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Category: Economics

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Economics Entrepreneurship Marketing Personal Development

Why a low price and a discounted high price is not the same

If you think the buyer perceives your price equally whether it is just a low price or a higher price with a discount – then think again. 

When we are considering buying a product or a service, our subconscious mind creates a whole slew of associations. We decide if we believe the features and functions of the product or service will deliver the value we expect to receive. The brand and everything we associate with the brand influences the value and benefit we expect to receive from the product or service. So, does the lack of a brand, how the product or service is presented to us affect how good we think it will be once we purchase it? If the product or service is sold by a salesperson, how that person presents themselves and the product or service will have great influence over how we will associate value and benefit to the product or service. Some of these associations will add to the value we expect; some will detract from them. Some brands will add value; others will be totally neutral; some will detract from the value. Also, some features will add varying degrees of value; others will be neutral, some will detract from the value. 

This cocktail of associations can be summarized as “perception of value,” and it happens in the blink of an eye, while the potential customer is going through the decision-making process as to whether they will purchase the product or service, or not. This also means that for most of our purchases, we do not make a true valuation of the various products or services available but we use our “perception of value” or gut feelings to aid us in making a decision. In behavioral economics, the term for this process is known as heuristics. 

As soon as we see the price of the product or service, we make an immediate association between our “perception of value” and the price. It is an association that is emotional, but where the outcomes are pretty simple to come by. There are only three possible outcomes:

  • The price is above my “perception of value,” and therefore I will not buy the product or service.
  • The price is generally in line with my “perception of value,” and therefore I will buy the product or service. This is valid for a range of prices.
  • The price is below my “perception of value” and therefore, what I initially thought was an adequate product or service must have some perceived flaw I did not initially discover, and hence, I will not buy the product or service.

It is also important to know that different people will have differing “perceptions of value,” and the very same people will have a different perception of value across various times and circumstances. But for now, that is a topic for another article. 

So, if a too low price is set, then what can occur is an expectation with the buyer that the product or service may be inferior (even though that cannot be proven at the time of them making a purchasing decision). Why does a price plus a discount work differently? That is because the buyer’s “perception of value”  is then tied to the original price before the discount was put in place, and the discount just means the buyer now perceives the product or service as a bargain, it is a better deal for them.

So, to sum this up in a more formulaic manner:

  • Price compared with “perceptions of value” = a buy or not buy decision
  • Price compared with “perceptions of value” + discount = a bargain

However, it needs to be noted that the discount cannot be too large. If it is, a significant discount in itself will make the potential buyer think twice about purchasing the product or service. It might have the opposite effect to what the seller initially intended – a higher sales volume. Just as with a too low price, to begin with, an excessively large discount will generate doubt in the mind of the prospective buyer. They will think, “the vendor must be desperate to sell this, probably because nobody wants to buy it because it is not a very good quality product or service,” or ”the vendor has figured out there is something wrong with the product or service so they must offer a deep discount to sell any of them at all.” 

In conclusion, most buyers are usually quite quick to decide the value they perceive with a product or service they are thinking of purchasing. They then compare that value with the price and decide to buy or not buy the product or service. Discounts, if reasonable and not too large, will drive higher sales because the buyer’s “perception of value” is anchored to the original higher price, not the discounted lower price. Thus, a discounted high price is not the same as a lower price – even if the dollar value is the same!

Per Sjöfors
Founder
Sjöfors & Partners
www.sjofors.com

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Best Practices Culture Economics Growth Human Resources Management Skills

Staying Positive During A Challenging and Exhausting Job Search

The current job market is experiencing a Revolution!  Millions of people globally have lost their jobs, sources of income, or been furloughed as a result of the Covid-19 pandemic.  While this widespread, unprecedented crisis is happening through no fault of our own, that may be of little comfort when you’re stressed about paying bills and putting food on the table.

 

Losing your employment is one of life’s most challenging and stressful experiences a person will endure.  Aside from the obvious financial challenges it can cause, the stress of losing a job can also take a toll on your mood, the people in your life, and overall mental and emotional health.

 

Making a living isn’t all our jobs do for us.  They influence how we view ourselves and how others see us. Our jobs provide a social outlet and give structure, meaning, and purpose to our lives. Suddenly being out of work can allow one to feel depressed.  You might be asking yourself, “Who am I now?”  You might even be going through a grief process and feel very confused about what the future will hold.

 

As a recruiter, sitting on my side of the desk and seeing what has and has not been working for people in this New Work World, I want to share what I have been experiencing with my candidates.  I’m more or less on the “front line” of this job situation and in my 30 years of doing this job, I’ve never seen the job market like this.  I’ve been through five significant downturns in the market but this one is very different and what may have worked in the past isn’t working now.  Every situation is different but I see some underlying themes that are getting some applicants the good job offers.

 

More than ever now, our mindsets are of crucial importance to stay upbeat and positive.  There are ways to help you better cope with what you may be dealing with at this time.  This is not the time to sit back and wait for things to happen. Take the time to re-evaluate the steps you have been taking and the ones I am suggesting to see if a bit of “tweaking” in your methodology might work well for you.   Perhaps these suggestions will bring you more success where you will come out on the other side with a renewed sense of purpose and a mindset programmed to stay positive no matter what!

 

1. Give yourself time to mourn or grieve your loss

 

Any type of loss in our lives causes us emotional upheaval, and that includes the loss of a job and paycheck.  Being out of work also comes with other major experiences, some of which may not be what we want to face.  This job loss may cause:

 

  • Concern about how you will manage your life
  • Your professional identity crisis
  • Your self-confidence and “who am I” signature
  • Your work-based and friend social network
  • Your daily routine and purpose
  • You and your family’s sense of well-being and security

 

If you feel you need to see your minister, priest, counselor, etc., for some support during these tough times, don’t be afraid to do it.  Sometimes a wise relative you respect can be a good support person or even a trusted friend.  The main thing to remember through this entire process is that your “self-worth” is really not tied to your “net-worth.”  Just like the fabulous quote from Henry David Thoreau, “What lies behind us and what lies ahead of us are tiny matters compared to what lives within us.”  You have an amazing skill set and creative ability within you.  Hold on to those positives these days and know that with the right mindset and determination you will be able to turn this around.  I’ve heard from numerous clients lately that if the candidate is not coming into the interview with a positive attitude, their chances are not as good as they could be if they present themselves in a more upbeat and positive manner.

 

2. Consider other areas to define yourself:

 

Some recommend that writing is a good outlet during stressful times to help us heal.  Several years ago, I did just that. Taking a writing class opened up new doors and the writing itself proved to be a very healing exercise.  It gave me another identity as “a writer” during challenging times.

 

Losing a job might allow you to do something different to define yourself in a new way.  Maybe you like to garden, cook, paint or make jewelry.  Studies have found that using our creative ability allows us to heal and can have a huge effect on our self-esteem and identity. Solid self-esteem is very important in the interviewing process.  I have gotten feedback recently from clients telling me when candidates come across too down in the interview or report they have been on numerous interviews and have not had any offers, which puts a negative mark on their chances with the hiring authority.  Companies themselves are treading rough waters right now and don’t need to deal with any additional negativity. A positive mindset can go a long way in advancing your chances to make the second round of interviews.

 

3. Create a Job Search Plan

 

A famous quote I refer to often in my consulting practice to candidates is a quote by Benjamin Franklin, “If you fail to plan, you are planning to fail.”  Avoid getting overwhelmed by breaking big goals into small, achievable steps.  Instead of trying to do everything at once, set priorities.  If you are not seeing success in your job search, take some time to rethink your goals.  One of my candidates this past week had not heard back from the hiring authority for over a week.  He decided to see who he knew who could benefit from the products this company sold and made a phone call to them even before he knew he had the second interview.  He then called my client and told him he had done some research on his own and had made calls to his contacts in the industry and knew he could bring these possible leads to this company. He did a spreadsheet with the products these companies had purchased in the past and how this company could be instrumental in servicing their needs.  My client called me after receiving this spreadsheet and told me how impressed they were that he took the time to research and put this spreadsheet together.  They told me it demonstrated to them how beneficial he would be to their team.  An offer was made, he accepted and he starts this new job very soon.  By planning for a possible good outcome and putting an actual plan together on his own time with efforts that had no guarantee of success, it secured a new job for this candidate in a tough market.  These creative efforts are very important in this New Work World.  Just interviewing and demonstrating your accomplishments and what you have done in the past isn’t always enough.  Going over and above to bring out WHY you would help the company grow or make a difference on the bottom line is what companies are looking for these days.

 

Recently, I placed an oil and gas systems analyst applicant into a real estate related company due to transferable skills. In the interview, he bonded with the person he would be working for because of a common interest in hunting and fishing. This invoked the human element between the applicant and the client and secured a job offer.

 

4. Do daily exercise – even if it’s just a long walk.

 

A quote I’ve always liked is by Friedrich Nietzsche, “All truly great thoughts are conceived while walking.”  I believe that to be true.  I’ve gotten some great ideas on my walks in the early morning.  If work demands prevented you from exercising regularly in the past, make the time now.  Exercise relaxes tense muscles and relieves tension in the body, releasing powerful endorphins to improve your mood.  Trimming a few inches from the waistline and improving your physical presentation may also give your self-confidence a boost. I can’t express enough how your positive presentation on the interview is so important.  I’ve had candidates with exact backgrounds for a job get beat out of offers by others who have only transferrable skills.  You have to show how you can contribute to the task at hand and make a difference in a positive manner.

 

5. Reach Out to Stay Empowered

 

Your natural reaction during these challenging times may be to withdraw from friends and family out of shame or embarrassment.  Don’t ignore the importance of other people when you’re faced with the stress of job loss and unemployment.  I have heard it said that “social contact is nature’s antidote to stress.”   Nothing works better at soothing your shattered nerves than talking face-to-face on ZOOM with a good listener.  That person doesn’t even have to have solutions.  Just having someone to listen without judgment is what is needed.  It can be very healing and makes one feel supported.  Some people are afraid to reach out for support out of pride but opening up won’t make you a burden to others.  In fact, most people will be flattered you trusted them enough to ask for their ear and it will strengthen the relationship in many cases.  A candidate I was about to send on an interview wanted to cancel the appointment because his child had become ill and he felt he needed to be there.  We talked for a good while about how we could orchestrate him getting another family member to come over and sit with the child for a couple of hours so he could have a chance at this interview.  After we talked about his options in the situation and having someone to listen to, he felt more ready and calm to do the interview and he did end up getting the job.  If I had allowed him to cancel the interview in these very challenging times, I’m not so sure I could have been able to reschedule the appointment because of the surplus of good candidates available.

 

The Covid-19 Pandemic of 2020 has spurred the evolution of how the New Work World has revolutionized the job market.  When you take the time to plan your NEW strategy in this New Work World, you can allow yourself to stay positive with a new mindset and power up yourself to reach success.  There are as many avenues to success as there are successes. Old methods of finding employment are no longer working as we now adapt to new protocols. Most importantly is a positive mindset and a willingness to go the extra mile to show ourselves and our skillset in the best light to new employers.  In order to change on the outside, we have to start by changing on the inside and truly looking at what we have to offer that we might have overlooked in the past.  Success is at hand with positive and persistent effort.

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Economics Growth Personal Development

Want to Win in Business? Test your Strategic choices with a Simulation

My former employer, BTS pioneered the use of business simulations for strategy alignment since the company was founded in 1986. Since then, they have developed more than half a million leaders in this space. They have built hundreds of simulation and experiential learning solutions for virtually all industries, which means that we have deep and varied industry expertise across our 1,000 full-time professionals.

Some of our current clients include: IBM, Microsoft, GE, Salesforce, SAP, Citi, Fidelity, JP Morgan, Unilever, LG, Coca-Cola, and others.

Why all this background? As a Hero Club Member, I would love to share this content with fellow members. Winning in Business is a powerful, flexible, 3- to 4-hour digital solution that puts users in the driver’s seat of a virtual company. In the simulation, users compete to construct and run the most profitable and sustainable company in an evolving marketplace. Over the course of 3 simulated years, users must plan for and respond to a variety of events and external pressures.

Click HERE to learn more and get a free demo of this amazing business simulation.

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Best Practices Economics Growth Leadership Personal Development

Learn about your customer’s business

Some of the best sales professionals I ever met demonstrate a strong combination a business acumen and influencing capabilities.

For the business acumen part, I asked a Senior Partner at one of my clients how did he learn about the industry, and his answer was – “With a Business Simulation Experience”. Through an Industry Business Simulation, participants:
• Understand the interdependencies in the industry ecosystem and how key players create value and influence one another
• Inhabit the executive mindset, understand industry terminology and how the industry sector business is run
• Articulate the key strategic priorities, financial levers, and challenges facing the industry
• Identify the critical decisions made on a day-to-day basis, the inputs, outputs, impacts & implications of those decisions, and how market changes implicate decision making
• Engage in informed discussions about the industry with a true appreciation of the business and a point of view on how and why market trends impact the industry sector ecosystem
• Develop an action plan to apply the knowledge and capabilities back on the job and drive results

Click HERE to learn more

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Economics Growth Leadership Personal Development

Why do you think pilots train with simulators?

The answer to this question is so simple but true. Pilots train on simulators so they can make mistakes in a risk-free environment and not die.

I believe it is the same for Business Leaders. Our simulations use an engaging board-based format to simulate a company that participants are required to manage and operate as a team. Participants increase their business acumen by experiencing business flow, functional interrelationships, and how making a decision in one area has a ripple effect across the entire business—which eventually impacts the bottom line.

During the simulation, participants are challenged by realistic scenarios that require them to evaluate business situations, apply sound decision-making, analyze the results, and learn from the conclusions drawn.

Click HERE to learn more. We would love to help

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Best Practices Economics Growth Management Personal Development

Leaders Who Outperform Competitors In A Down Market

No one likes a downturn in the economy whether it is short-term or a longer-term recessionary period. What ensues for business leaders and their employees tend to be a natural reaction – heightened anxiety, stress and hunkering down into an approach that focuses on defending and retaining existing clients to keep them happy and the revenue intact.

Focusing on happy clients during a downturn is not new nor should it be a new focus. In fact, focusing on clients is something good organizations do during good economic times. What’s changed is what actually comes next – a leadership focus on managing employees to tasks the organization feels will lead to desired goals.

Studies prove when leaders have heightened levels of anxiety and stress, they become more goal and task-oriented and less “people-oriented” towards their employees. Employees feel the pressure, the culture shifts, and everyone is less happy than they were just a few weeks prior to the economic downturn. And, the shift lasts……. hurting productivity & employee engagement.

The lasting effect of this shift is twofold: (1) productivity and focus decrease, negatively impacting desired results and (2) unhappy employees are waiting for the upward turn in the economy to jump ship and move to a better organization who feel the experience would have been better.

Who are those who leave? Your best employees. If you refer to Leigh Branham, the author of “7 Hidden Reasons Employees Leave” you’ll find managers believe 89% of all employees leave for more money when the actual number is 12%. Without your best employees your ability to execute a growth strategy can become significantly handicapped.

So, what do the best leaders do during an economic downturn to find success? Let’s take a look at the two things winning leaders focus on accomplishing – employees and real investments into a growth strategy.

 

EMPLOYEE FOCUSED

Great leadership knows the tasks and work will get done by their direct reports because they hired qualified, capable people. What this same leadership also knows is that their employees can and will get caught up with distractions of a downward economic cycle in both their personal life and business. By acknowledging to their direct reports these distractions and challenges, they offer a few important things to their employees:

• Connection – Employees want to know their boss ‘gets it’ and knows what they are feeling and going through as stressors. Outward acknowledgment helps create and keep a line of communication open where the employee may have a periodic need to just talk through things not related to their tasks and goals. The employee feels relieved they can talk to their boss if needed without the risk of it coming back in the form of a negative performance review.

• Listening – Let’s be real, employees do not have a lot of outlets to talk through their stressors at work. Listening is the biggest form of emotional support when employees don’t want a solution but understanding. They don’t want to think there is a professional risk in being human.

• Engagement – Those leaders who master connection and listening create the highest level of engaged and committed employees for making the business successful. It also reduces turnover when the economy turns positive. How do we know this is true? A Harvard Business Review study revealed 58% of all employees trust a stranger more than their Manager.

 

INVESTING IN A GROWTH STRATEGY
There are 4 types of business behaviors during an economic downturn by leadership:

1) Prevention-focused companies, which make primarily defensive moves and are more concerned than their rivals with avoiding losses and minimizing downside risks.
2) Promotion-focused companies, which invest more in offensive moves that provide upside benefits than their peers do.
3) Pragmatic companies, which combine defensive and offensive moves.
4) Progressive companies, which deploy the optimal combination of defense and offense.

#2 is the most important leadership decision you can make for your business. These leaders know that while there is short-term pain in terms of selective cost-cutting, they actually spend budget dollars to create a new growth strategy for when the upward economic turn starts to evolve. This is something I discuss in my February 2020 whitepaper entitled “Economics – The Business Owner’s Blindspot” as Plan B. Creating and preparing your business for growth by investing the time and resources will put you ahead of your industry peers who will be trying to figure it out when you already have, and the economy has turned positive. This gives you a window of exclusivity to accelerate business results.

We know COVID-19 will have an unprecedented impact on businesses. But, we also know there is no permanence to this current challenge and things will get better. The question is: “what can you do right now during the COVID-19 pandemic to be prepared to capture new growth when the pandemic subsides?”

 

TAKING PROACTIVE ACTION
Step 1 – Analyze your market’s buyer behavior right now and predict what it will be when the economy turns positive. What will be their triggers for engaging and not engaging? How you build a strategy around those constraints and enablers determines success in creating positive outcomes
Step 2 – Initiate a plan today around your employees so they are with you for the hard times and good times without having thoughts of leaving for greener pastures (a.k.a. better leadership)
Step 3 – Budget and be willing to spend money on strategy that will give you a competitive advantage over what everyone else is doing right now and where they are focused
Step 4 – Embrace your limitations as a leader and obtain the help to build out Step 3. Average leaders try to do this themselves. Great leaders know their limitations and embrace it – there are no feelings of vulnerability nor concerns they will be viewed as unqualified leaders. Quite the opposite.

What leaders exemplified these traits and found exceptional success during their time leading an organization? Herb Kelleher, co-Founder & CEO of Southwest Airlines. Elon Musk, Founder & CEO of Tesla. Rodney Martin, chairman & CEO of Voya Financial. There are many more – and you can be one of them too.

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Accounting Best Practices Culture Economics Growth Industries Investing Management Personal Development Technology

The Cybersecurity of Banking and Finance

I’ve discussed the importance of cybersecurity in healthcare due to the extremely sensitive personal data and the loss of trust if hacked. If healthcare data and a patient’s trust is as sensitive as research shows, then it’s no surprise that the banking and financial industry is in serious need for anticipatory cybersecurity and digital data protection.

Banking Evolution

Up until the early eighties, transactions at financial institutions were handwritten, calculated long-hand, and done without the aid of a computer or calculator. Fast forward many years and not only can we make deposits and automate our bills to be paid online, but many employees of financial institutions are starting to work remotely as well.

Additionally, cash-out technology is replacing physical cash and check exchange. PayPal, Venmo, Zelle Pay, Apple Pay and many more make the exchange of money a social network of sorts with minimal or no fees, depositing straight into your bank account digitally without the bank’s physical presence or involvement.

A Breach of Banking Security

Whether you drive to a bank to withdraw cash or log into your Venmo account and deposit cash digitally, banking is a personal and serious subject. Keep in mind, a financial institution has every last little detail about our financial situations.

Historically, a security breach in a bank was a takeover robbery. These now pale in comparison to cyber crimes committed against financial institutions, where they take sensitive information and even your identity. Much like the healthcare industry, financial institutions are faced with thousands of cyberattacks every single day, with ]the financial reward much greater than cash.

One example of a big bank that suffered a massive attack was Capital One. A single weak spot in cybersecurity allowed cybercriminals to capture the personal information of over 100 million people and leak it to the world.

In the past year, there have been over 3,000 known successful cyber attacks against financial institutions according to the Treasury Department’s Financial Crimes Enforcement Network. In the case of the Capital One hack, their system flaw was described as a “configuration vulnerability” in its security software that compares to the tellers and security guards in past banking years all going to lunch with the vault wide open and a lobby full of people.

Time for a Change!

Anticipatory cybersecurity measures should be elevated at financial institutions much like the healthcare industry. Capital One’s hack is not the only large scale financial institution that succumb to hacking, as we saw with companies like Equifax and Morgan Stanley being attacked as well.

Banks and financial institutions implement cyber protection, but are they really safe? I know of several cyber companies that test for vulnerabilities in this industry and within 48 hours they gain access to everything the bank “assumed” was protected and safe. But cyber protection is ever-changing and in need of constant testing for new vulnerabilities, and unfortunately, the vast majority of current cybersecurity strategies is about reacting quickly after the problem occurs rather than an anticipatory one.

The Hard Trend that cybercriminals continuously find a way to outsmart the institutions should be used by banks to pre-solve hacking problems before they become a nationally reported disaster, and be anticipatory by using behavior analytics and other anticipatory tools to prevent a breach of security and the breach of trust.

Cyber Solutions

When hacking occurs repeatedly in an industry, trust breaks because the customer does not feel their personal information is truly valued by the institution.

Hackers love to take advantage of weak passwords or use emails loaded with malicious computer code that lets them get inside the network while others scan for out-of-date hardware and software missing the latest security fixes. Likewise, cybercriminals work around the clock, therefore the IT firm or internal IT department must be in place to do the same.

Anticipatory cyber strategies put the cyber education of employees as a priority, with an outside firm doing security scans on everything before the problem occurs, having all software scanned and updated regularly, and making sure spam filters are adequate in your company’s email system.

Free Perimeter Test

Because we see cybersecurity as a strategic imperative in protecting your future brand and reputation, we have identified best-in-class cyber testing companies that will provide a free perimeter test of your organization to check for vulnerabilities in your cybersecurity defense system, provide the results of their tests and recommend immediate actions that can be taken to stop any uncovered leaks in your system. If you would like a free perimeter test to check for vulnerabilities in your cybersecurity defense system, please contact us.

Ask for your free perimeter test at: https://www.burrus.com/perimteter-test-request/

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Best Practices Economics Marketing Personal Development Sales

The Challenge of Pricing Disruptive Technologies

This month, I attended a couple of entrepreneur and investor events.  The term “disruptive technology” appeared frequently and prominently – as it should.  What figured less prominently was an understanding of how to capture the value of disruptive technology in the form of price.

If you’re disrupting, you’re delivering value differently….often enabling value differently.  You need to be paid for your creativity…That’s the market imperative. After all, it costs money for a company to build new, highly differentiated value…and the price is how that all gets paid for.

My Lens on the World: Value-based pricing.

Full disclosure: when I call myself a sales, value, and pricing expert, I mean I am an expert on helping companies achieve win-win, value-based pricing.  Customers use price as a comparison point against perceived value. If I can help your B2B salespeople regularly build enough value, customers will have stronger buying preference, at higher prices.

I’ve heard several good definitions of value, but for our purposes, I’d like to use this one:

Value is the desirability of outcomes your products or services deliver to a customer.

This definition gives insight into how value forms and builds in the customer’s mind.  It guides to sales and marketing organizations working to build – then objectively price – a disruptive innovation.

Outcome-based Value Analysis.

Customers don’t buy your offer; they buy their own outcomes/results.  What they are willing to pay for your offer is how strongly they desire results.

Human buying behavior around price is pretty consistent.  Customers:

  1. Compare noticeable differences between options (almost always the top two).
  2. Translate differences into personal and business outcomes. Any outcomes not envisioned are ignored.
  3. Assign value to all outcomes. “Assigning value” can be gut feel, emotional desirability…all the way to a formal analysis of business impacts.
  4. Compare the value of outcomes to the relative prices, and buy according to this calculation

The good news:  This is how customers operate intuitively. It’s no work at all to get a customer to engage in this mental process. Did you ever pay more for gas because a station is easier to get to? How much work went into getting you do decide?

The bad news: contrary to what “rational buyer” economic theory predicts, customers only think as hard as they need to (read those four steps again to see how mental shortcuts could form). It’s not particularly hard to force more detail on their process, it simply takes purposeful selling and marketing effort at the right time.

For established products, salespeople must either walk a prospect through more detail in analysis…or hope that the customer makes perfect value assessments unguided. Hint: they almost never do. I have a secure income helping “established product/service” companies sell at better prices.

For disruptive products, value-building must be even more purposeful. Each customer is walking an unfamiliar path.  They require more detailed guidance all along the way: comprehending novel outcomes, envisioning those outcomes for themselves, belief/confidence in realizing outcomes, valuing outcomes, and more.

Penetration / Skim pricing: a Myth?

The Internet age has introduced us to the idea of buying profitless market share and figuring things out later: penetration pricing is the new false idol of business.

You can — and people do– price disruptive technology for profitable penetration.  The key:  be in a winner-take-most (WTM) market.  Only buy market share in WTM markets….and either have deep pockets or patient money.  Any company bringing a disruptive offer to a normal market is at risk with a penetration pricing strategy.  You’re far more likely to end up as roadkill than as the next Amazon.

As long as your price is less than your value, the idea of charging less to sell more is a myth (the topic of one of my most popular posts ever).  The demand curve you learned in econ class is based upon several unrealistic assumptions – assumptions made so that the math works more easily, not to explain real-world buyer behavior. For one thing, the math assumes little to no differentiation.  In contrast, the whole point of disruption is differentiation.

Pricing Is Profit

Regardless of the price you charge for a piece of business, your production costs don’t change.  That means that an additional price dollar is a bottom-line dollar.  Conversely, every dollar you don’t charge (or discount away) is a profit dollar you just donated to a customer.

Those profit dollars?  You need them for disrupting, innovating, customer education, etc. Whether you do subscription pricing (or its economic cousin, leasing), or whether your offer involves Uber-style distributed asset ownership (or its economic cousin, franchising)…understanding who receives what outcome/value is the key to a successful pricing strategy.

You Can’t Price The Value You Haven’t Built

If your disruptive offer generates value, you need to have a system for causing that value to come into being in the customer’s mind.  In consumer markets, this might come via media-delivered content.  In a complex/consensus B2B environment, the mix will shift to include more human-to-human value-building customer conversations: that’s my thing.

Disruptive Change and Value

Value only exists in a customer’s mind.  Value for something disruptive often involves a little more commercial teaching work — getting a customer to wrap their mind around a novel outcome.  Unless the outcome is unusually intuitive, that takes some sort of value building communication. That value building is rewarded by a higher, value-based price.

I hope this helps.  If you’d like to talk in greater depth, please feel free to reach out. Also, I’d appreciate your liking, commenting, or sharing with your networks, or with colleagues who it might resonate with.

To your success!

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Best Practices Culture Economics Entrepreneurship Industries Investing Management Personal Development Technology

5G Entrepreneurs Creating Billion-Dollar Businesses

Within the next five years…

New multibillion-dollar businesses will appear that didn’t exist before due to 5G wireless technology. Because of this, many industries will either be agile, reacting to an ever-increasing number of 5G innovators disrupting their industry, or they will be anticipatory innovators and use the predictability of 5G capabilities to become the disruptor.

The first generation (1G) of wireless came with the introduction of cell phones constrained to phone calls and high-level executives. The second-generation (2G) gave us better call quality for wireless phones and offered a new capability for text messaging via SMS. The third-generation (3G) facilitated mobile internet browsing and early video calling.

Most recently, 4G brought us useful multimedia networked computers with media-rich streaming applications like Snapchat, Instagram, Facebook, Netflix, and more.

Up next is 5G.

This generation of wireless technology is already being deployed in major cities in the U.S. and other countries. Qualcomm, Ericsson, and Broadcom, as well as network providers AT&T, Sprint, and Verizon, are all putting in maximum effort, with mobile device manufacturers starting to launch their first 5G-enabled devices.

While consumers have become jaded to the 5G terms as seen in commercials, there are many consumer and business implementations of 5G to be excited about. Once deployed and fully operational, 5G would essentially be the solution to deliver complete digital connectivity from the tip of the carrier network and essentially be the death of cables in homes and offices alike.

As it stands today, 5G would function as a set of simultaneous revolutions, all of which must function without any trouble whatsoever, in order to provide the speed and connectivity it boasts. Some hiccups actually go beyond technological functionality and spill into business and social conflicts:

  • Unified Carriers. 5G wireless would essentially place companies like AT&T, Verizon, and the combined T-Mobile and Sprint in competition against Comcast and Charter Communications for services. 
  • Remade Landscapes. 5G allows for smaller transmitters that consume lower power, with smaller 5G transmitters covering much smaller service areas than those typical 4G towers. A carrier would need about four hundred times more than we currently have, camouflaged in urban areas. 
  • Restructured Global Technology Economy. Upon implementing 5G, areas such as Scandinavia where Nokia and Ericsson reside would become the primary hub for telecommunications, and China Mobile and Huawei are jointly responsible for the architecture of 5G, making China more powerful in the data world than the U.S.

The cost is of most concern in many cases. Prices for service would most likely start out pretty high compared to where we are now, covering the costs to implement the technology.

In several articles of mine, I’ve called on anticipatory businesses and individuals to pay attention to the Hard Trends shaping the future both inside and outside of their industries, and the digital disruptors that may affect them directly or indirectly. Implementation of 5G would certainly jump-start those disruptions.

The following are perfect examples of technology-driven changes I’ve discussed in previous articles and their correlation to 5G technology:

  • Vehicle-to-Vehicle Communications and Driverless Automobiles. 5G will enable Vehicle-to-Vehicle (V2V) communication, using the low latency of 5G wireless networking, allowing each vehicle to know exactly what all the other vehicles are doing around it.
  • Virtual Reality (VR) and Augmented Reality (AR). Ultra-fast connectivity and synchronicity are important for the user experience, as video communication within corporations will be meshing with VR as remote employees take virtual tours of a manufacturing plant with individuals who are physically there. In the AR world, the very infrastructure of AR glasses and other AR technology is contingent on high-speed connectivity with the amount of data present.
  • Cloud Computing. 5G wireless has the potential for distributed cloud computing services, creating near real-time experiences with edge computing that are much more engaging to users than Amazon, Google, or Microsoft are today.
  • Internet of Things (IoT). Everything from kitchen appliances to parking meters can all be made easier to produce, easier to control, and more connected than ever before. 5G transmitters will become IoT hubs, acting as real-time service hubs for all the households in their specific coverage areas.
  • Healthcare. The availability of low-latency connectivity in extremely remote locations such as Mississippi, where trials of 5G connectivity are implemented, would connect individuals to remote medical professionals for information.

By being anticipatory, many telecommunication providers are pre-solving problems with 5G before they occur by way of moving customers into a 5G business track before most true 5G services exist. It is the perfect time for you and your organization to anticipate what’s to come, and more importantly, what is to be affected by 5G in your industry. By paying attention to the Hard Trends shaping the future, you can stay ahead of the curve to avoid falling behind.

To be certain of the Hard Trends shaping your future, get a copy of my latest book The Anticipatory Organization – I have a special offer for you!

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Economic Storm Coming? What to Do Now.

I get it.  I’ve managed P & Ls through recessions and I understand the options and the challenges.  If you’re not ready for it, sometimes the best you can do during a business downturn is simply play to survive.  This article discusses what you can do before hard times hit in order to expand your choices during.

The Cost of Cost-cutting

Make no mistake:  times sometimes get hard.  For example, if you sold capital equipment into the oil & gas industry during the oil price slide of 2016-2017, you know that there is sometimes no alternative but to “right-size” in response to an uncontrollable market dynamic. Companies need to step up the spending discipline during down cycles.

Cost control is good corporate practice, but it has limits.  Cost control, what one of my first bosses called “frugaling” takes energy and management focus.  Cost-cutting your way to profitability is one of the hardest ways to increase net income. Combining cost-control and growth is even harder:

You can’t shrink your way to growth.

When you start cost-cutting, it’s difficult to maintain customer service and responsiveness levels.  Your people find it harder to be that helpful cheerful voice for your customers.  It’s harder to invest in innovation.  It’s harder to get face-to-face with customers. You are at significant risk of trading customer satisfaction for cost improvement.

As you struggle through needing to “frugal”, don’t mistake right-sizing for a growth plan.

More importantly, don’t mistake a cost-cutting project for a guiding business principle.  It’s a tactical coping mechanism, not a strategy, or a path to long-term success.

Let’s Start With What You Shouldn’t Do

Don’t get taken by surprise.  That company who sells into oil & gas should know that an oil price dip is coming.  One of those is always coming.  Always. Leaders in that industry have absolutely no right to be surprised by the fact that oil prices fluctuate.  It’s just a question of when.  If you aren’t preparing your company for it, you don’t deserve to lead a company.

Don’t start feeling superior to some specific industry, people.  A recession is always coming, too.  Always. Go back and read the paragraph above as if it’s directed at you and your industry, because it is.

You Can Prepare the Hard Way…

Some preparations are really difficult.

  • For instance, you could try to manage your fixed costs down.
  • You could reorganize your financing, trading debt for equity…preferably, patient money. At a minimum, it might be worth it to ask your impatient money to be less impatient.
  • Perhaps you can aggressively build cash during good times. Perhaps you should step up your expense control now so that it doesn’t become need to become dysfunctional later.

These preparations can keep your frugaling from being the kind that damages your company’s long-term health. Keen awareness of customer value (awareness I help clients develop and sharpen) can guide you through prudent cost-cutting.

…Or You Can Prepare a Simpler Way.

Some preparations are more doable (perhaps still challenging, depending on your culture and leadership) but set you up for success – during and after challenging times. I can help with these, by the way.

  • Radically rethink who “sells”. Expand the mission of every customer-facing role in your company. Go beyond current “customer experience” (CX) theory.  Where CX trains your people to “delight”, go further: every person trained in value discovery.  I teach three simple questions and a mindset shift that turn every person into an extension of your sales discovery process.
  • Radically rethink who buys. Typically, one silo at your customer holds budget, but many silos benefit. Get to all of the silos who benefit, and help them realize maximum value from your product or service.
  • Radically re-shape your most important customer relationships. There are specific strategic planning systems that shift key account management from “what all can we sell to this customer”, to “how can we add even more to our customer’s business?”
  • Radically reshape your customer’s perception of the value you deliver. Your customers don’t buy your products or services, they buy business and personal outcomes.  What they are willing to pay for those outcomes can increase if you help them perceive outcomes’ value more clearly.  While you might be able to add new products/services in the medium to long term, your salespeople can add to the value of your existing offerings right now. It just takes the right kind of conversational skills and a little additional business acumen.

Start now.  If the economy tightens, your customers will be distracted, and these will get harder. Also, your competitors will be struggling to take your customers – some will try to buy your customer’s business away from you.

Of Course, You Could Just Not Prepare at All…

You could wing it when the time comes, right? What could go wrong?

Contact me if you would like to discuss what you could do in your business. If you know somebody who might benefit from this article, please share.

To your success!