Retail isn’t really about prices, it’s about profits. Adjusting prices is definitely one way to address profits, but the most successful merchants also ask, “what about the wholesale cost of my incoming inventory?”…
It’s that time of year again! The days are getting shorter, the air is getting colder, and the in-laws are hunting for bargains on airfare. The holidays are upon us and that means it’s retail’s time to shine! - or at least brace. Here are a few stocking-stuffers to help you maintain firm control even during the busiest times...
Ever hear the saying, “Time is money”? It’s true, but people don’t often realize the extent to which it’s true. Of course, time is precious and irrecuperable and all that, but let’s focus on the financials. (This is a business blog, after all). The value of time is not fully measured by hourly rates or annual salaries. Time as money is far more valuable than most people think...
We at Shopventory work with thousands of merchants all over the world. So, we know the words "year-end inventory" often strike terror into the hearts of most retailers. However, there's no better time than an end-of-the-year inventory count to get your business organized and be certain you're starting the new year right...
As the old adage goes, imitation is the best form of flattery. However, when you have unique concept that is your baby, small business copycats can drive a person crazy. Especially with so many creatives as our clients, we know how important it is to protect your ideas and artistry from intellectual property theft. NFIB recommends filing the appropriate patents and trademarks as soon as possible, as well as creating a Google Alert to let you know when any other business might be plagarizing your name or product model. One of the more effective ways to combat intellectual property theft of products on the Internet is filing a "trade dress. This is proving to be much more effective even than a patent, because it falls under the Digital Millennium Copyright Act. There is no debate. Either [the offending party has] to remove it from the Internet and stop selling it or Google will shut them down,” she says. “A trade dress isn't for everyone. It protects the look of a product. But in my case, it’s worth a lot.”
That said, there are plenty of ways to copycat that are just plain legal. Don't fear those copycats or try to fight them—simply be better than them. Use the competition as healthy motivation to improve your products, provide better customer service, spruce up your shop and do just about everything better.
Copycats are a tell-tale sign that you're doing something right, so take it as a tip of the hat to the hard work you've put in to make your business what it is. Generally, copycats are not viciously trying to put you out of business. They recognize a winner and want to piggyback on your success. A recent article from PandoDaily argues that type of validation is hugely important and that copycats are actually the best thing for your business. "Ultimately, the strategy that wins out is to be your own architect. Losing sleep over copycats stealing your business model and making reactive decisions to squash them lets them win. Worse, it taxes your team in their efforts to make something truly great."
Same goes for the flip side. Often times, being a copycat (to some extent) can actually be good for your business. Chances are, someone somewhere was also running a business like yours before you were. Borrow strategies and ideas from other successful companies (whether from your neighbors down the block or from sister-businesses in other cities) and implement them in way that makes them new and fresh for your customers. There's no need to constantly re-invent the wheel, just make the wheels at your shop more appealing than others.
How to you act (or react) when it comes copycats? Let us know in the comments!
In 2013, there were an estimated 8.6 million women-owned businesses in the U.S. generating 1.3 trillion in revenue and providing jobs for nearly 8 million people. OPEN for Women recently launched their CEO BootCamp, intended to foster confidence, competence and connections among this growing community of women entrepreneurs.
OPEN held an event in Los Angeles this week that was partially broadcast online, so we tuned in and thought we'd share the most poignant highlights from the video, applicable (and actionable) for any CEO out there!
1. Listen to what your clients want. This was actually a takeaway from the intro video, as well as the meat of the presentation. It's so important to be flexible and tune in to what your customers really want. The example in the intro was a natural, eco-friendly apothecary which pivoted to offer clients full-service skin care. How did the owner make that decision? Everyone kept asking if they could book facials. Simple as that.
2. Jump before you're ready. We loved this indirect tip from Alexis Maybank of Gilt, the hugely popular online sample sale that changed the retail industry. Gilt's first sale launched just four months after the founders started the company, before they even created the product returns page. It's never going to feel like the absolute perfect time to press GO, so why not start now?
3. Don't be afraid of the naysayers—learn from them. Having coffee with people who poke holes in your business plan are valuable. It helps you fill the gaps you might not've seen prior. And it helps you more confidently answer those hard questions when they come later from potential investors or customers. At the same time, maintain your focus and don't let them deflate you.
4. Build a strong human foundation. "It's human nature to hire people exactly like you, but that doesn't make for the strongest team," offered Maybank. You need people to push back, you need people to make the important lists, you need people to be creative and skilled in different ways than you are. No matter what, you need everybody who works for you to be flexible and understand that their role today won't be the same as tomorrow.
5. Connections are everything. Make introductions, take meetings, introduce yourself, be open and be generous. A supportive network starts with you and this was a common thread throughout all of the presentations and throughout CEO BootCamp itself.
6. Know when to let go. Denise Wilson of Desert Jet started her private plane charter company as a one-woman show, but in order to take her business to the next level, she need to get out of her own way, so to speak. She recognized that she had to let go of some of the minutia and be the CEO, not the pilot/mechanic/marketing manager/bookkeeper/etc.
What are some of your biggest challenges as a female entrepreneur? Any tips you've learned along the way? Let us know in the comments!
Pricing can be a bit tricky until you get the hang of all the formulas that help you decide what each item costs. But what about when you add psychology to it all? Thomas Nagle and Reed Holden, authors of The Strategy and Tactics of Pricing, determined the nine principles, or "laws," that affect consumers' psychology in regards to their purchase decisions. With these laws, you can better adjust your price strategy knowing the psychology of your customers.
1. The Framing Effect Customers are more aware, or price sensitive, when they consider the price as a loss instead of a worthwhile gain. They also are more aware of pricing when prices are not paid as part of a bundle, but separately.
You've seen the infomercials that eagerly tell you to purchase their product for only five easy payments of $49.99, right? We know that it's really just $249.95, paid in full or in parts. But marketers rely on this trick because they know customers are likely to veer away from the higher number if it is displayed. By doing this, marketers are reducing the "loss" which customers perceive.
2. Reference Price Effect When a customer can directly compare the price of a product with a competitor, price sensitivity increases.
Knowing that stools at Wal-Mart and Target are cheaper than at a small shop, a customer may be wary of the price difference. This effect is difficult to work with because each customer has their own priorities and values when it comes to products.
This is why you shouldn't bother making an argument that your product is better. Rather, you should talk about why your product is different.
3. Fairness Effect Customers are more price sensitive when they consider a product's price to be past the point of "fair" or "reasonable" depending on the context of the purchase.
Similar to the Reference Price Effect, this concept of fairness and what the customer feels they should be paying is relatively unpredictable. Customers may have an average price they are willing to pay for a product, but there are always outliers above or below the average.
4. Shared Cost Effect
If you and three friends have a barbeque, the price of all the food appears lower because the amount you pay is only a fourth of the total price. The smaller the amount of the product price customers pay for themselves, the less price sensitive they tend to be.
Difficult Comparison Effect
If a customers feels that the effort required to find information about the best price, competing products or best solution is excessive, they'll less likely to be sensitive to the price. Similarly, if they have to compare an unknown product to a familiar one, and it take a long time for them to discern the difference, they'll probably select the familiar one regardless of price.
Customers may also be less inclined to find alternatives on the fly if they are short on time or are given a sense of urgency. This is exactly why limited-time offers work so well.
6. Switching Costs Effect The higher the inconvenience a customer must make to switch providers, the more price sensitive the customer becomes to look for alternatives. Switching costs take many forms - investment of time, resources, complexity of purchase, number of people a buyer needs to convince (like their husband), etc.
7. Price-Quality Effect Customers worry less about the price if higher prices denote higher quality. Creating a perception of exclusivity, rareness or quality will persuade the buyer to be ok spending more. The product itself doesn't need to be of the highest quality. If the branding denotes a high-quality ethos, customers will spend.
Do you truly believe that a shirt with a Nike Swoosh is worth on average $15 more than one without? It's the perception of Nike being a quality brand that convinces customers to pay the higher price.
8. Expenditure Effect
Customers are more price sensitive when the purchase accounts for a significant percentage of a customer's available income or budget.
When customers are on a tight budget, they will think harder about whether or not the product is worth the purchase, compared to a spendthrift or a person with enough money to spend wildly. Knowing your ideal customer will help you decide pricing; delving deep and considering his or her spending means and income is the sort of detail that will help direct your business.
9. End-Benefit Effect Customers look at the overall big picture of their purchase: the end benefit. There are two parts to this:
- Derived Demand - The more sensitive customers are to the end benefit price, the more sensitive they tend to be to the prices of the products that make up or contribute to that benefit.
- Price Proportion Cost - This refers to the percent of the total cost of the end benefit determined by a particular component that contributes to the end product. The smaller the components share of the total cost of the end product, the less sensitive customers will be to the end benefit's cost.
This applies to high-priced products that have multiple components contributing to that cost (ie. Computers, entertainment centers, exercise packages/programs, etc.). A customer considers what warrants that high price and decides if that is worth it for them in the end. As you've probably read, some of these effects overlap. One effect can lead to another. Hopefully you have a better idea of the purchasing mentality of customers and can use it to your advantage. These will not help you predict the perfect prices that will make some buy every single time, but you can understand why someone may not purchase one thing. And also, it should be encouragement to look into your competitors so you can outwit their prices.
For more information on price sensitivity and consumer psychology, read Holden and Nagle's book, The Strategy and Tactics of Pricing. Or leave a comment below!