"COMMON SENSE BUSINESS" * By Stan Rosenzweig
Common Sense Business Column #13
By Stan Rosenzweig
Learn how to charge more
Weak pricing power is worse than business failure. At least with failure you
get put out of your misery. You go home, get drunk (optional), get a good
night’s sleep and start over in the morning. When failure isn’t imminent,
however, you don’t get that luxury. You just drag on and on in a timeless
business purgatory.
But, wait a minute. Aren’t a lot of bright successful people in the same
boat? In the airline business, for instance, smart executives are getting their
clocks cleaned by upstart startups not weighed down with legacy salary and
benefits overhead, not to mention an overabundance of seats and an under-supply
of fuel.
In manufacturing, General Motors, no longer the Everest of auto making, is
now just a junk yard mountain of red ink and rusted out memories. With 2.5 as
many pensioners as productive workers, $800 gets added to the cost of each car,
which their foreign competitors don’t have to do.
In days gone by, airlines, auto makers and the rest of us would raise prices
to cover rising costs. That was the beauty of pricing power. Today, so called
"street prices" are not decided by us, but by consumers, and Walmart. So, if you
are ever to get out of this rut, you have add value that is price controllable
by you. Here are some examples of how it’s Being done;
When the Chinese commoditized the world market with unbranded $2 computer
mice, Logitech elevated the desk rodent with wireless bluetooth mice and usb
port mice, at much higher margins. Cell phone companies reversed the drop in
average monthly billing by adding wireless picture service and wireless music.
Think pictures and other downloads are free? They’re not. They’re high margin
add-on business.
Airlines are planning to give us new reasons to get on board with convenient,
short distance air taxi service between nearby towns at a higher cost per mile.
And Ford’s new SUV hybrid improves its margins by meeting two American needs. It
combines our need to conserve energy with our insane lust to straddle a big bad
machine to go to the dry cleaners.
Apple looked in its warehouse, scratched its head and asked "How can I make
this stuff seem cool?" The resulting iPod is a societal contribution that
finally keeps kids from yelling at each other on the school bus. Hey, at $400
per kid, it’s cheaper than Ritalin.
Look through your own warehouse and identify something you can change for the
better. Then, like at Priceline.com, start naming your own price.
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