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Price

Article Contributed by Bernard Meyer

Small business owners often have so much responsibility on their shoulders that they often don’t have much time or energy into really researching effective pricing strategies.

Pricing is one of the four main components of an effective marketing mix, along with the product, promotion and place. In fact, besides the actual product, a company’s pricing strategies may be the main driver of sales.

Many small business owners’ first strategy is to look at their closest competitor’s prices and then decide to go a bit lower. There are many pricing strategies available for small businesses, and this may not be the most effective for your business.

That’s why today we’ll look at the 7 most effective pricing strategies to make your small business more competitive and profitable.

Competitive pricing

Right off the bat, we’ll go with the most popular strategy: the direct challenge to your competitors’ prices. However, effective competitive pricing relies on two conditions.

First, you need to take into account multiple competitors, and not just a single one. Then take their average price and decide if you want to go lower or stay at the same level and offer other benefits.

Secondly, you need to take into account whether your business’ cost structure is similar to that of your competitors. Only then does their average make sense for your business. If your cost structure is different, then your price is too low and you may end up cutting into your own profits.

Customer Perceived Value pricing

Customer perceived value (CPV) pricing is one of the many pricing strategies that require quite a bit of data to work. Essentially, you have to determine the perceived value of your products compared to your competitors’.

CPV is calculated as:

CPV = Total Perceived Benefits – Total Perceived Costs

Here, the CPV is equal to the net benefits of your product or service, converted into dollar amounts.

For example, if a customer is eager to purchase your furniture or consulting services, he may perceive the benefits at something equal to $1200 (including any emotional benefits as well). He may perceive the costs to be around $800.

Therefore, anything between $800 and $1200 would be a fair price, although the lower the price, the greater the CPV and the greater the incentive for the customer to purchase.  If you charge above $1200, you will essentially be pricing yourself out of the market.

Cost-plus pricing

Cost-plus pricing is based on your cost structure with margins added on so that you can turn a profit. Essentially, you first need to calculate what your business costs are related to producing a product or delivering a service.

After that, you need to decide what a good margin will be that will allow you to cover your costs but also won’t scare off your customers.

For example, let’s say that a business comes up with the following costs:

  • Direct materials: $25
  • Direct labor: $15
  • Allocated overhead: $12.50

In total, the costs come to $52.50. Let’s imagine then that you prefer to have a standard markup of 30% on all products. That means the final price will come to $68.25.

While cost-plus pricing is one of the more straightforward pricing strategies available, it does have some drawbacks.

It most importantly ignores the competition, therefore the prices may not be competitive enough in the market or even could be below the market value. Secondly, it doesn’t place a lot of incentive for the business to work too hard to eliminate costs.

Captive product pricing

This pricing strategy is also known as the razor blade pricing  technique, whereby one item is sold for a low price (or even free) but requires another premium product to work effectively.

In the popular example, Gillette may sell its razor blade (something which is not replaced often) for $7, but a pack of 5 razor blades (replaced regularly) will cost you $20.

As in the above example, the two or more items required for captive product pricing must work together. Gillette razor blades don’t work with any other razors except for Gillette’s.

Similarly, a pillowcase from IKEA (higher price) will only fit IKEA’s pillows (lower price), as they have specific dimensions.

Versioning & Freemium pricing strategies

A common pricing strategy for many services, including SaaS (Software as a Service) businesses is the versioning and freemium pricing.

This involves selling the same services at different prices for different versions.

There is often an introductory price that could be much lower than the medium or higher prices. The introductory price for freemium is free. However, this version is often limited in certain ways. If the customers want to get more features from the service, they will have to pay for the higher version.

This has the benefit of inducting the customer into the service or software ecology. A customer is more likely to continue on with a service if they have taken the time and energy to learn about the service. During their introductory period, the business will encourage the customer to upgrade by showing off the higher features.

Charm pricing

The first of the psychological pricing strategies is charm pricing, a technique commonly employed by the supermarket and retail industry. In charm pricing, products with round dollar figures are reduced by one or more cents. So, instead of a bag of candy being $3, it is now reduced to $2.99.

Although mathematically the difference in prices is only 1 cent, psychologically it has a stronger effect. Our brains view the left-most number as being very significant.

Therefore, while the price goes down by 1 cent only, we see the round-figure price at $3 and the lower price at $2.

For that reason, the effect doesn’t work when you go one cent lower on other prices. For example, if you lower a price from $3.80 to $3.79, the effect is insignificant because the left-most number is still the same.

Prestige pricing

This can be seen as the opposite of charm pricing. Instead of decreasing the price, here the retailer will increase it to a much higher value.

This is most effective with luxury goods that are seen as more prestigious than other comparative products.

For example, women may be more willing to buy Kiehl’s shampoo for $30 rather than a L’Oreal shampoo for $3.97. The round number (and prestigious brand) convinces the shopper that it is high quality.

According to a study conducted in 2015, these prestigious, rounded numbers encourage shoppers to make feelings based on their ‘gut feelings’ rather than any calculation. In the study, the authors discovered that shoppers were more willing to buy champagne at $40 rather than the lower price of $39.71.

Pricing strategies for your small business

These pricing strategies may be very effective for your business. However, again, as with most of them you will need to first be aware of all the costs associated with your product or service. Also, you will need to be aware of your competitors and your own business structure before you consider any pricing strategies.

When you determine the best pricing for your products, however, you will see your sales increase and measurable boosts in your profits.

Author bio: Bernard Meyer is the Head of Marketing at InvoiceBerry, the online invoicing software committed to helping small business owners send out invoices quickly and professionally. You can also find him on Twitter and LinkedIn.



 
  


Article Contributed by Robin Singh

“Rome wasn’t built in a day.” This famous literary phrase holds special significance for the new age startups. Regardless of how ambitious and focused  you are, remember that it takes time to build a business. Although, your plans might be big, but your day-to-day operations, budget, customer base are still small. During the initial days of your business, you’ll need to work with what you’ve got.And for most startups that have just launched their first product, that’s not much.

On the bright side, it means that a startup doesn’t need to spend a fortune on massive software solutions. Since your employees are limited in numbers(which means minimal training), hence your only help documentation focus group are your ‘customers’. Beginners usually don’t have more than a single product and need to be frugal with both time and money. In fact, employing a technical writer is not a good idea.

Under such circumstances, what you do need is a help authoring software that you can use by yourself.  A collaborative cloud-based wiki solution is a great option as it will help your customers and can be accessed by your teammates as well. Apart from being affordable, such a tool should be able to integrate with other management platforms that you use on a daily basis. Finally, you’ll need a great set of customized features which will allow you to control your brand image.

With these requirements in mind, we’ve listed out the top five authoring software options that every startup should consider using.

ProProfs

As your business grows, so does your knowledge base, which is why ProProfs offers a help authoring solution most suitable for improving your customer self-service experience. Help content can be created in minutes and with no coding experience whatsoever, and the only thing you need is source material. From there on, you can design web-based documentation in HTML and CSS formats, or create PDFs and eBooks.

WYSIWYG editor promises user-friendly and intuitive knowledge bases. All features are convenient for company-wide use so that you can co-write, edit or share your documents with other team members. The reporting feature is also included, just as well as integration with Google Analytics and users surveys. That way, you can make your online documentation SEO-ready, and then measure its success through customer feedback.

But, what really sets ProProfs apart from other similar solutions is its context sensitive help builder. With tooltips, popups and lightboxes, interface intuitiveness is assured for both websites and mobile apps, to meet the expectations of your support reps and your customers.

Helpinator

The importance of good documentation is monumental for all businesses. Documentation signals you are serious in your approach and want to empower the users. This is why you need an online documentation tool like Helpinator that can assist your writing and publishing process from start to finish. This tool works from WP, JavaHelp and OracleHelp, and supports multiple formats. That means that the same source text can be packed into a PDF as well, which makes Helpinator a definite time-saver.

Besides free help documentation templates, you’ll get a template builder too, along with a great customization feature. In case you’re working with international customers, you can explore its multilingual options. Helpinator serves as a task and report manager too, but only when help documentation projects are in case.

Dr. Explain

If your startup is an IT company that produces software systems, your online guides will have to be loaded with screenshots of applications and web pages. In simple words, it means you require powerful customization features along with a potent snipping tool as well.

Apart from other standard options, Dr. Explain offers this as its unique selling point, though only in comparison to Helpinator. Various formats are available as well. The software is applicable to Windows, Java and Flash applications, and provides tons of features for editing text and codes while adding images, content tables and indexes are done with ease.

HelpCruiser

Though it is somewhat basic, HelpCruiser is a great pick for those who need a granny-proof solution while designing their first help documentation. Basically, everyone can use it, and it delivers nothing more than you’d expect.

It’s the program’s template engine that makes HelpCruiser so convenient in the first place. It allows you to write and edit with ease, while customization is ensured with a “ribbon” interface, inheritable styles and visual themes. Interestingly enough, you can include YouTube videos, GIF animation and audio clips to your documentation, along with standard images and tables. The end product can be imported and published in a variety of formats, from DOCX and HTML to RTF and CHM.

Adobe RoboHelp 

In case you’re off to a pretty great start and have the means to equip your startup with all the automatic solutions used by the growth-focused companies, look no further than Adobe RoboHelp. It’s best suited for large knowledge base systems, though, which means that if you aren’t  looking at that kind of expansion anytime soon, Adobe RoboHelp is not the right fit for you.

Whatever the case, this help authoring tool offers a couple of perks that others don’t. RoboHelp allows you to create for any device and is therefore especially popular among mobile-centered businesses. Readability on the go is achieved with scannable solutions like thumbnail images, while inquiries are made faster with automatic suggestions. The HTML5 layout is highly responsive and promises intuitive navigation on both web and mobile devices.

The parting words

Startups truly have a lot on their plates, but obtaining a great help authoring tool is one of the tasks that shouldn’t be ignored. Keep your pick within the budget, though. Each of these solutions is available in some sort of demo version, which will certainly help you to decide better. Opt for those solutions that keep price and effectiveness in balance, and you’ll surely make the ‘right’ choice that helps your business grow.

Author Bio:

Robin is a Technical Support Executive. He is an expert in knowledge management and various Knowledge base tools. Currently, he is a resident knowledge management expert at ProProfs. In his free time, Robin enjoys reading and traveling.


Article Contributed by Walter Moore

There are different formulas for business success but a quick glance at various successful organizations showcases some similarities between them. There are crucial steps that successful businesses follow and their initial strategies have a significant effect on their outcome.

Determination

One of the steps that thriving businesses take is to be courageous enough to turn their ideas into reality. A viable idea and a sustainable desire to implement it is a basic aspect of being successful in business. Finding a niche involves something that you are passionate and knowledgeable about.

Perseverance

Entrepreneurs need to be able to withstand setbacks along the way. Allowing obstacles to deter will compromise your ability to achieve your business goals. Learn from the mistakes that you make and make an effort to avoid them in future. When you use a crisis as a learning opportunity, this contributes to growth and development.

Discipline

Owning a business gives you a sense of freedom. However, you need to have self-discipline and handle your freedom responsibly. The survival of your business depends on how dedicated you can be without direct supervision.

Commitment

When you have a business idea, you need to be committed to it as well as the people who are involved in your plans. Whether they are family members, friends or employees, a strong network is crucial to sustaining a business.

Patience

Patience is a key factor for entrepreneurs because success cannot be expected overnight. It takes time to establish a profitable venture. A patient approach will enable you to preserve during challenging phases and remain focused.

Flexibility

Along with a brilliant concept for your business, you need to be flexible enough to adapt to changing needs. Maximize on your customers base and do what it takes to make your products and services as accessible as possible.

Hiring Business Attorneys

Gehres Business Attorneys are among the professionals that a business needs during the early stages of setting up. For some business owners, the reasons for hiring lawyers may not be obvious but the reality is that a lawyer can provide assistance for virtually all areas of your business.

Experience

While hiring a business attorney, there are different factors worth considering such as the lawyer’s level of experience. Do not hesitate to find out how much experience a potential lawyer has in dealing with business issues. If you have a specific issue that you need help with, for example, business incorporation, ask the lawyer if they have dealt with incorporating businesses before.

Resourcefulness

A business lawyer should ideally be able to identify problems, provide solutions and refer you to other specialists when the need to do so arises. If you have specific legal needs, you need a lawyer who is familiar with them or can recommend someone who specializes in that area.

Knowledge

A lawyer also needs to be acquainted with your field and its legal issues. Your lawyer is expected to keep all your information confidential and adhere to the code of ethics that guide s the legal professions. An attorney should be ready and willing to give you and your team the information you need regarding the legal aspects of your business.

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Article Contributed by Abhishek Talreja

Embracing technology is inevitable for every business. Using social technologies can terrifically improve business productivity.

“By using social technologies, companies can raise the productivity of knowledge workers by 20 to 25 percent” (Source)

Building interactive communities that share information and collaborate is a need of the hour for businesses of today. A community of employees and partners that is engaged and motivated will surely steer ahead faster.

Social enterprise technologies can be integrated with mobile, giving employees the freedom and the flexibility to execute tasks from anytime and anywhere. Data analytics further ensures that each employee can work on a set of tasks that are most important for the business at a particular time.

Social media is already prevalent in the day-to-day lives of customers as well as employees. Businesses now have an opportunity to leverage this behavior to connect with both these types of audiences for a better outcome.

Social technologies take collaboration to the next level, helping teams to share knowledge and ideas quickly and more efficiently.

With an active enterprise social network, a business can align its employees and business processes with its organizational culture.

Here are some of the benefits of an enterprise social network:

Improved Employee Motivation

Employee motivation is directly correlated with their happiness and their ability to work in a harmonized environment. An active social network gives employees a platform to interact with each other and work towards a common goal. It helps in improving the productivity level of the teams along with their retention rate.

Ease of Internal Communication

An enterprise social network helps organizations to do away with email communication. It helps in sending out relevant information and knowledge to all the employees, quickly and efficiently. It also helps in reducing meeting times by simplifying team communication.

Brings Global Teams Together

Large enterprises usually have teams that are spread across the globe. A social network helps in simplifying communication and collaboration among such teams.  The system ensures that communication flows freely across geographical boundaries as well as departments.

Here are some of the key strategic steps for implementing an enterprise social network for your business:

Have a Vision

Before implementing an enterprise social network in your organization, you need to have a clear cut vision that drives it. It is essential to know what exactly the platform will do to improve individual process productivity and employee motivation. The role of the leadership team is important in understanding how knowledge and information will be shared on the platform. You need to ensure that there is genuine engagement and collaboration on the platform to get real benefits from it.  You should also figure out the requirements of the teams and their expectations from the system. You can use a survey like this to gather some key insights.

Get the Teams to Use the Network

The key challenge that any business would face would be to get the teams to use the social network on a regular basis. For this you need to get your Human Resource team to motivate the rest of the employees by communicating the program benefits. Employee orientation and training are some of the essentials for getting commitment from teams to be a part of the community. You need to communicate about the advantages that the system would bring to the employees, in terms of professional growth, improvement in productivity and more work engagement etc. Initially, you can get your leadership team to actively use the network. The strategy would give the network a user-base that will keep it active.

Cater to Each Department

The network must help each department in the organization. An employee from the finance department must be as happy as somebody from the marketing team or any other team, in using the platform. Building a community across the organization is important to get more acceptance.  Make sure that the system is user-friendly and similar to the popularly used social networks. You need to create a project team with representatives from each of the departments in the company. The project team members know the processes of their respective departments and they can raise their concerns, during the implementation of the project, if any.

Identify Active Users

You need to build a team of influencers for getting everyone in the organization to use the system actively. These are those users who are enthusiastic about it. You have to train your influencers to understand the benefits of the system and how to use it effectively. This will enable you to spread the word to the rest of the employees relatively quickly and easily.

Process Analysis

While implementing an enterprise social network, you need to identify all the business processes that will benefit from it. Develop case studies for on how each of the processes would get streamlined with the help of the implemented system. Present these studies to the respective departments while launching it. The more comprehensive you make your presentation; the higher will be its usage rate.

Internal Promotions

You need to promote the enterprise social network within your organization. Put it on your company website and run email campaigns, highlighting its benefits. You can also put up posters in your office premises. Be persistent with your marketing efforts, after you have successfully implemented and tested it. This will help you to ensure that the teams do not go back to the older ways of doing their tasks.

Measure and Analyze

You must have a predefined set of goals. The goals should be related to the overall productivity of employees and their level of motivation. Another important metric that you need to track is the employee retention rate. Understanding the return you are getting from your investment is crucial although it may not be simple to measure it in the beginning.

There are quite few enterprise social network platforms that you can try out as well. These include the likes of Tibbr, Jive, Yammer, SocialCast, Convo, Kaltura, Chatter, Zyncro, Socialtext and Workplace by Facebook. You can choose from these according to your business requirements. You can also opt for a customised solution business to fulfill specific business needs.  Have a plan and vision for your ESN implementation to get the precise outcome. Get your teams to get involved and it will be surely be a success.

Author Bio 

Abhishek Talreja is working as a Digital Marketing Manager with Enterprise Monkey. He has a keen interest in technology, and small business productivity.  Enterprise Monkey helps Small to Medium Enterprises and Not-For-Profits save time & money and increase revenue through automation, optimization & intelligence.

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21Mar

Preparing for Your Business’s Expansion

Posted by Pamela Swift in Operations

Article Contributed by Finnegan Pierson

Many entrepreneurs aren’t satisfied with only being the head of a local small business. For many business owners, their true dream is to oversee a rapid expansion of their company into a national or even international brand. However, actually performing such an expansion successfully isn’t easy. It can be a very complex and risky process. With that in mind, you should take all the precautions possible before launching a significant expansion of your company. Here are some tips that can help you prepare.

Set Goals that Are Actually Attainable

Before you launch an expansion, you must first set down specific goals so you can focus on laying the groundwork towards achieving those goals. However, unlike your lofty aspirations for your company, these goals must actually be something that can be feasibly accomplished.

Launching four new locations for your chain restaurant is one such goal. Alternatively, it may be adding ten new distributors for your fashion products or increasing revenue by $1 million. Overall, you need to know where you’re going, and it has to be something realistic. Keep in mind that the largest companies didn’t expand to that size over night. According to Walmart, it took the retail giant five years to expand to 24 stores.

Plan for Sustainability

Even if your goals are achievable with your current resources, they may not be sustainable. Keep in mind that even the big corporations often fail at expansions. As Harvard Business Review reported, Target’s expansion into the market in Canada failed spectacularly.

Determining sustainability isn’t a simple task. It requires significant number crunching. Factors you have to consider include your current infrastructure, your workforce, your suppliers, you distribution pipelines, your management personnel, your financial capital and more. You also have to examine your ratio of debt to equity. Whether or not you can sustain the growth you want with what you have needs to be determined by taking all these factors into account.

Consider Financing Options

An expansion of course needs to be funded. If you have enough funds in reserve to invest into such an expansion, you may be on firm ground. In other cases, you may have to borrow to allow the expansion to be realized. Beyond traditional lenders like banks you may want to consider other options. For example, you could implement marketplace lending. This is a form of peer to peer lending in which individual investors lend funds to borrowers directly. These kinds of transactions have become popular as of late and are mostly transacted through online lending platforms.

Whatever kind of lending you implement, make sure you have a solid plan for paying back the borrowed funds. If you borrow more than your forecasted revenues, you may find yourself in bankruptcy court. According to Fundivo, the number of outstanding loans to small businesses has surpassed 23 million.

Prepare Your Employees

To make an expansion happen, you need your personnel and workforce to on board with your plan. Certain employees may need to be shifted to other locations to oversee new branches. Make sure you alert the employees you have in mind of the need to move well in advance so they can make the proper adjustments with their families to prepare. It can cost up to $97,166 to relocate a single employee.

You may also need to institute new training programs to train employees on how to handle the expansion. Recruitment efforts will also of course have to be made to facilitate your company’s growth. Do the research to determine exactly how many new positions you will need to fill. Some may be full time. However, others may be part time positions or even temporary third party contractor work to complete the expansion.

Overall, you are likely to experience some growing pains as your company moves along with its expansion plans. However, if you have done the proper planning to prepare for the growth in question, you should be able to successfully exit the transition as a larger and more profitable company.

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