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Month: June 2020

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Best Practices Entrepreneurship Investing Marketing Personal Development

Behavioral science puts old price theories to an end

Low prices gets more customers, high prices gets fewer customers. This is an “old” truth that the business economy has lived by for a very long time. In reality, our buying behavior is considerably more complicated than that, and a higher price can on the contrary increase sales volume. 

Traditional knowledge in business economics follows that price and demand have a linear relationship. The management’s marketing strategy in terms of pricing is then simplified to the practice of setting the price so that the total earnings are optimized.

However, modern research complicates this well-known business practice. We humans tend to allow psychology and other non-rational factors influence our behavior and that includes our buying behavior. This strict economic theory does not give the whole picture, though.

When people make decisions in purchasing situations, it is based on an estimate of the product or service value. Of course, that valuation may differ across various situations. For example, an umbrella is much more worthwhile to the buyer when it rains. Still, you see shops that sell umbrellas when it is not raining.

However, the estimated value correlates not only with the personal and current needs, but also on its relation to other products or services of the same kind. Is this product or service of good quality? Is it worth its price? If the answer is “Yes,” the consumer will purchase the product or service and on the contrary, if the product or service is not considered worth its price, then a purchase is unlikely to occur.

Since the consumer often does not know how good the quality of a particular product or service is, the price itself is a quality indicator. The value thus rises in the consumer’s eyes as the price rises. This is not about status or a desire to show off wealth. Of course, this can have a determining effect, but the principle applies in a general sense and also to products that do not have “status” attached to them.

An everyday example can be a pair of winter shoes. In the shoe store, it is difficult for the consumer who is not able to look at the shoes in-depth, to see if they are of high quality or not. If, on the other hand, the price is high, we assume that the quality and thus the value are higher. Buying low-quality shoes for the winter season, which may start leaking or quickly lose their freshness, is a huge miss, even if they only cost a fraction of the more expensive shoes.

The problem is that you as a consumer do not know this in advance. The cheap shoes can keep the moisture out as well as the expensive ones, but it is uncertain factor, that only time will tell whether your purchase gave you good value or not. However, price is a factor – perhaps the only one – that the consumer has in assessing the (perceived) value of the shoes.

As a company or trader, this becomes an important thing to consider, especially with regard to pricing strategies. A low price means that people also perceive the value as being lower. Therefore, a low price does not, of course, mean higher sales in number. In fact, in some contexts it can be just the opposite. Too low a price can lead to reduced sales as “cheap” signals poor quality and value to the (potential) customer.

Price is therefore important in itself. Companies need to understand that a correctly set price is not about placement on a linear graph, but about finding the point where consumers’ perceived value is the greatest.

The next question then helps to know how this value can be found, where is the optimal price? The answer is perhaps obvious: You ask the consumers. By asking consumers to value different products and indicate what they would be willing to pay, you get results for price indicators for a specific product or service. You can then see the true balance between price and sales volume. This can be refined through a number of variables and it is also possible to work across different markets.

The results are analyzed and processed and at the other end, there is a graph that looks very different from a “standard” graph analysis. Instead of just a linear relationship, it becomes a two-way staircase where different price plateaus and price walls appear in the data.

So, we humans do not act according to the classical and traditional economic theory mentioned earlier. Psychologically, we perceive a low price as lower quality and thus of lower value. The price we as consumers are prepared to pay is about what we perceive as “worth the money.” In this situation, a higher price can be a sales advantage too good an opportunity to pass up on.

An estimated 95% of companies today use a simplified model for pricing their products and services. You guess, use cost-based pricing or predetermined marginal goals. However, if the actual willingness to pay is included in the calculation, the profit margin can often increase by 25–40%. Sometimes even more!

This means that the price of the products can be significantly improved. Businesses and traders, many perhaps pressed under small margins, can, through such an analysis, have a more stable basis for their pricing. Profitability is increased and they have better opportunities to develop their business.

Of course, this is based on the fact that the products or services are genuine. Trying to bluff consumers by setting a high price on a substandard product or service is not going to be a success. This will quickly have a detrimental effect and damage the brand significantly.

The importance of consumers’ perceived value may not be revolutionary. However, it is a new process how this value can be investigated and analyzed. In this, behavioral science and psychology play a greater role than the classical and traditional economic theory. Pricing strategy becomes a whole new ball game, once you know what the consumer is willing to pay for a product or service.

Per Sjöfors
Founder
Sjofors & Partners
www.sjofors.com

Categories
Best Practices Entrepreneurship Marketing Personal Development

7 Keys to Help You Focus on Strategy Not Tactics

As a business coach, I’ve observed that strategic business owners tend to be focused and successful.

And tactical business owners tend to be scattered and struggling.

If you want lasting and profitable business success, the key is to marry a small number of highly focused strategies with a variety of tightly aligned marketing and sales tactics.

Here are 7 keys to help you get started.

1. Tactics are easy – and it’s tempting to confuse executing tactics with moving your business forward. Ain’t always the case though, is it?

2. Strategy is the WHY TO and tactics are the HOW TO. If you stop focusing on your “WHY” even for a short time, you’ll fall into the trap of getting really good at creating and selling projects/services that you don’t want to be doing. How are you trapping yourself with off-strategy successes?

3. It feels good to execute tactics – and it feels hard to create strategies. This is because you have to come face to face with the time-space continuum. You can’t execute everything you want to do all at once. And you probably shouldn’t try. How have you subconsciously let yourself be overwhelmed with not enough strategy but too many tactics?

4. Tactics pile up – there is always more to do. Strategy is a limiting factor. Strategy shows you what you should NOT be doing, building, selling, and offering. Strategy serves your business as a filter. With no strategy, every tactic looks reasonable. How have you buried yourself in tactics while starving yourself of strategy?

5. Business owners and entrepreneurs LOVE talking to each other about tactics. What’s worked? What hasn’t? What’s next? They rarely talk strategy. They rarely talk about things they want to stop doing. What questions could you ask your colleagues to find out what they have pared down and eliminated to help them increase their strategic focus?

6. We’re too busy for strategy. Really? How about spending a morning in your comfy chair with a notebook and a set of colored Sharpies to have a strategic meeting with yourself? In less than two hours, you can do a data dump, a project review, a client review, an “ideal business model” exercise and create several lists such as “Low-payoff activities that take too much of my time” and “High payoff activities that I need to create more time for.” Review your notes, summarize and categorize them, and begin to put them into action. When’s the last time you had a strategic meeting with yourself?

7. Busying yourself writing emails is not a strategy. Email is not a tactic. And email is not a high-payoff activity. Yes, you might get a few client emails a day. Or customer service emails. Or a handful of leads. Other than that, sitting on email all day is a deadly distraction that sucks up way too much time. So stop. Make a sign over your desk where you can see it from your computer that says, “EMAIL IS NOT MY JOB.” How has email stolen your strategic focus lately?

If some of these – ANY of these – resonate deeply with you, comment, and give me an “Amen!”

Tactics before strategy leads to suffering. When you make strategic decisions first, all your marketing and sales choices become easy. Don’t be a victim of the all-too-common entrepreneurial disease of tactic-itis. You’re too smart for that. Focus on strategy and the tactics will become obvious.

Categories
Body Language Human Resources Management Negotiations Sales Women In Business

“These Are The Deadly Body Language Signs Of Anxiety” – Negotiation Insight

“Recognizing body language signs indicating anxiety is like taking aspirins before headaches occur.” -Greg Williams, The Master Negotiator & Body Language Expert  (Click to Tweet)

 

“These Are The Deadly Body Language Signs Of Anxiety”

 

“People don’t realize; they’re always negotiating.”

 

When reading body language, you must know the body language signs to observe to understand the meaning those signs convey. Without that insight, you’ll miss the full intent of the message. And that missed opportunity could have been the point to de-escalate a situation that then ignites into something more uncontrollable.

Anytime a situation becomes tense, it heightens the probability that it will escalate into dangerous territory. It’s for that reason alone that you should be aware of sharp tensions. And, while some symptoms are more meaningful than others, depending on the situation, the following are signs that indicate degrees of increased imminent danger, that can become enhanced by anxiety.

 

Clenching Fists 

When an individual begins flexing his hands into clenching fists, he is preparing for some form of battle. That battle may initially be the source of verbal escalation. Then, it may become heightened by the anxiety that’s fed by the rise in tension, which would only serve to increase the probability of it becoming dire. Thus, each time a cycle occurs, it provides the fuel to accelerate the process. If an interrupt doesn’t happen to short-circuit the process, physical violence can become the endpoint. Since this act indicates the closeness of physical danger, it’s a sign that should not go ignored. To do so could be at your peril.

 

Flexing Neck

An often-overlooked body language sign of anxiety is neck flexing. While the effort can be engaged to exercise the reduction of tension in one’s body, if the source of that tension stems from stress, the environment becomes more susceptible to escalating into threatening behavior. And that could enhance the probability that you and others could become the target of someone’s fiendish out-lashes.

When observing someone flexing their neck, recognize that act alone doesn’t indicate pending troubles. Like with body language gestures in general, to accurately assess someone’s intent, the more gestures you observe, the better the information you’ll have to obtain someone’s intentions correctly. With that insight, you’ll become better positioned to take corrective action should danger ensue.

 

Invading Personal Space

There’s a space perspective that people have to others that indicate how safe and comfortable they feel in that space. You’ll note someone’s discomfort if they back up, or use a gesture, such as extending their arm outward, to allow you to see the extended space that they’d like you to keep from them. If, after receiving a signal about the appropriate distance one would like to maintain is violated, further assessment needs to occur immediately about the violater’s intent.

Because when the vicinity of space becomes violated, the act might become perceived as a hostile gesture. And, if the anxiety of other harmful actions accompanies that gesture, a dangerous situation could be born.

Nevertheless, sometimes, people may want to be unusually close to you. In some cultures, it’s customary for people to engage one another in closer proximity than other cultures. If their closeness doesn’t cause you anxiety, let them feel comfortable by obtaining that closeness. But when it prompts uneasiness in you, say something before they have a chance to do something, that something being anything that might bring you further discomfort or harm.

 

Feet Movement/Placement

Of all the gestures that could indicate pending danger, depending on the space between you and someone else, feet placement is the one that you should initially observe. Because a person will use their feet to approach you, and the way they do so, will give you insight into the intent of their actions. Someone moving quickly towards you might be indicating that they’re happy to be in your presence. The reason for that may be what you should question. To make that assessment, you must observe other gestures. As an example, if the person has a scowl on their face and they’re slowly moving towards you, and they begin to smile as they get closer, you might interpret that action as being less threatening than someone clenching their fists as they approach you while not smiling.

Then, once someone is close to you, their feet will indicate their intention. As an example, if a person plans to exit your environment, one foot will point in the direction they plan to exit. If they intend to become more aggressive, they’ll move closer to you, and their feet may momentarily become aligned with yours. If an attack is imminent, before its occurrence, a momentary backward step may occur, followed by a thrust of energy to propel a fist, elbow, or kick. And obviously, you’ll know their intent to harm you at that instance. So, before things get to that point, pay attention to the body language that foretells its arrival.

 

Reflection

When I was a kid in early grade school, I remember playing a game called “what’s missing.” As the kids entered the classroom, the teacher had items placed throughout the room. The kids would take note of those items and their locations. After that, we closed our eyes. Then the teacher rearranged or removed some of the things. Once we could open our eyes, we had to tell the teacher what items were removed or repositioned.

I loved that game. It reminds me so much about reading body language signs. By noting what signs you saw one moment and observing how they’d changed into what they became, you can note when anxiety might be the motivator that caused that change to occur. Thus, by perceiving your environment via someone’s body language signs, you get a glimpse into the coming attractions. That means, by being observant of such actions, you’ll have more time to thwart the efforts that might lead to unwanted activities. And everything will be right with the world.

 

Remember, you’re always negotiating!

 

Listen to Greg’s podcast at https://anchor.fm/themasternegotiator

 

After reading this article, what are you thinking? I’d like to know. Reach me at Greg@TheMasterNegotiator.com

 

To receive Greg’s free “Negotiation Tip of the Week” and the “Negotiation Insight” click here https://www.themasternegotiator.com/greg-williams/

 

 

Categories
Negotiations Sales Women In Business

“How To Never Again Be Derailed By Negotiation Distractions” – Negotiation tip of the Week

“Distractions can be the pleasures of life. They can also be the source of lost control.” -Greg Williams, The Master Negotiator & Body Language Expert (Click to Tweet)

Click here to get the book!

“How To Never Again Be Derailed By Negotiation Distractions”

 

“People don’t realize; they’re always negotiating.”

 

He realized that he was in a tight spot in the negotiation. And he did not like being in that position. He thought, either way, I come out on the short end of the outcome. Then he remembered a negotiation tactic that he’d read about many years ago. The highlight of the article was how to derail a negotiation by using distraction techniques. The purpose of doing so was to escape talks in which you no longer wanted to engage or be committed.

If you’ve been in a negotiation that was to your disadvantage or felt the outcome might not be to your liking, continue. You’ll discover how to use distractions to escape or benefit your position in a negotiation. You’ll also uncover tools of interruption that you can use to prevent other negotiators from using this tactic against you.

 

Why are distractions used in a negotiation?

  • Distractions are used to thwart the initiative of the other negotiator – because the person with the initiative controls the flow of the negotiation for the time he has it. Someone can also regain control of a discussion by using distractions.

 

  • If you need time to consider other options, you can use distractions to facilitate your needs.

 

  • A negotiator uses distractions in an attempt to belabor the other negotiator’s concentration.

 

  • Distractions can be used to limit and confuse the options of the other negotiator.

 

  • They can also be used to psychologically wear down the emotional abilities of a negotiator’s opponent.

 

  • Distractions are also used as a tool to alter a negotiator’s position.

 

  • They can also be used to interrogate the other negotiator (e.g., you knew there was a price drop before, didn’t you?) Meanwhile, the conversation was about terms – the distraction was an attempt to shift topics to alter the thought process of that negotiator.

 

In the planning stage of your negotiation, assess how you might be distracted, and the possible reason that might be behind such efforts. Then, prepare a plan for how you’ll deal with them.

 

How might you be distracted?

A good negotiator may use distractions to draw your attention from a weak point in his offer, and thus cause your position to become more vulnerable. He may also use it to give the appearance that his proposal is better than it appeared. He might do that to give the impression that your options were limited.

There can be a myriad of reasons to distract a negotiator from the current path he’s on, disrupt the plan you have for the negotiation, etc. Note when someone attempts to distract you, the reason they may be doing so, and where they’re trying to take you mentally. Unless you’re able to control the distraction, don’t become distracted.

 

What makes some distractions better than others?

The answer, in short, is the situation. Some situations may be direr than others. Thus, the distraction you choose to implement will determine the outcome of that situation. And that’s what makes some disruptions more potent than others.

To assess the best course of action to adopt, consider your position, the outcome you seek from using a distraction tactic, and how the other negotiator might respond. Once you have that perspective, implement your action, and observe the initial outcome. If you’re successful, note what occurs going forward. A good negotiator may affect a charade to gain further insight into your ploy. If your efforts are not successful, use another strategy to interrupt what’s occurring and see if that one fairs better.

 

How might distractions be used?

Distractions may be employed to position an uncertain opportunity to cast dought on that outcome. As an example, if a negotiator thought the result of the negotiation might cast him in a bad light with others, he may intentionally detract his ability to negotiate effectively. That would be the setup for him to later talk about how the process was unfair. In so doing, he’d get ahead of a potentially adverse event, while providing a reason for it before it occurred. That might also be the justification he needed to reopen the negotiation while aborting the agreement that came from the initial deal.

 

Protecting Yourself From Distractions

The best way to protect yourself from distractions is to understand the intent of the action. If you’re involved in an intense negotiation, and your counterpart suggest you take a break and discuss other matters, his intention may be honorable. But keep in mind that a good negotiator can also use a timeout tactic to change your mood for his purposes. Thus, you must be mindful of the current climate of the negotiation, question how it got to that point, and have an idea about how to alter it. That way, you can use the timeout to your advantage, or not accept the offer and continue plowing ahead.

Once again, distractions can be advantageous to your position. But only if you control what occurs during the disturbance and where it leaves you when it’s over. Also, you can invent a distraction for any reason that suits your purpose. You’ll gain insight per how the other negotiator responds in that situation, which will also give you more insight into the actions he may take to thwart your efforts. That by itself will be invaluable information to use during the negotiation.

 

Reflection

Always know your capabilities in a particular negotiation, know the environment, and know the abilities of the other negotiator. Having that perspective will help you avoid the distractions that might derail your negotiation. With those assessments, you’ll know your strengths, the other negotiator’s weaknesses, and the best time to negotiate. With that knowledge, you will have enhanced your negotiation efforts. And everything will be right with the world.

 

 

Remember, you’re always negotiating!

 

Listen to Greg’s podcast at https://anchor.fm/themasternegotiator

 

After reading this article, what are you thinking? I’d like to know. Reach me at Greg@TheMasterNegotiator.com

 

To receive Greg’s free “Negotiation Tip of the Week” and the “Negotiation Insight” click here https://www.themasternegotiator.com/greg-williams/