clerical errors) when setting prices? How?
  • Do you use price lining? (whereby you sell items at a range of prices, such $12, $17, and $25 dollar ties)
  • Do you advertise prices? Where?
  • Do you let customers bargain over the prices of any items?
  • How do you use prices in competing with larger firms? (such as Amazon)
  • Have you formed a buying group (cooperative) with other small firms to get better terms on your purchases?
  • Do you use odd prices ($4.95, $59.95) rather than even prices ($5.00, $60)?
  • When you take a physical inventory, how do you compute the value of the merchandise remaining in stock?
  • Do you understand the difference between an initial markup and a maintained markup? Do you use these concepts in setting your prices?
  • How are your prices displayed?
  • What payment method(s) do you accept? (cash, check, store charge, bank card, PayPal)
  • Do you understand both of these terms: Elastic demand? Inelastic demand?
  • What do you think about everyday low pricing?

In Part 2, we start examining these issues. So, why don’t you look over the preceding questions now and come up with your own answers. Then, compare them with our commentaries.

 

An In-Depth Infographic on Blogging

6 Jul

Thinking of starting or improving your own blog? Do you want your blog to go from good to great?

The Wise Startup Blog has developed a terrific infographic with more than one hundred ideas on developing and posting a blog. Take a look.

 


 

An Oracle Infographic on the Internet of Things

5 Jul

With the rapid advancement of technology around the globe — and our expanded use of connected devices — the Internet of Things (IoT) is here in full force, and major IT companies are acting accordingly in expanding their client offerings.

But for those who are unfamiliar with or unsure about the concept, what exactly is the Internet of Things? According to TechTarget:

“The Internet of Things (IoT) is a system of interrelated computing devices, mechanical and digital machines, objects, animals, or people that are provided with unique identifiers and the ability to transfer data over a network without requiring human-to-human or human-to-computer interaction.”

 
Here is an interesting infographic on the IoT and its importance from B2B giant Oracle.

 

The Fast-Growing Era of Tailored Ads by Country

30 Jun

Unlike in the past when firms could use universal themes in their ads around the globe, with just minor changes, today, companies need to use a more tailored approach in the face of stiff competition.

As an example, KFC has really stepped up its advertising strategy — and not just in the United States. Here are a selection of tailored ads from around the world. We feature YouTube ads from SEVEN countries here.
 

From the USA YouTube Channel: There is now an “extra crispy” Colonel Sanders played by actor George Hamilton, known for his perpetual tan.


 

From the India YouTube Channel: The new limited edition KFC Watt A Box will not only fill you up but also your smartphone.


 

From the UK and Ireland YouTube Channel: KFC Rollerskater — Bring home the weekend with KFC.


 

From the South Africa YouTube Channel: Through #‎TasteGuarantee, KFC is making sure that customers are happy and satisfied with every meal, and continue to get the great tasting food you know and love!


 

From the Hong Kong YouTube Channel: “Finger Lickin’ Good Edible Nail Polish.” [This ad is in Chinese.]


 

From the Philippines YouTube Channel: For those preferring hot tasting chicken, KFC Hot Shots is getting customers all fired up! 


 

From the Thailand YouTube Channel: The legend is back by popular demand — KFC crispy chicken Chilliwack, cheese, onions, peppers , dark burn. [This ad is in Thai.]

 

When Are Small Data Best Used?

29 Jun

Over the past few years, many companies and analytics experts have become greatly enamored with “big data,” now that such data are  easier to collect and analyze. [For example, see 1.]

Nonetheless, there still remain many instances when “small data” can be quite useful.

Consider these observations from Jessica Stillman, writing for Inc.:

“Ask Google how many people are searching for the term ‘big data’ and you’ll get a graph that resembles a steep mountainside. The concept has become incredibly hot over the last few years and it shows no signs of cooling anytime soon. And why not? Every day, our devices spew out an incredible amount of data on our behavior, preferences, and relationships. What could be wrong with our newfound obsession with combing through numbers for profit-boosting insights and previously unnoticed correlations?”

“The trouble according to Martin Lindstrom, author of Small Data: The Tiny Clues That Uncover Huge Trends, is when we overuse data to the point that we forget to actually talk to people. In an interview with Knowledge@Wharton, Lindstrom argues that what he terms ‘small data,’ i.e. face-to-face conversations with actual, real-life customers often in their own homes, is a more reliable source of great business ideas than massive databases and sophisticated number crunching. ‘I think it’s fair to say if you take the top 100 biggest innovations of our time, perhaps around 60 percent to 65 percent are really based on Small Data,’ Lindstrom claims, citing breakthroughs ranging from the idea for Snapchat to the resurgence of Lego as examples of the fruits of small data.”

 
Click the clever image to read more from Stillman.

CREDIT: Getty Images

 

20 More New Apps to Check Out

28 Jun

Yesterday, we posted an infographic on Which Newer Apps Are Poised to Take Off? But, the apps cited there are by no means the only new apps to know about and consider utilizing.

Recently, The Guardian (a British publication) named other 20 new apps that are “coming to a screen near you.” Here is the list in alphabetical order):

  • Airtime “Created by Napster co-founder Sean Parker, this is a new spin on chats, using live video of you and up to five friends, while enabling you to pull in videos, music, and GIFs to share.”
  • Beme — “Launched by YouTube star Casey Neistat, this video-sharing app tries to make ‘honesty’ its virtue with an emphasis on unfiltered videos. You can’t review what you’ve shot before sharing it, but you can see people’s reactions.”
  • Flipagram — “A bit like Instagram, but with the ability to add music to photos and videos before sharing. Licensing deals mean the music is legit, and the app can share to Instagram and other social networks as well as its own community.”
  • FreshTeam — “As a messaging app for office teams, FreshTeam gets colleagues pinging messages back and forth, as well as jumping into voice calls and checking one another’s location on a map.”
  • Kimoji — “Kimoji has a stinking 2.5-out-of-5 stars rating on Apple’s app store, although it’s tempting to wonder how many people are reviewing its figurehead Kim Kardashian rather than the app. If you’ve ever wished there were more shoes, nails, and bottoms in your emoji keyboard, it’s worth a look.”
  • Miitomo — “Nintendo’s long-awaited first mobile app. It’s based on the company’s Mii avatars: you create a character and dress it up, insert it into photos, and send it off to interact with friends’ Miis.”
  • MSQRD  — “This app has made a smartphone craze out of ‘face-swapping,’  proving so popular that Facebook bought it. There are other ‘selfie animations’ to explore.”
  • Mush — “This is a location-based social app for mothers, helping them meet other parents in their area for messaging and playdates. It also offers advice on all things involving British motherhood.”
  • Musical.ly — “This is a social network for amateur music-video creators. It  is an app for making and sharing lip-sync videos with friends.”
  • Once — “Is modern dating just about swiping through dozens of  profiles looking for matches? Once is different, showing you a single match every day and giving you 24 hours to get in touch. Or not.”
  • Peach — “It’s about messaging friends, but also sending doodles, sharing music, and rating…  anything you like.”
  • QuizChat — “News site BuzzFeed’s quizzes are regularly shared on social networks, but its standalone QuizChat app aims to get you completing them with friends in pairs.”
  • Rando — “This sounds like a dreadful idea: pick a photo at random from your smartphone; then send it to a friend. You can also send GIFs or quotes. Its developer says he made it to make people think about what’s lurking in their camera rolls, and whether they’re happy to share it.”
  • Rapha RCC — “This is a social app for cyclists, tied to the Rapha Cycling Club. It costs £135 a year, with the app helping you see nearby rides with other members (and organise them yourself) as well as managing your profile and sharing bike talk.”
  • Shelfie — “Take a photo of your bookshelf and it’ll tell you which books are available as free (or at least discounted) E-books. It’s also a social reading network for chatting.”
  • Stylezz — “This is the latest in social fashion apps. You can browse the latest outfits from fashion bloggers by following their profiles, but you can also share photos of your own.”
  • Talkshow — “Subtitled ‘texting in public,’ this app aims to get people hosting virtual chatrooms about any topic they like, encouraging visitors to contribute their thoughts and images.”
  • Vidku — “It is entering a crowded market of video-sharing apps, but its selling point is control. You can share your clips publicly or in private groups, with the option to ‘unshare’ them from individual friends or whole groups whenever you want.”
  • WonderBox — “From children’s apps firm Duck Duck Moose, this is a social app designed to be used within families. That means private messaging between parents and children, and creative challenges to share.”
  • Yubl — “A UK social startup, this is another app with an emphasis on groups: friends, not co-workers in this case. It focuses on visuals created by you.”

 
Here is a video clip about Yubl.


 

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