The Price is Right

 

When you buy a car, you are given a price. You don’t care how much it has cost the car company to build that car. You either decide the car is either valuable to you or not (with perhaps a little bargaining here and there, unless you are my wife, in which case you just buy the car). Some people buy Bentley’s, some people buy Kia’s. Either car gets them to the same place in the same amount of time. Sure, a Ferrari might get you there a little quicker, but that’s beside the point. (And anyway who needs to get to the grocery store at 120 mph? Maybe someone with digestive problems, but I’m really getting way off topic here.)

The point is that people buy things for different reasons. For a North Dakotan, seat warmers might be worth a thousand bucks; if you live in Arizona, your bum will never get chilly enough to turn the seat warmers on. Whatever the reason, at the end of the day when customers put down their hard-earned cash for your product or services, they are deciding that what you have to offer is worth the price.

If you are doing the job right, your clients are buying things that you think they ought to value. They will be more inclined to value these things if they are presented the right way. Price, obviously, is a prime component in your product’s presentation. For instance, let us say you own a carpet cleaning business and you would like to charge seventy-eight million dollars per cleaning. In that case, Bill Gates is probably your really only true potential client. If he passes, you’re going to have to rethink your rates.

So how you do make sure your prices are both fair and justifiable to both the client and yourself? For starters, remember that pricing is not about efficiency; it’s about effectiveness. Setting fair and justifiable prices is not about how fast you get something done—or even how good you get it done. (Although doing a bad job isn’t ideal; always do your best for crying out loud!)

Pricing is about the effect your product and/or services have on your customer. Does the product or service meet the goals you promise it meets? If the answer is yes and your customer buys it, the price is right. Our old friend Dan Sullivan of Strategic Coach says that there is only one person important in confirming your product.   It is the person that writes the check!

I don’t mind plugging the hot dog establishment in Hollywood called Pinks but, in fact, they don’t need my plug. More often than not, the line to get a hot dog there is like the lines that formed when Star Wars first came out and people couldn’t get tickets on the Internet ‘cause Al Gore was still a few years away from inventing it.

Is a hot dog worth waiting hours on end for? The people in line at Pinks obviously think so. That’s a perfect example of clients placing a value on something greater than its general cost. They’re willing to wait because to them it’s worth it. In fact, often times, businesses price their products much less than many of their customers are willing pay for the value they receive.  Crazy but it is true!  You see, many people see values, other than the specific, first impression, value of an item they purchase.  A hot dog is not a hot dog when it is a Pinks hot dog.  A car is not a car when it is a Ferrari.

Thinking about the various values that we deliver when we offer our product or service is important.  Have you stopped to assess the REAL VALUE you deliver?  If you have, then it is likely you have confidence in the value of your product.

This brings up a very important point. Too many undervalue the service or product they deliver.  Since your product is in many ways a reflection of you, as is the price, you really cannot accurately estimate the value of what you provide without taking a moment to accurately assess your own worth. Presenting a product and standing by its price has a lot to do with projecting confidence in that product. To have that kind of confidence, you must first have that kind of confidence in yourself. It’s amazing the amount of people walking around without an adequate amount of self-confidence. Half the battle of self-confidence is simply deciding that you are worth it. Believe it and it will be true.  Don’t be afraid to test what the sophisticates call “Price Point”.  Don’t set a price just because it is the same price of other comparable products?  Why create a product that someone else created before you unless you can bring greater value to that product than others?

Selling your product or service coming from a confident place, delivering value that your customers want and confirmed by the dollar votes of your customers confirms that THE PRICE IS RIGHT.

Today’s challenge:

Make a list of all the things about you that are of value – not economic value, but personal. Think out of the box. Which non economic values does your product or service speak to or enhance?  When speaking about and most importantly pricing your product or service,   see how that new understanding effects what you believe that product or service is worth.      

Credibility Is Quality

Yes, I love food.  And I love relating my theories to food!

Your daughter’s birthday is coming up. You want to get her favorite kind of cake—a triple-chocolate mousse cake. You decide to try the new bakery around the corner. The guy behind the counter is very happy to see you. He takes your order—your daughter’s name, the occasion, size of the cake, flavor—and tells you the cake will be ready at the end of the day.

When you return at the end of the day, the cake is not ready. The bakery is having problems with this, that, and the other, and it turns out Janet’s cake will not be ready until the next morning. This is pushing it since your daughter’s party starts the following afternoon. The cake still isn’t ready in the morning—they need a little more time.

When you finally pick up the carrot cake (you ordered triple-chocolate mousse) half an hour before Janet’s birthday party begins, it reads: Happy Graduation, Janice.

Are you ever going to return to the corner bakery? No.    

Credibility is quality. If you are credible, people will correctly assume you produce a quality product. If you seek to run a successful business (which of course you should—otherwise why are you running it?), credibility is a key factor in making your customers feel confident they have come to the right place. Credibility will compel them to return.

There are certain basic ingredients that go into making a person and/or company credible, just as a chef needs key ingredients for making a delicious cake.

To begin with, reliability and timeliness go hand in hand. Stick to your promised deadlines—say what you mean and mean what you say. A client has to know when you say they can expect a product on such and such date, they will get that product on that exact date. If people feel that they can count on you, they will count on you. This translates into business. Of course, unexpected circumstances and events arise from time to time, and when they do, you must always communicate with clients and keep them informed at all times. Surprises are rarely pleasant in the business world.

It’s also important to be realistic about projects. Assess the workload honestly. Never set an impossible deadline or budget to appease the customer in the short run. In the long run, missing that deadline will come back to haunt you like a boomerang. Pay now or pay later is a phrase that applies to both customer and provider. You know how much the work you provide is worth, and you know how much time it takes. If a customer expects you to compromise on the level of quality you pride yourself on delivering, then your company may not be a suitable fit for that customer. At the very least, they should expect a lesser degree of quality. At the end of the day, such an expectation is unacceptable. Never compromise on quality. It is a direct reflection of who you are and what your company stands for.   

Listening is another key component to sealing your reliability. If you don’t know exactly what the client wants, how can you deliver it? The guy at the bakery obviously wasn’t listening when he was told it was Janet’s birthday. Maybe his mind was on the horse races or some such thing. At any rate, when clients seek you out for your specialized service, you owe them your full and complete attention. If you are unsure about anything, always ask, always keep the lines of communication open. Never assume!   

In addition to building upon your own honorable reputation, another benefit of making your word your bond is that fact that a number of other human beings out there aren’t in the practice of doing this. Rest assured that every time you come through on a project, there is someone out there who didn’t. There are plenty of examples you could come up with in the business world: The cable guy who showed up three hours late. The painters who made a mess of your house. The barber who shaved your head when you wanted a little trim.

Not surprisingly (but unfortunately), there are just as many examples of this in our private lives. We all have the flaky friend, sometimes more than one: The friend who never calls back, who’s always late to the movie, who always forgets our birthday. (Why are you friends with this person? Cut ‘em loose!)  Make sure you aren’t that flaky friend. If you are—and shame on you if you are—you are probably also a flaky business associate. And it’s probably costing you!             

Today’s challenge:

Make a credibility checklist for companies you have to deal with both professionally and personally. Examine what these companies have done wrong and what they have done right.

Determine whether or not you are the flaky friend!  Keep track of who you owe calls to, favors, how many people you’ve rescheduled on simply because you didn’t feel like seeing them, how many times you promised you would do something by a certain date and then missed the date, etcetera.

The Fifth Element

It has been quite a while since I published my last blog. The Summer and Fall go so fast that I forgot to think. Publishing this blog helps me do just that. It helps me think!

Dan Sullivan, the creator of the terrific executive coaching program, Strategic Coach, discusses what he call four common referability standards. I believe them to be actually four reliability factors. These are just as essential in business as they are in everyday life, which is why I have instilled these qualities and characteristics in my children.

• Be on time.
• Say please and thank you.
• Do what you say you are going to do.
• Finish what you start.

What's that? You ask. Those are only four?

Everybody calm down. I’ve added a fifth: Think before you act.

I tell this to my children all the time. (If only I had to say it once, how much more blissful life would be!) This fifth element applies just as much to my business associates as it does to my children—and to me. Actions have consequences. And not anticipating those consequences can make them inherently more dire.

Take the somewhat famous (or infamous) tale of a gentleman from Fort Sumner, New Mexico, who attempted to get rid of a pesky mouse. Once he caught the vermin, he threw it into a pile of burning leaves outside. The mouse, on fire, ran out from under the pile of leaves and back into the man’s house.

The poor mouse was destroyed. But if it is any consolation to you mouse-lovers, the house was destroyed as well. A clear case of not thinking ahead. The man was hell-bent on killing the mouse (in a despicable way). He did not anticipate the mouse would be momentarily alive, capable of running. He most certainly did not anticipate the mouse would be capable of running back into the house and lighting it on fire as well. And because he failed to acknowledge this possibility before throwing the mouse into a pile of burning leaves, he was consequently out one house.

Things go much better when you think ahead. Ask Tracy Porter of the New Orleans Saints. Some time ago, he picked off Peyton Manning and ran it back for a game-winning touchdown in the Superbowl. This wasn’t luck. Peyton Manning’s Colts ran their favorite play, a pass to the outside receiver. They had run this play a number of times during the game, and during the season. Tracy Porter knew there was a good chance they would run the play again. He anticipated and placed himself in the perfect spot for the interception. In his case, the consequences of his actions led to a Superbowl victory.

He thought before he acted.

So you decide.

Would you rather win a Superbowl or have a mouse burn your house down?

That’s what I thought. And speaking of thinking — of thinking ahead, in particular — you cannot run a successful business without anticipating what is around the corner. You might not always be right, but you will always be prepared. And being prepared will allow you to more readily adapt even when circumstances are not what you expected. Simply being reactionary to whatever events unfold is a sure-fire way to run your business into the ground. Time and time again, you will get caught blind-sided and be unable to deal with the crisis at hand. And if there’s one thing that’s for certain—one thing that does not require much forethought—there will be a crisis or two.

Beware: I’m getting ready to go off on a tangent.

Because thinking is The Fifth Element when it comes to reliability factors, and The Fifth Element is a fine science-fiction film staring Bruce Willis, let’s take another example of thinking ahead from a cinematic classic starring Bruce. In Die Hard, Bruce Willis is running all over Nakatomi Plaza battling terrorists. When he meets Hans, the ringleader, Hans acts like a frightened escaped hostage. Bruce tells him to relax, even handing him—the ringleader!—a gun.

Bruce Willis in "Die Hard"

Now everyone in the audience is yelling at the screen: “Don’t do it, Bruce! That’s the bad guy! Nooooo!”

Bruce turns his back and Hans tries to shoot him. But, surprise surprise, Bruce gave him an empty gun.

“You think I'm a shmuck, Hans?” Bruce says, as the audience breathes a sigh of relief.

Bruce thought before he gave Hans the gun. He thought: Should I give this guy a gun? I don’t know him. He could be a bad guy. I’ll give him an empty gun. If Bruce gave Hans a loaded gun and turned his back, that would have been the end of the Die Hard franchise and the title would have to be changed to Die Easy.

Before making momentous decisions involving the path your business is about to take, thoroughly examine all the potential outcomes for your decision. Think, if I do A, then B, C, and D might happen. You’re probably hoping for a particular outcome. But since there are no guarantees in life, simply operating on hope is just too risky. Consider what would happen if options C or D came to pass. Maybe these are less desirable options, maybe they are downright unacceptable—in which case perhaps not taking a certain action is the best possible scenario.

If you do go through with a specific plan, you need to also have specific plans ready for the possibility of things going wrong. That way, if things do take a turn for the worse, you can immediately go into action. You can say to yourself and your colleagues, “We thought this might happen, here’s what we need to do now.”

Having a plan of action in advance also allows for you and your colleagues to be more calm, in greater command when the — um — poker chips hit the fan. A lot of times, going into panic mode simply stokes the flames of a crisis. The ability to stay calm and keep a clear head is vital. And this cannot be done unless someone has planned ahead, has thought before they acted, has anticipated, and was prepared. In business, be a boy scout. Be prepared!

Today’s challenge:

Play a game of chess. Or learn how to play! No other game teaches you to think before you act like the game of chess.

Social Capital

In my previous post, we discussed structural capital. Today, let’s take a look at another equally important piece of intellectual capital: social capital. Social capital is your company’s vendors, referrals, referral sources, and your friends.

Take a moment to consider the amount of clients you have obtained through friendships. Odds are the number is more than a few and maybe most. Friends have value beyond mere friendship; they can help generate business. This is probably the best reason to make friends and have friends, and even to pretend to be friends with people you don’t like. (Okay, so that’s nonsense—I’m just checking to see if you’re paying attention.)

The fact is, aside from being there in good times and bad, friends in the business world can often mean the difference between landing a job, getting that account, or being awarded a juicy contract.

Your means of networking and socializing patterns can be turned into a unique asset with real value. The ability to build relationships is a definite commodity and should be viewed that way. No one else knows the same people you know in the way you know them. No one else has the same resources you have. In all likelihood, you have your go-to guys and gals. Maybe you know just who to call should you happen to need an accountant in Boston. If you need a good lawyer down in Georgia, you can call what’s her face. Or for tickets to the Olympics, you can call one of your Canadian friends (although you’re too late). For getting rid of a body quickly, call Harvey Keitel’s character from Pulp Fiction.

The point is this: the bankers, the insurance people, the number-crunchers are all resources. They are members of your club and vice versa. This is a private club. Not just anybody gets access. They need to be your referral, your customer. Your friend. If you want to have members in your club and in turn be a member of other clubs, you have to be a part of a social capital network.

Once you’ve developed this network, build up this bank account of assets. Systemize it, formulize it. Create conditions in which you can bring the value out to the people you want to deliver that very value to.

Having social capital requires you to be one specific thing: social. Some people are natural socializers— professional socialites. Mingling and shaking hands and getting to know others is simply a way of life. For others, being social is easier said than done. If you are a wallflower, your business may not be flourishing the way it could be for the same reason your life might not be flourishing the way it could be. There is something to be said about being gregarious. Some days, you might not be feeling all that social. That’s normal, that’s part of being human. But if you find yourself not wanting to be social every day, well then, you’re missing out!

I have been given the best advice ever about maneuvering through a strange situation with folks who you don’t know. As the people you meet to talk about their most favorite subject. Them!

• Where did you grow up? 
• How did you come to live in this town? 
• What did you study in school? 
• What is your favorite movie? 

 The potential questions are endless and the answers are liable to present either new questions to ask or points of common interest and understanding that should reveal you to be one of the best conversationalists in the world.
Not too long ago, I went to a party with friends in a neighborhood I wasn’t all that familiar with. The party was hosted by a friend of a friend—I did not know her. We seemed to drive for hours trying to find the place. It brought me right back to my junior high days.

We finally found a house filled with revelers and joined in on the fun. The mutual friend who brought us to the party had not arrived, and it took us about half an hour to determine we had walked into the wrong party. Everyone had a good laugh, and guess what? It was actually fun. We never wanted to leave that party.

By the time we did, I had made several potential new friends. I’m not suggesting you crash random parties every weekend; I’m simply pointing out that a lot of times the most interesting people are the ones you don’t know precisely for that reason. Everyone has a story—there’s no such thing as a boring person. Even a boring person is interesting by the very fact that they are boring. (My friend Jocelyn knows the most boring person in the world. She loves to tell stories demonstrating how boring this person is. As you might guess, the stories are boring, but Jocelyn has a great time telling them.)

I notice when I go on trips, especially overseas, I am much more social than usual. I like talking to the people I meet. They are just as interesting, if not more, as the ancient ruins and museums any country has to offer (as if museums are ever interesting). When I am on the subway, or in markets and stores in another country, I tend to make an effort strike up a conversation with people. I have met a number of interesting folk this way. Something in the back of my mind tells me, who cares if the conversation doesn’t go well, you’ll never see this person again. Knowing this helps me to relax, be more open to those around me and the possibilities that exist. Then when I get home, I realize I could just as easily be this open and friendly to the people in my own country, my own city and neighborhood. There is no reason not to be. Sure, some people might think you’re a big weirdo if you decide to say hello to them as you pass them on the sidewalk. But that’s their problem. If you’re the type that dreads going to parties, dreads leaving your comfort zone in general—think of social situations as an experiment. Go to that party and imagine you are in another country and that you will never see these people again and that ultimately it doesn’t matter what they think about you. It doesn’t.

“Accept all invitations,” an elderly man, a stranger, said to me in a deli once when I was waiting to be seated. It’s good advice. I’ve benefited greatly from it.

I’ve also heard people say, “I’ve got enough friends,” as if there is a limit to the amount of people someone should have in their life with whom they can share things, laugh, confide in, empathize, sympathize, and relate to.

Yes, having friends can increase the value of your social capital in the business world. But more importantly, in the real world, in the world where we are always striving to get the most out of life and enjoy it and appreciate all it has to offer, you can never have enough friends. They are priceless. Your life will be richer as a result, and not just economically.

Today’s challenge:

Accept all invitations. Go to a party (even one you’re dreading!) and make a point to meet at least one new person. Then consider how you have benefited from this introduction, both as a person and a business associate.