Keeping Customers Buying: At What Price?

Austere times suppress spending even in the face of no change in inherent demand for a good or service. How do your sales change as you raise or lower pricing?

How cyclical is your business? What discounts or premiums are built into the pattern of your cycle?

A cohesive pricing strategy with fine tuned price adjustments can help your business nuture demand into sales with retention of as much revenue as possible. All too often price adjustments are made on an across the board basis. Flatline pricing adjustments both produce the least optimal financial result for a given level of change and indicate a deficiency of either understanding the market or the capacity to execute skillfully.

The plot below gives a visual image to the dynamics of demanded capacity (1.0 equals sold out) at various pricing levels (1.0 is the average price of the standard product) across a multi-tiered product line (Economy through Deluxe).

The darkest green is the highest demand. The mountain ridge going from bottom-left to upper-right reflects the nature of lower prices for economy products and premiums for deluxe products.

A key learning from this study was that the standard plus product (ST3) was over-priced. Priced correctly it should equal or exceed the demand for the standard product.

An additional learning was the inferiority of the economy product, as no level of discounting seem to generate demands equivalent to the standard product. here the solution would be either improvement to the product or shedding of capacity depending upon which made more sense.

To read the full story of this specific applied pricing strategy and its ability to support a purposeful and succesful effort to raise revenues just click on the link for On The Case.

For more information on Metamorphosis Consultant and author Patrick O'Shei, click here.

Private Business Owners, & Monetizing Business Value, When Exiting

The economy is apparently emerging from recession-good news for all, hopefully to include those who need jobs. However, there's one group of people for whom the hard work, introspection and self-examination about their future cannot and should not be over: private business owners, especially those running small businesses.

Most small business owners are running hard to meet day-to-day obligations, serve customers, make payroll, hire the next employee, file the taxes. The economic downturn for many has taken substantial income out of their pockets.
For too many owners, the urgent reality of "today's market" overshadows the far more dramatically important: the looming and critical decisions about how they plan for their exit from their business-and how they package the business to enable this exit, at the time of their choosing, with the economic nest-egg they need.

I recently spoke with a group of about 20 private business owners, running retail service businesses, for whom this issue was front-and-center. They are "subject matter experts", technically adept in their fields, most in business for more than a decade, some for several. Many of their businesses gross $1-5MM annually. Like many, they're working hard to make ends meet these days.

Over the last 10 years, a fragmented set of studies paints a potentially worrying picture for business owners like these. While the data are a little sketchy, enough "data points" exist for the direction to be clear (these data sourced from entrepreneur.com; for more information, you might want to review these sources provided by some small-business experts: http://bit.ly/SmallBusStats ):

• 45%: proportion of small-medium sized business people who say their biggest regret was starting to save too late for retirement. Harris Interactive, September 2006
• 30%: proportion of self-employed business owners who say they have no retirement savings. National Association of Self-Employed, January 2006
• 30%+: percentage of private business owners who've done NO exit planning.
• In a related topic, Inc. Magazine cites a 2005 PricewaterhouseCoopers study of 364 CEOs of privately-held companies:
• 65% of the respondents said they planned to leave their company within 10 years.
• 51% thought they would leave via a sale to another company.
• 43% of the respondents said they had done little or no succession planning.
• #1 reason why private businesses don't sell: lack of planning by the seller. PriceWaterhouseCoopers study

These statistics worrying enough-but here's a final one to sharpen the point-this one courtesy of Rick Taft:

• 25%: estimated proportion of small businesses for sale, that actually sell.

Most private business owners, especially in smaller companies, are "fully invested" in their businesses-and yes, that means that "in the business" is likely where they've put "investment" that might have funded retirement. Most must be banking on "good luck" at that moment of successful sale-but apparently many haven't begun to imagine what's required in order to get there, quite yet.

As a small-business owner-how are you thinking about your exit? How are you positioned to manage your transition? 

We've assembled a high-level questionnaire to touch on the key areas related to preparation and "packaging" of a private business for sale (here). These questions don't assume that every owner wants to sell-but do assume that every owner seeks as much value as possible from what he/ she has created.

We welcome your feedback, comments, thoughts-and want to hear your experiences.

Inspirational Leadership - What Values Will We Embody?

IN a recent post (21 March 2009) in the New York Times, Thomas Friedman writes about his concern that we don't have any "adults in charge" - and that as a result, "politics worse than usual" prevail.

Mr. Friedman said, "Inspiring conduct has so much more of an impact than coercing it."  ... 
He goes on in one paragraph to quote Dov Seidman, CEO of LRN, on what it might look like to actually have leaders behaving like leaders - and engaging citizens, stakeholders (and now, yes, SHAREHOLDERS) around those values, motivations and principles that draw us forward - the greater values we hold in common.

"There is nothing more powerful than inspirational leadership that unleashes principled behavior for a great cause...  What makes a company or a government “sustainable" is not when it adds more coercive rules and regulations to control behaviors.  It is when its employees or citizens are propelled by values and principles to do the right things, no matter how difficult the situation.  Laws tell you what you can do. Values inspire in you what you should do. It’s a leader’s job to inspire in us those values.”

What are the best examples of inspiring leadership - in your home, organization, or nation - that have propelled you to virtuous action? 

Who has been the best example of this kind of leader for you?

Managing the "Right Stuff" - Leadership Lessons from the NBA

The No-Stats All-Star - NYTimes.com

I’m not a basketball fan. Before reading this article, I couldn’t have named a single player on the Houston Rockets – and in fact, had never heard of Shane Battier, who is the subject of this article.  Shane Battier, his approach, and the observations made about the larger “mode of managing” illuminated here have leadership repercussions what we focus on, where we find ourselves as a society and an economy today – and I can feel the tremors rippling through leader- and management development as well.

In summary:  Shane Battier is an individual with undistinguished individual statistics.  However, he does many of the "right things", the unselfish things, the ego-less things... those things that make his teammates' performances improve, that dramatically improve his team's overall odds of winning games - and increase opponent's odds of losing.  The Houston Rockets have been able to create a "meta model" of performance - and measure these intangible but very real contributions of Shane Battier - and in fact, of every Houston Rocket.

[Note to author Michael Lewis: Basketball isn’t the only ‘arena’ where we should be looking at team-level performance metrics (and the ways that individual performance affects the team and other members on it). Basketball isn’t the only place where we should be attending to “team dynamics” and team performance – instead of individual performance. It isn’t the only place where we should be thinking about metrics and measures that really matter to the long-term health and vitality of the enterprise. Just thought you’d want to know.]

Our economy – and esp. the financial system, set up with incentives and loose regulation for the Masters of the Universe, could drive sales (see this note elaborating a view on the financial system meltdown). 

Apparently, however, this system could not review the odds as well as Daryl Morey and Shane Battier, apparently can’t digest and respond to data as well, or understand from the data what it is that they should be doing.  Apparently, this system and the leaders and players in it, could learn a lot about managing – and about winning, overall as a team - from watching the NBA, and from studying the Houston Rockets.

The No-Stats All-Star - NYTimes.com

Article Excerpts:

Statistical Anomaly His greatness is not marked in box scores or at slam-dunk contests, but on the court Shane Battier makes his team better, often much better, and his opponents worse, often much worse.

Here we have a basketball mystery: a player is widely regarded inside the N.B.A. as, at best, a replaceable cog in a machine driven by superstars. And yet every team he has ever played on has acquired some magical ability to win.

He may not grab huge numbers of rebounds, but he has an uncanny ability to improve his teammates’ rebounding. He doesn’t shoot much, but when he does, he takes only the most efficient shots. He also has a knack for getting the ball to teammates who are in a position to do the same, and he commits few turnovers. On defense, although he routinely guards the N.B.A.’s most prolific scorers, he significantly ­reduces their shooting percentages. At the same time he somehow improves the defensive efficiency of his teammates...

... the big challenge on any basketball court is to measure the right things. The five players on any basketball team are far more than the sum of their parts; the Rockets devote a lot of energy to untangling subtle interactions among the team’s elements. To get at this they need something that basketball hasn’t historically supplied: meaningful statistics.

There is a tension, peculiar to basketball, between the interests of the team and the interests of the individual. The game continually tempts the people who play it to do things that are not in the interest of the group.

... [in the game], the player, in his play, faces choices between maximizing his own perceived self-interest and winning. The choices are sufficiently complex that there is a fair chance he doesn’t fully grasp that he is making them.

... instead of grabbing uncertainly for a rebound, for instance, Battier would tip the ball more certainly to a teammate. Guarding a lesser rebounder, Battier would, when the ball was in the air, leave his own man and block out the other team’s best rebounder.  A player whom Morey describes as “a marginal N.B.A. athlete” not only guards one of the greatest — and smartest — offensive threats ever to play the game - but renders him a detriment to his team.

Knowing the odds, Battier can pursue an inherently uncertain strategy with total certainty. He can devote himself to a process and disregard the outcome of any given encounter.