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What Can You Do to Cultivate Customer Loyalty?

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Recruiting a new customer is a victory, the goal of every business owner and Freelance professional—but you can’t exhale yet. When it comes to making money it’s not only what you make, it’s what you keep, and that folk wisdom applies not only to sales revenue, but also to customers. The real genius of being in business is learning how to retain customers.

Building a thriving community of customers is foundational to sustaining a business entity; strategies dedicated to nurturing customer loyalty by persuading them to continually do business with you is an important part of a comprehensive marketing plan. Loyal customers are repeat customers; they also refer new customers and that makes it imperative to develop strategies that generate and encourage customer loyalty. Neglecting this function can easily result in customers you worked so hard to attract eventually moving on, perhaps to do business with a competitor.

Unfortunately, many businesses struggle to retain customers, a consequence that can diminish sales revenue and weaken the ability to survive. It has long been known that implementing strategies designed to retain customers is fundamental; customer acquisition cost has increased by nearly 50% since 2013, making it so much more expensive to acquire a new customer, as compared to the cost associated with retaining an existing one, further proving the value of repeat customers and promoting the loyalty that stimulates repeat business.

Customer loyalty is the happy result of the relationship between satisfied customers and the businesses they know and trust. Building a loyal customer base for your entity brings benefits in at least two ways—it discourages customer churn and therefore limits the marketing dollars you’d need to spend trying to retain them and second, loyalty helps you grow and preserve your current group of customers. Not only that, promoting loyalty can also convince customers to become cheerleading advocates for your brand.

In other words, encouraging customer loyalty can do wonders for your business, like enhancing sales revenue, strengthening customer relationships and brand building. You just need to work at it consistently! Below is a list of customer loyalty strategies, one or more that’s sure to be useful for you.

Exceed expectations

Customer expectations are feelings, actions and outcomes that customers anticipate will result from their experience with your brand, from first impressions to final purchase and on to using the service or product that was purchased. You’ve probably heard the oft-repeated advice that urges businesses should “under promise and over deliver”—you do that by exceeding customer expectations. So, if you promise a customer that you’ll follow-up to answer a question or resolve a problem within 24 hours and you contact the customer within six hours, you’ve exceeded customer expectations and planted the seeds of loyalty. Common customer expectations include:

  • Quality product. Product quality is at the top of most customer checklists. They want a product that meets their needs and delivers on the promises of its description, photos and reviews. 
  • Great customer service. Customers expect businesses to provide friendly and knowledgeable customer service before, during and after they make their purchases.
  • Value for price. Value is represented by the satisfaction customers feel when the price of the product or service seems appropriate (or like a good deal). Perceived value for money spent is subjective, but customers want a price they believe is justified.
  • Personalized interactions. Customers want to feel like the company values them by providing an efficient, pleasant and personalized buyer’s experience.  

Exceptional customer experience

Promoting customer loyalty involves more than offering products and services that satisfy the needs, goals, or problems of customers. To truly win over a customer and create loyalty, you must persuade them to become your cheerleaders. An exceptional customer experience is the true foundation of customer loyalty. Superior service is integral to encouraging customer loyalty and promoting positive word-of-mouth that differentiates you from competitors.

Customers who are pleased with the experience your brand provides, and also trust the reliability and quality of your products and services, are positioned to become loyal customers. They’ll usually be happy to share their favorable experiences with friends, family and colleagues and give your brand enthusiastic endorsements that commonly result in referrals of new customers and repeat business. These demonstrations of customer loyalty are a powerful, and inexpensive, way to reach new customers and build your customer base, sales revenue and brand.

  • Surprise and delight. To create a positive, memorable experience for your customers, remember that it’s the small and unexpected things that keep them coming back.

Expertise

Because your goal is to attract and retain customers, generate referrals and recruit brand cheerleaders, know that you’ll promote those aims by demonstrating that you are a reputable and trustworthy expert in your field. You’ll build credibility and customer loyalty by sharing your professional know-how with customers and prospects.

  • Educate customers. Content marketing is all about educating customers and it is now the marketing strategy that most customers prefer. The purpose of marketing is to persuade prospects to do business with you. For example, if you are a Freelance gardening and landscape specialist, you would do well to create videos, and/or publish a monthly newsletter or blog that focuses on helping plants survive winter and how to prepare a garden for spring plantings. Throughout the seasons, new posts will address how your readers can create a beautiful garden. Distribute your customer/ follower education info to your email list and encourage list members to subscribe to regularly receive the info.

Reliable

Conscientiously build a reputation for being consistent and dependable to further support customer loyalty for your brand. For example, if you promise that a product will be delivered within 48 hours after purchase, take steps to ensure delivery occurs within that time frame. Or if the graphics for the marketing campaign brochure you’re creating for a client must be ready for a 10:00 AM meeting that your client has scheduled with his client, be prepared to work as long as it takes to produce a perfectly designed and edited deliverable at the agreed-upon time and place, to make both your client and yourself look good.

Flexible

While it’s important to have policy and procedure guidelines in place, it is smart to remember that customers have circumstances and problems they grapple with. So, if you’ve established a 14-day return policy, but a customer wasn’t able to return the product within that window, perhaps because of a business or family emergency, graciously accepting the return and offering either the usual refund or store credit may be the best course of action. It’s likely that you’ll gain much more than you’ll lose and it will be an effective way to encourage customer loyalty.

Communicate

One of the easiest ways to keep in touch with customers is through email. Ask for customer email contact info after completing purchases, or while they explore your sales/marketing funnel during the buyer’s journey, so you can send information that a prospect would like to see, or keep existing customers updated on new products, or perhaps follow-up with them after a sale to inquire about their perception of their customer experience. This information can be used to improve customer satisfaction.

Studies have proven that personalized emails have a transaction rate 6 times higher than impersonal emails. Addressing recipients of your marketing emails by name, sending birthday or holiday greetings to existing customers, or thanking a customer for a recent purchase are the types of outreach that customers appreciate. Personalized messages can help create an emotional bond between your brand and your customers that promotes customer loyalty.

Social media platforms will help to bring your customers into a community. Communities are an effective way to start conversations with your customers and also encourage user-generated content. You might start by inviting customers to share pictures of themselves using your product for posting on Facebook, Instagram, or Pinterest, for example.

Feedback

Whenever a customer makes a purchase, request their feedback with an email questionnaire or online survey link sent to their email (you can also place that link on your company website). It’s important that you know what customers like or dislike about your products and/or services and how they feel about your customer service and experience. If you aren’t aware of this information, you will be unable to make changes that will make your customers happy. Always be ready to listen to customers and address their concerns a timely manner. Make it easy for them to get in touch with your company by clearly displaying the email address, phone number and social media links on your website and in emails.

  • Make it easy to communicate with a real person. While technology has made it easy for customers to find information regarding your product or service, it’s a mistake for business owners to hide behind a wall of tech. There’s going to be an event that causes a customer to feel the need to speak with a real-life person. Make sure that your contact information is easily located on your website and in your emails and follow-up on inquiries in a timely fashion.
  • Spend time with customers. Speaking with customers is good business—they’ll immediately recognize that you care about them as individuals and want to provide a pleasing customer experience for them. It’s Relationship Building 101. Furthermore, you can learn a few things, such as what motivates them become, and remain, your customers. What you learn in conversations with customers is invaluable—the intel can be used to generate more specifically useful content and support the development of more effective marketing campaigns. Moreover, you might even be able to recruit customers who are especially happy with your brand to share their experiences in testimonials or case studies.

Transparency and integrity

There will be days when things fall apart. Rather than retreating into excuses and denial, put your big boy/big girl pants on and be honest with customers about the bad news. Mistakes happen; customers know this and when you face up to the problem, customers will respect and appreciate your honesty. Don’t get defensive or over-sensitive if you get called out on something that was your fault. Instead, use emails and social platforms to take responsibility and resolve the issue.

Train employees

Employees are part of your team and they are capable of generating customer loyalty—or destroying it. Employees who buy into your brand promise and culture are more likely to themselves feel loyal toward your company and inclined to share their enthusiasm with friends, family and the customers they assist. Make sure your employees have the proper training and tools to enhance the customer experience and keep them updated about company developments that will support their work. Always treat employees with respect and listen to insights and suggestions they have to streamline procedures, sharpen your marketing campaigns and pay special attention to any rumblings of customer discontent.

Incentives

You want to give customers reasons to keep coming back and that’s when incentives can be helpful. Your give-away could be as simple as a 10% discount on their next purchase that is at least $50 or giving them a free (relatively inexpensive) branded item after their tenth purchase. Instituting a loyalty program might include the following.

  • Points System – Customers earn points which can be used for a reward.
  • Tier system – Provide a small reward and increase the reward over time.
  • Support programs around your customer’s values – Customers aren’t just concerned with monetary rewards, show your support for programs that they support.
  • Coalition programs – Team up with a related company for deals outside of your company

Happy New Year!

Kim

Image: © The Next Crossing. Marrakesh, Morocco 2017

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Help Customers Trust Subscription Pricing

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The mere thought of guaranteed revenue arriving each month like clockwork will bring a smile to the face of every business owner. Recurring revenue is a dream come true; now you’ve got the cash-flow to pay expenses on time and in full. You can replace or upgrade business equipment when necessary. You can invest in professional development that makes you more knowledgeable, and therefore more useful to customers, and more respected in your professional community as well. Recurring revenue enables you to plan for the future of your business with confidence—and sleep well at night.

The leading way to generate recurring revenue is by introducing a subscription payment option to your business. Savvy Freelancers and SMBs are reviewing the buying habits of their best customers to determine if converting certain of their products or services to the subscription model can be successful. In the B2B sector, subscription pricing is a payment option where customers pay a recurring fee, typically monthly or annually, to receive access to a product or service, most often cloud-based software or storage, i.e., software as a service (SaaS). Freelancers and SMBs might offer subscription pricing for coaching, marketing, network and website management, or bookkeeping services.  

Thoughts of a subscription payment plan may make business owners salivate, but the process requires careful thought and planning. You’ve got to get things right from Day One and that is especially true for service-based businesses where value is not always immediately recognized. SaaS subscriptions, network and/or website management and bookkeeping services, on the other hand, have a readily apparent value that customers and prospects can picture themselves needing on a regular basis. For this reason, non-IT related service-based subscriptions may face challenges.

  • Value perception: To establish trust in a subscription payment plan, the business must demonstrate unambiguous value to prospective customers. If the customer begins to feel that s/he is not getting their money’s worth, there will be a risk of service cancellation. 
  • Service enhancements: There’s an ongoing customer expectation to continually sweeten the pot with (free) service upgrades. Global enterprise companies (like credit card companies and banks) can afford this strategy and the expectation has been set. SMBs and Freelancers may struggle to fulfill this wish, however.

Talk up value

Your subscription pricing model and everything related to it must align with the perceived value of what customers get in return. Customers must be able to see and/or believe the value of your product or service, consistently and at every touch point. Your job, Freelancer or SMB owner, is to continuously communicate that value, so customers will understand the benefits they’ll receive when opting-in to the subscription. Only when that is achieved will customer concerns fade and trust in your subscription grow.

Communicating value begins at the introduction of the subscription model sales process; the offer of a free trial will play a pivotal role in building the value you want to demonstrate. A short free trial invites prospective subscription customers to test the product or service, if it is new to them, or experience how subscription pricing can work to their benefit. Businesses acquired 50.0% of subscribers through trials, making it one of the most effective customer acquisition strategies. Additionally, as customization has become a growing preference, add-ons have become an essential part of personalized offers and 28.1% of customers offered add-on options to allow customers to tailor the subscription to their needs.

Prioritize quality control

The engine of a successful subscription-based payment model is customers who feel confident and happy to use and pay for your service or product. Your quality control procedures will play an integral part of making that possible. You must be forever vigilant and closely monitor the quality of your product or service performance and delivery, customer service/customer experience and the payment process.

Embed quality control into your workflow by making it part of someone’s job description (yours, Freelancer friend!) to confirm that customer expectations are met, respond to and document glitches and monitor the turnaround time for resolving issues. BTW, attentive quality control will make you quickly aware of brewing customer concerns, knowledge that can, for example, reveal service enhancements that customers may appreciate. You may discover another way to instill trust and value in your company. 

Expectations and the customer experience

Begin setting expectations when prospective customers first interact with your subscription sales funnel. Life is about managing expectations and it’s in your interest that every customer understands what is (and is not) included in the subscription you want them to buy—e.g., accessible services, products, tools, supporting technologies, change orders and how to reach customer service on the phone. In order to make an informed decision, subscription prospects must understand and accept what the service offers, channels for contact and the level of support offered by your organization.

Be advised that available payment methods are now an essential part of the customer experience. Economic uncertainty has made customers exceptionally price-sensitive and potentially influenced by their satisfaction, or disappointment, with the payment options you make available, along with the add-ons or upgrade options and other customization features. Debit cards remain the most popular payment method (68.6%), but the desire for access to alternative payment methods is now undeniable. Including subscription payment methods that were once seldom available can address the growing preference for a convenient, seamless payment experience that recognizes customer needs.  Alternative payment methods have been proven to generate more revenue (5.0% renewal invoice decline rate) and help prevent fraud (0.9% of failed fraud transactions). 

Customer retention

The smartest business owners will implement customer retention strategies designed to discourage customer churn and grow the subscriber base. The customer experience presents numerous opportunities to appeal to customers by offering potent sweeteners that may include loyalty rewards, product or service bundling, hybrid models, subscription pausing options, or other special offers designed to promote customer satisfaction and loyalty. In 2023, the average consumer churn rate was 4.1%, staying consistent year-over-year. As customers become more particular with spending, their purchases become more intentional, making them less likely to churn once a decision to buy has been made.

BTW, subscription pauses are a convenient alternative to sidestep cancellation when a customer needs relief from monthly payments or product deliveries. 39.7% of merchant sites enabled the pause functionality and prevented over 400,000 plan cancellations.

Thanks for reading,

Kim

Image: © Lucy Lambriex /Getty Images 2015

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Thoughts on B2B Pricing

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The prices assigned to a company’s products and services are an important element of the company’s marketing strategy. Pricing strategy plays a key role in determining a company’s revenue and overall financial picture and cannot be treated as an afterthought. Those of you operating in the B2B sector especially will note the codependent relationship between product and service pricing and the ability to attract and retain customers. B2B purchases are complex, involving multiple stakeholders, an extended sales cycle and high-value contracts. According to Marketing Chart, 63% of B2B buying committees consist of at least three decision-makers.

Identifying the optimal price range is critical business intel. If prices are too low, it becomes difficult to attain the sales revenue goal; there will be extra work and worry caused by the need to fill the sales pipeline with evermore prospects and hope to convert enough of them into paying customers. Price at a level that prospects find excessive may alienate them and possibly drive them instead to do business with a lower priced competitor. So your mission here is to find a sweet spot price range that prospects will tolerate and become your loyal paying customers.

Evaluate your industry and competition

As you contemplate pricing you will benefit by first identifying benchmarks by investigating pricing norms, in particular, standard mark-ups and the typical profit margin range in your industry. Next, check out the prices of a few competitors. Evaluating these numbers will also reveal whether or not your product and/or service production or acquisition costs are reasonable relative to the typical selling price range found in your industry and used by competitors.

Be advised that while knowledge of competitive pricing will help you determine an acceptable price range for your products and services, it would be ill-advised to merely apply a competitors’ prices for similar items to your line. Let factors that are unique to your situation guide your finalized pricing strategy.

Determine your pricing potential

It’s critical to identify a price range for your products and/or services that aligns with your brand and market position and is also accepted by your target customers. Knowing where on the value spectrum customers classify your products and services is essential information for every business and that knowledge is particularly important for pricing. You’ll confirm pricing potential when you understand customer perceptions of your company value and brand position. You may decide against pricing at either the upper or lower extremes of customer price tolerance but by considering key factors, including acquisition or production costs, competitive pricing intel and knowing the price tolerance of target customers, you can determine which end of the pricing spectrum will be most advantageous for your line.

Remember also that Freelancers and business owners in nearly every industry continue to grapple with the unfortunate effects of depressed wages, which for many have not kept pace with inflated prices that were declared “over” in 2022 but that we can’t seem to outrun. Customers remain cautious with their spending and most companies realize that pricing competitively to attract and retain customers is a must. Here are some common B2B pricing strategies that may help you find your sweet spot.

Cost-plus pricing

This strategy employs an uncomplicated mark-up formula. The business owner calculates the acquisition or production costs of the product or service, adds a certain sum for overhead expenses such as rent, payroll and utilities and arrives, tacks on the desired profit margin and arrives at a price that will cover all costs and deliver the margin. Also called mark-up pricing, this strategy focuses on internal factors like production or acquisition costs rather than external factors like brand reputation and competitive prices. 

Premium pricing

A premium pricing strategy aims for the maximum amount a customer is willing to pay for a product or service, rather than focusing on production/acquisition costs, competitive pricing, or other factors. Selling your product or service at a premium can mean deliberately pricing higher than competitors, as a way of demonstrating to your target market that your product or service is of a higher quality and more desirable than what’s sold by competitors and is therefore worth the additional cost. If marketing and branding activities convey high-end status and particularly when customers and influencers provide good word of mouth, a premium pricing strategy will be a brand-building asset and fulfill customer expectations.

Loss leader pricing

AKA penetration pricing, this strategy is enacted when a business assigns an irresistibly low price to a high-volume product or service with the intent of enticing customers to abandon competitors who sell a similar product or service at a noticeably higher price. The hope is that customers drawn to the loss leader will be motivated by the availability of other desirable items, and already happy with their bargain-priced item, will purchase those products or services that bring in a higher profit margin and make up for the low, or nonexistent, profit margin of the loss leader. Some B2B companies use a “freemium” version of loss leader pricing and allow new users to access a limited version of a product or service at no cost in the hope they’ll convert to paying customers. The strategy can also be effective for lead generation.

Trader Joe’s customers will be familiar with the chain’s quite successful use of loss leader pricing. For 20+ years, bananas at Trader Joe’s were priced at 19 cents each (increased in March 2024 to 23 cents each, as a result of rising transportation and farming expenses). The price of an organic banana was returned to 29 cents each, after being priced at 25 cents each for a few years. Trader Joe’s Markets is a privately held company and does not publicly report income, but it is believed that annual earnings are about 13 billion annually—so loss leader pricing appears to work for them.

Competitive pricing

Monitoring competitive pricing is time-honored business strategy. When the pricing strategy is influenced by a close competitor, prices are set relative to rivals and follow the going market rate for similar products and services. Prices may be set slightly lower or higher depending on factors such as product quality, target market and the marketing strategy. Proprietors of relatively new B2B companies often benefit from using this strategy because existing brands have already determined what customers will pay for similar products and services.

Tiered pricing

Most businesses serve a wide range of customers who have different business needs and operate under different financial conditions. Tiered pricing addresses the diversity of customers by offering price points for products and services that reflect the addition of features included at each level. Lowest cost versions include only basic features and highest price versions offer the most, and most desirable, features. Tiered pricing can increase revenue by enabling the business to sell to a wider range of customers.

Tiered pricing can also support the pricing strategy known as price anchoring. By offering three or more pricing tiers, the business can position its premium option as a psychological reference point as the best value for the money and use this story to encourage customers to accept up-sells.

Subscription pricing

With a product or service that requires repeated sales, e.g., access to software as a service (SaaS) or attending a monthly networking meeting, Freelancers and other business owners will turn to the subscription pricing model. Subscription pricing is usually a win-win for both customer and business owner because monthly costs are locked in with (typically) an annual contract. Both parties know the amount of money that will be paid or received each month or quarter. Subscription pricing delivers the advantage of expense (the customer) and revenue (the business) predictability that will encompass a predetermined length of time that also supports business planning for both the customer and the Freelancer or business owner.

Thanks for reading,

Kim

Image: ©TK Kurikawa for Shutterstock 1457812421

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Make Sure the Price is Right

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If your goal is to build a thriving and sustainable business entity (and I know that it is), it’s imperative that you determine the right price point for the goods and services you sell. Establishing the most advantageous price range is an element of your marketing strategy. That means your pricing strategy must align with both the brand identity and market position occupied by your products and services and also be acceptable to target customers. Understand where your company is—and where you want it to be—in terms of perceived brand value. Do you consider your company to be a discount option, middle-road, or a luxury option?

Pricing is integral to business profitability and a cornerstone of business success. Experienced business owners and leaders agree that a pricing strategy can make or break a company—set prices higher than what customers care to spend and sales are lost; set prices too low and revenue potential is not achieved.

Surely, you’ve noticed that pricing has been a sensitive topic over the past few years, as inflation that (allegedly) topped out in 2022 caused the prices of numerous goods and services to rise as business owners sought to protect their profit margins from increases their organizations faced for the raw materials, acquisition costs, transportation and other expenses associated with bringing goods and services to market.

Unfortunately, readers of this post—mostly, Freelance consultants and SMB owners—often lack the financial cushion to withstand all but the briefest periods of economic adversity. Enterprise companies and other well-capitalized entities are better equipped to absorb both the rising costs of product production or acquisition and customer push-back associated with higher retail prices. Instead, the “little fish” are squeezed between inflated business costs and customer reluctance to accept price increases. Their reluctance may stem from budget cuts that inhibit B2B sales and in the B2C sector, the problem can stem from wages that may not have kept pace with inflation. Both scenarios can lead to prospects who second guess their need to spend and result in shrinking sales revenue.

As was discussed in last week’s post, being in business is all about solving problems, is it not? In order to survive, companies large and small must at least generate enough revenue to cover operating costs. Increasing the price of your goods and services might make you nervous; it may appear that you’ll lose a customer or two and that is worrisome. Keep in mind that customers are aware of inflation. They also understand that you are in business to make a profit. Optimizing your pricing strategy is the best defense. Offering a simplified version of your products or services can perhaps be an attractive option that may allow you to retain price-sensitive customers.

Calculate production/ acquisition costs

Let’s start with the math: (Price – cost) x quantity = profit. Before pricing your products or services, you must calculate the time and money you spend to obtain or create them. Tally the costs of each item purchased and each hour spent to produce, acquire, or create each product or service that you sell. So, if you purchase at wholesale products that you resell, calculate the costs of buying and shipping those items. If you manufacture the products yourself, or outsource the production/manufacturing, calculate the costs of the materials, manufacturing expenses, employee wages and the time you devote to production tasks.

Likewise, if your business is based in the knowledge economy—maybe you customize business strategies, or you create sales training workshops that you present in video classes—to the best of your ability, calculate the number of hours spent designing your intellectual property and assign an hourly rate to yourself so that you can determine the wholesale cost of your work (keep in mind that you’ll bill your clients at retail).

Once you’ve confirmed the amount spent on obtaining or creating your products or services, you will have discovered a vital piece of financial info—the break-even point, which represents the minimum selling price required to cover the costs you’ve invested to obtain your products and services. For info on pricing tools that might be useful for your business entity, click: https://www.symson.com/blog/best-competitive-pricing-tools

Benchmark against key competitors

Both industry statistics and the pricing habits of key competitors can provide guidance when evaluating potential pricing strategies. Within each industry, there are typical standard mark-ups and profit margins that are recognized as normal ranges. This info can help Freelancers and SMB owners to first, understand if their product/ service acquisition or development costs are too high or low relative to the typical selling price range and also where, or if, their selling prices fall within the typical price range for that product or service.

Further confirmation can be gained by investigating the pricing of two or three direct competitors, to discover an upper and lower price tolerance for your customers and identify a pricing sweet spot. In other words, for products similar to what you offer, if you discover that the most expensive competitive price in your market is $300 and the lowest is $100, that’s a convincing indication of the price range your customers accept and you can therefore confidently price your offerings somewhere between those values, guided by your production or acquisition costs and your company’s brand identity.

Emphasize value, not price

Benchmarking the pricing of certain competitors can be instructive but you should avoid copying what your competitors do. Competitive pricing intel is best utilized as guardrails that help you discover a price range that your customers can be expected to accept. Believe that your products and services can stand on their own merits—that is, the value your brand delivers. Your company and its products and/or services are more than just a price tag, more than a commodity.

Too many Freelancers and SMB owners attempt to win customers by being the cheapest game in town. This mindset nearly always leads to underpricing—undervaluing— your products and services and your company as well. When you choose to primarily compete on price, it is unlikely you’ll ever preside over a thriving entity. It’s much more likely that you’ll be trapped in a race to the bottom as you compete with those who are willing to undercut your price whenever necessary. According to spellbrand.com, “by being the cheapest or lower priced, you attract the wrong customers. You attract customers who make decisions based on price and not value.” Leave the price wars to Walmart and focus instead on how much customers might be willing to pay once they understand the value associated with your organization.

When you compete on value, you will attract and interact with prospects who respect you, your professionalism and abilities, and your company. The moment you decide to emphasize the value, you will attract those ready to invest at the level of service or product you can deliver. 

On that note, along with a thrifty vision of your product or service to attract price-sensitive prospects, develop also a VIP up-sell category in each product or service that you provide because there are always customers willing to invest in the very best you offer. Including a premium option of your products and services is a quick way to add even more revenue to your business income streams. When you are playing the long-term game as an entrepreneur, you want the best.

Thanks for reading,

Kim

Image: LazingBee

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Building a Referral Partnership

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Now that you’ve got your business up and running, beating the odds and experiencing some success—congratulations!— ambition may bring thoughts of growing your entity. It’s natural that you’ll want to realize the dream that drove you to launch a business. You’ll wonder how you might continue to grow your customer base and revenue and become a force in your marketplace.

You’re dreaming big but you’re also pragmatic; you’d prefer to attain growth without taking on onerous debt or committing to some other risky strategy. Your choice of strategies may be limited but there is at least one that, over time, has the potential to deliver the growth you’d like to see without putting a dent in your budget. Your ideal growth strategy could be a referral partnership.

A referral partnership is an agreement in which business entities refer customers to one another. A well-chosen and consistently executed referral partnership agreement can become an important element of a business growth strategy and enable the participating businesses to reach new markets and access new customers to whom they can introduce their respective brands as they book additional revenue. While the reciprocal benefits of referred customers is the foundation of the agreement, in some instances a bonus might be paid for referrals that result in a sale or billable hours. Negotiating an agreement that is considered advantageous to the parties is crucial to building a successful and sustainable referral partnership agreement.

The principal building block of a successful referral partnership is your list of potential partners whose customers can be reasonably expected to become your customers as well, as your own customers can likewise be recommended to your referral partner’s business as a potential customer. The viability of a referral partnership rests on what you and your partner can offer one another.

When you think of business colleagues, or even your customers, whose product and/or service line complements, but does not compete with, your offerings you can create a short list of potential candidates and discuss the possibility of creating a referral partnership. There are other factors to consider when selecting those you’d like to discuss a referral partnership, as you might expect, including identifying a potential partner who shares your values and whose customers can be expected to have the motivation to do business with you and vice versa.

Once you have selected a partner, it is important to develop a clear plan for how the referral partnership will work and expectations for its performance. It should also outline the roles and responsibilities of each party.

Building blocks of a sustainable referral partnership

  • Trust

Trust is a core aspect of finding the right fit in a business partner, and evaluating trustworthiness often comes down to conversations, track record and intuition. This is why it’s essential to take the time to have those pivotal discussions around vision, values, professional and personal background. Sadly, the business relationship you went into with such high hopes and visions of the money the parties will make is closer to fantasy than reality. In fact, some 50 to 80% of partnerships fail in the first few years. Before you finalize a deal, build a strong foundation of mutual respect and trust with your referral partner to increase your chances of success.

  • Similar values

To create a beneficial small business partnership, there needs to be common ground. For this reason, it’s important to ensure your prospective partner shares business goals and values that are aligned with yours. This goes beyond the desire to simply make a profit — it means confirming that you share similar core values that guide how you conduct business.

  • Define roles and responsibilities

Although there’s no legal requirement for a written contract that details the terms of a referral partnership agreement, getting things on paper will help participants to establish accountability, avoid miscommunication and defuse the potential for conflict that might arise from an underwhelming outcome, for example. Your referral partnership document can summarize the expected duties that participants will undertake to promote, whenever appropriate, selected products and services of a referral partner. A written agreement demonstrates that each participant is satisfied with the terms, in particular the amount of work that must be done to generate viable referrals. The terms and conditions of your referral partnership agreement might reasonably include:

  • Describe the responsibilities and expectations of participating companies (owners and staff)
  • Define what constitutes a referral
  • When referral bonuses (if applicable) will be paid and the amount paid per referral
  • Length of the partnership
  • Results that define success or failure
  • Timeline for assessing initial results and for declaring the partnership a success or failure
  • How the partnership can be terminated

Thanks for reading,

Kim

Image: © Everett Collection, photo by Conrad Hall (1970 Academy Award Best Cinematography) Butch Cassidy and the Sundance Kid (1969) starred Robert Redford (L) as the Sundance Kid and Paul Newman as his partner in crime Butch Cassidy. The film was nominated for Best Director and Best Picture at the Academy Awards and won four Oscars, including Best Original Screenplay and Best Cinematography.

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Subscription Model Spotlight

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The subscription-based business model is an American classic. From the newspaper that the neighborhood paperboy delivered every day to your parent’s house, to the magazines you looked forward to receiving from the mailman each month and, of course, the Book-of-the-Month Club, founded in 1926 and enjoyed by your grandparents, millions have bought subscriptions over the years. We trust the process.

As the e-commerce revolution lured millions of newspaper, magazine and book readers to digital formats and software as a service (SaaS) introduced a menu of business services that make back-office operations much faster and efficient, the number of products and services available by subscription has exploded. There are now hundreds of subscription-based businesses to indulge you, from cable TV and movies to goodie gift boxes for you (Hot Sauce of the Month Club) and your dog (Barkbox).

Subscriptions are the original recurring revenue business model, able to bring a fairly predictable amount of money into a business at predetermined intervals, making subscriptions adored by business owners (and increasingly, Freelancers). Customers also appreciate subscriptions: they make obtaining frequently used products or services more convenient and often less costly, since there is almost always a discount offered as compared to the price of a one-off item. Plus, time is saved and inconvenience spared when there is no need to repeatedly make purchases; a subscription guarantees that your order is complete and payment settled just once a year and renewed annually as desired (and sometimes renewed automatically, which means you do nothing beyond reading the renewal confirmation if no changes will be made).

What’s not to love? Monthly (or annually or quarterly) recurring revenue represents predictable cash-flow and every business owner wants it. The smartest, most forward-thinking business owners and leaders, including Freelancers, are brainstorming ways to integrate a subscription service into their company’s offerings. The good news is that the acceptance level of subscriptions in the general population makes it relatively easy to persuade prospective customers to buy. Persuading subscribers to renew the deal, however, can be another kettle of fish.

So, if the idea of selling your products or services by subscription comes to mind, first ask yourself which of your products or services customers regularly purchase throughout the year but might prefer to order and pay for just once a year and save themselves time and money? Float the idea with two or three of your steady customers and heed the reply. Adopting a subscription model requires serious forethought and planning and this is especially true for many B2B service businesses, where value is intangible and not always immediately recognized. For example, the value of software subscriptions is continually demonstrated with tangible and actionable information that’s generated on a regular basis and by frequent use of the platform by the customer. The value of leadership and Emotional Intelligence coaching, however, can be less immediately obvious.

Subscription business model experts reveal two critical success factors—perceived value and the subscriber experience. Regarding value, subscribers accept a recurring subscription fee when the product or service subscribed to consistently demonstrates its worth. Should the subscriber feel that s/he is not receiving value that justifies the subscription cost, the possibility of service cancellation is imminent. The benefits derived from the product or service subscribed to must be front and center in the subscriber’s mind. S/he must clearly witness or perceive the expected value, preferably through a noticeable, if not measurable, improvement in whatever need the service or product addresses.

Regarding the subscriber experience, quality control and the consistency of the expected outcomes delivered by the product or service are key. There is an ongoing need to maintain, and periodically upgrade, the subscriber service and experience delivered. Subscribers tend to expect service enhancements at regular intervals. Suggestions of other critical factors you may want to examine as you and your team evaluate the potential viability of a subscription model for one or more of your products or services are below:

1. Is the subscription model is right for your business?

 As noted above, do yourself a favor and confirm that enough of your customers will feel it advantageous to commit in advance to the purchase of one or more of your company’s products and/or services by subscription. Is it important to customers to reorder what you sell on an ongoing basis, or are sales typically intermittent or even one-off? Discuss with your accountant the amount of monthly subscription revenue needed to make offering subscriptions feasible for your entity. If you get a green light to move forward, it will then be necessary to develop strategies that promote and defend subscription revenue and minimize subscriber churn (i.e., cancellations). Be prepared to develop marketing campaigns that describe to current and prospective customers how buying your product or service as a subscription service will make life easier or doing business more cost-effective for them.

2. Subscription or retainer fee?

Even if you do a steady business with a certain client, for example, providing payroll solutions or website maintenance and security, a retainer agreement may be more appropriate than a subscription (both generate recurring revenue). A retainer fee is a fixed amount of money that a customer pays to a company/consultant in advance and for a specific period of time, typically, a month, quarter, or year. The retainer fee covers an agreed-upon scope of work or number of hours that the company/consultant agrees to provide to the customer. The customer can use the consultant’s services as needed, up to the limit of the retainer agreement. If the customer does not use all of the hours or services included in the retainer, the consultant still keeps the entire fee; if the customer exceeds that limit, the consultant can charge extra fees or negotiate a new retainer.

A subscription fee is a recurring fee that a subscriber pays to a company/consultant for access to a predefined service or product. The subscription fee is billed monthly, quarterly, or annually and the subscriber can cancel (sometimes) or renew the subscription at any time (usually toward the end of the billing period). The subscription grants access to the product or service, which the subscriber can use as desired. The consultant/company provides the product or service on a continuing basis or provides access to an online platform or membership access site.

3. Try before buy 

Consider offering a short free trial to allow prospective subscribers to experience the advantages of subscribing to your product or service—first month free, for example. Tempting current customers and prospects with a sample of your subscription service could convince a number of them to sign up and pay. Furthermore, you’ll make subscribing still more attractive when their pricing options are uncomplicated. Offer one standard monthly (or quarterly or annual) fee; if you also sell premium and/or economy versions of your product or service, price those subscriptions accordingly.

4. Set clear expectations:

Set clear expectations from the start of the subscriber relationship. Customers must understand what they’ll receive for the price they’ll pay–services, products, tools and/or supporting technologies. Subscriber info should walk customers through what the subscription offers, the level of support available from your team and company contact info.  Ensure that prospective subscribers fully understand the value they’ll receive, tangible (the product or service) and intangible (training, additional info and/or support).

5. Discounts for longer-term subscriptions

The monthly fee should reward longer subscription commitments—24 or 36 months, for example—with correspondingly progressive discounts. While some subscribers desire only short-term use, others will use your product or service basically forever. By offering subscribers a variety of subscription options and offering deeper discounts to those who agree to pay upfront for long-term commitments, you’ll have a better chance of attracting more subscribing customers and increasing recurring revenue.

6. Easy or automatic renewing

The subscription model is an excellent vehicle for customer retention, but your organization must implement strategies to further remind subscribing customers of its relevance to them and provide various incentives for renewing the subscription. Make renewing frictionless and enable subscribers to auto-renew (with an opt-out option). When you make renewal easy for subscribers, they’re more inclined to do so.

7. Quality control and customer experience

Subscriber satisfaction is not to be taken lightly; it is never a given. Ideally, you’ll find it in your budget to assign or hire (W2 or 1099) a subscriber experience specialist who will be responsible for ensuring that expectations are met. That person will also document and report on the turnaround time for resolving issues, as well as any recurring problems. Proper quality control offers you much-needed insight into subscriber concerns, which will drive ongoing service enhancements and continue to enhance subscription value. 

Furthermore, marketing experts have convincingly demonstrated that personalized communication is a deciding factor in reducing churn, building loyalty and re-engaging lapsed customers/subscribers. Your organization should collect as much subscriber data as possible and apply that info to generating email updates and personalized special offers that aim to encourage renewals. The goal is to maintain subscriber enthusiasm and reinforce the convenience, enjoyment and/or habit of subscribing. You want to avoid disengagement, complacency, or other dissatisfaction that may result in a lapsed subscriber.

8. Don’t skimp on packaging

If your subscription is a physical product, invest in premium packaging. With all due respect to the U.S. Postal Service, your product deserves better packaging than a flat rate priority box. While your physical product will require shipping, it is highly recommended that you avoid the temptation to save money by packing and mailing yourself. Instead, find a fulfillment house and outsource packing and shipping.

Your logistics provider will fulfill subscription orders for your product, packing and shipping those orders directly to subscribers in a way that effectively communicates the value of your brand and enhances the subscriber experience. The fulfillment center will also manage product inventory and store the inventory.

Thanks for reading,

Kim

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Should You Outsource? Think It Through.

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I’ll wager that the biggest obstacle Freelancers and small business owners face is limited time. There are so many responsibilities you must manage in order to keep the show on the road. Now look at the bright side—if you’ve got lots to do, it means that your business is growing and has the potential to grow even more. Your stumbling block is, most likely, that you have a small team (maybe just yourself) and you struggle to get your arms around a list of important decisions to make and other responsibilities that demand your attention. You may also have deadlines looming`.

You always assumed, but the point has now been emphatically made, that productivity is a key ingredient in the recipe for success. It’s imperative that you have the focus and ingenuity to develop goals and objectives that will promote your mission and then create and execute strategies and action plans that bring your plans to life. If you’re overwhelmed and stressed by an unmanageable to-do list, you’ll be unable to perform at peak efficiency. Circumstances will force you to make a change because at some point, every business owner must address the challenge of how to get the work done— on time, on budget and in ways that deliver a rewarding customer experience.

Spoiler alert—all potential solutions, including the choice of keeping the status quo (and eroding both the success you’ve created and your health), require that you spend money. The good new is, if you’ve objectively assessed your situation and determined how to efficiently handle your responsibilities, you will be positioned to increase productivity and business revenue.

Weighing your options

The process begins by confirming the tasks that must get done, acknowledging if anyone other than yourself can be reasonably expected to successfully perform certain tasks and documenting the number of days in a typical week you face a backlog of work. If you frequently work more than 50 hours per week, that indicates you’d benefit from bringing in help. If you frequently work more than 60 hours per week, that indicates you’d benefit from a full-time or part-time employee (W-2 tax form). If your need of assistance is more intermittent, for example, during the last week of the month or one or two afternoons a week, outsourcing (1099NEC tax form) is your best solution.

Make an honest assessment of your time, abilities, preferences and money. Furthermore, once you’ve decided which tasks are unsuitable for you, own the tasks that can be most effectively done by you. For example, it will likely be for the best that anytime the face of your brand must be represented, you, business owner, should be present. However, a number of office-based functions can be effectively handled by a savvy outsourced professional. An outsourced marketing expert will be able to suggest goals, objectives and strategies to jump-start growth in ways that the business owner may not immediately envision. A bookkeeper who has experience working with small or mid-size companies will not only bring the entity’s accounts up to a high standard of detail and accuracy but can also advise on issues such as cash-flow problems.

Accept that it may be too expensive for you to perform certain tasks if it diminishes your pursuit of billable hours. In general, if a certain task takes you or your team too long to do, it probably makes sense to outsource the function, especially if it’s something that must be done on a regular basis. Furthermore, if a task is highly specialized, it may make sense to outsource it to someone who spends their time immersed in that particular function and has a real expertise.

Consider outsourcing functions when:

  • You don’t have the ability to adequately perform the task
  • You have the ability to do the work, but dislike doing it
  • You have the ability to do the task, but the time needed to get it done is unacceptable (maybe because it’s specialized and you and your team lack the expertise)
  • You’ve realized how much billable time you’re losing by performing tasks that you could pay someone else to do (for less than your own billable rate).

Enable outsourcing success

Establish goals and define expectations for this new role in your organization, so that you can create a good experience for yourself, your team and the specialist(s) you bring in to provide outsourced services. It will be very useful to include in your productivity improvement journey an outsourced Human Relations professional who specializes in job analysis. This individual will discuss and confirm your recommendations of tasks that might be successfully outsourced and responsibilities that will be best handled by you, or current staff. Your outsourced HR adviser can also develop job specs, review and discuss your performance objectives and suggest the compensation you should offer to whom you’d like to hire.

Benefits of outsourced talent:

  • Cost: When you outsource certain tasks or services, you don’t have to pay the same wages as you would if you hired an in-house employee. Hiring outsourced talent is a way to manage fixed operating expenses as you nurture business growth. Furthermore, outsourced talent does not come with costs associated with in-house employees, such as taxes, insurance, holiday and vacation pay and other workplace expenses.
  • Efficiency: By outsourcing, you can free-up yourself and your team to focus on more important aspects of your business. This allows you to be more productive and get more done in less time.
  • Talent: Outsourcing is an attractive option when you need specialized skills or expertise only on an intermittent or short-term basis. Outsourcing gives you on-demand access to talent that would be impractical to permanently hire.
  • Scalability: If you have access to a larger pool of talent and resources, your business can scale up quickly without incurring the expenses associated with hiring W-2 employees or configuring additional office space, or even additional equipment rental fees. Chances are, your outsourced experts work remotely.

How to choose the right provider

When looking for the right expert to handle those functions you’ve decided to outsource, consider the provider’s specific industry experience. Choose providers who have excellent references and communicate well. When outsourcing critical functions or handling sensitive information, data security and confidentiality are of paramount importance. Assess the outsourcing partner’s security protocols, compliance with industry standards and measures to protect intellectual property. Evaluate their data protection policies, employee training, and physical and digital security measures to ensure the safety and integrity of your confidential information. Cultural fit and values alignment between your organization and the outsourced specialist are often overlooked but can significantly impact the success of the working relationship. Consider factors such as work ethics, corporate culture and shared values to ensure a smooth integration and collaboration.

Frequently outsourced functions:

  • Accounting and bookkeeping: Outsourcing accounting and bookkeeping services can not only save time, but also ensure that business cash is well-managed. You will be grateful when, for example, cash-flow is efficiently managed and you can make better business decisions. Moreover, you’ll be relieved to know that the business complies with tax regulations.
  • Human resources: Outsourced HR services can provide cost-effective solutions should you need to hire additional employees and decide whether the new hires should be brought in as employees or outsourced specialists. Your HR specialist can also create the job specs and refine your organization’s new customer or new hire on-boarding process, to ensure that all paperwork is present and written correctly and see to it that you present a seamless experience that reflects well on your brand.
  • Payroll: Outsourcing payroll services will save time and money by eliminating the need to close books or run reports after every payroll cycle. Regarding new hires and contractors, your outsourced payroll expert will ensure that all tax forms are sent in the on-boarding materials and that information to guarantee timely payment is included and signed by both parties.
  • Information technology: Outsourcing IT services can be beneficial for small businesses that need access to technical expertise without the overhead costs associated with hiring in-house IT staff. You must have a network that consistently delivers peak efficiency. Seamless and reliable IT performance is a necessity.
  • Customer support: Outsourcing customer support services can help your organization provide better customer service without having to hire additional staff or invest in expensive technology solutions that may not deliver the relationship-building personal touch that your organization needs.
  • Legal services: Outsourcing legal services can be a cost-effective way for small businesses to gain access to legal expertise without the onerous expense of paying to add the salary of an in-house attorney or law firm to your payroll. Depending on your needs, it may be smart to negotiate a retainer fee, if legal advice is a regular requirement. Otherwise, contact a business, patent, employment, or other attorney on an as-needed basis.
  • Marketing: Outsourced marketing services can be beneficial when you need help creating and executing marketing strategies, running campaigns and tracking results. Your outsourced marketing expert will introduce marketing automation to your company, or will optimize the automation system you have in place. This specialist will also maintain your social media accounts and ensure timely responses to comments and questions.
  • Web design and development: Outsourcing website design and development services can bring a level of design and technical expertise to your website that you and your team do not possess, even if coding skills are available in-house. Your inbound marketing and marketing automation depend heavily on an attractively, intuitively designed site that downloads quickly and operates efficiently. Your website designer may also provide technical support services that keep your site up and running, as noted above.
  • Virtual assistance: Virtual assistants provide administrative support services for tasks that may include scheduling appointments, managing emails, making travel arrangements and more–allowing small business owners to focus on running their business instead of getting bogged down with mundane tasks. Many virtual assistants offer specialist digital and social media marketing services, helping you attract new customers and some offer specialized accounting and bookkeeping services.

Thanks for reading,

Kim

Image: Stephen Root as Milton Waddams in Office Space (1999), directed by Mike Judge

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Fight Back Against Recession

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Economists and other thought leaders predict that 2023 will be a recession year and if the prediction holds, many Freelancers will see a decrease in sales revenues. Diminished revenue has the potential to bring on many unpleasant outcomes, among them the imperative to reconfigure how you can best allocate your shrinking funds. Belt-tightening isn’t fun, but do it right and you might survive or even, eventually, thrive. Take these three actions:

  1. Defend cash reserves
  2. Identify most profitable business activities
  3. Guarantee the optimal delivery of products and services

Conserve cash

You may not have a large amount of cash on hand in your business, but make a point to locate where you might find revenue that hasn’t been tapped. The first place Freelancers should investigate is the Accounts Receivable file. Rethink your strategy to collect unpaid AR and better still, start planning for AR when discussing the agreement with clients you’re about to work with. Request up-front money before you start project work on jobs that bill for less than $100—10% – 20% in advance is reasonable. Second, tie interim payments to project milestones where possible. Institute policies to avoid leaving more than 50% of the fee payable when project deliverables are handed over. The best defense is a good offense.

In the present tense, identify outstanding invoices and tactfully, persistently, pursue payment. Follow-up with clients who might be struggling to pay invoices and negotiate a payment plan if possible. Do whatever you can to ensure that all money owed to you will be paid as soon as possible (FYI, I’m negotiating right now with a client who should have no problem paying, but is 60 days late). Bring in the money and hold on to it—spend only on activities with demonstrated potential to increase revenue.

Double down on money makers

Going into a recession is a great time to do an audit and verify the most profitable parts of your business. When the economy becomes favorable again, you’ll be even better set up for success. Once you’re sure of the money-makers, do what you can to expand billable hours of those assignments. If you can scrape together a marketing budget, here is where you spend.

Marketing sometimes seems counterintuitive when you have less available revenue but in most cases, you can’t make money unless you spend money. What you must do is limit spending to activities that positively impact revenue generation. It could be that you buy a software program that makes it faster to generate and send client invoices. You might also invest in making credit card payments available and thereby make it easier for clients who can’t afford to write you a check can nevertheless use credit to pay your outstanding invoice.

There are also the more immediately recognizable marketing activities, among them selectively attending meetings and conferences where you might encounter prospects who may become clients and advertising, print or on-line, in publications that are read and respected by your target audience for your rainmaking projects.

All about deliverables, client retention, referrals

Happy customers create more business. Repeat and referral business is extremely important in a recession. Ensuring that your clients are happy is vital in any economy but especially in a recession. Creating glowing online reviews, testimonials and good word-of-mouth are essential to growing your revenue when times are tough (and even when there’s lots of money rolling around).

Sometimes when the economy changes, so do your client’s needs. Extract this opportunity, hidden in adversity, to learn more about your clients and what they feel they need now to ensure the survival of their organizations. Now is the time to talk to your clients and discover any changes in what they consider the pain points and priorities. Once again, it will be demonstrated that when you are attuned to the needs of your clients that knowledge can lead to more more active clients, more referrals and more revenue and profit.

Thanks for reading,

Kim

Image: © Keystone/Hulton Archive/Getty Images. Protesting the rise of food prices in 1973.

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Course Correction: Tacking Through Headwinds

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When you decide to become a Freelance consultant or business owner, your mission is to build and launch a successful and sustainable entity. To that end, there will be Important Things you must do very well and a corresponding list of Big Mistakes you must avoid and summarily correct if you fall into the trap. Our old friend the SWOT Analysis (Strengths, Weaknesses, Opportunities & Threats) reminds us that when leading a venture there’s always something to analyze, fix, capitalize on, or avoid. Below is a list of usual suspects that can tank a business. Be on guard!

Failure to understand the customer

Apologies for hammering this topic in nearly every post, but it’s impossible to overstate the fact. If you plan to become self-employed or open a business (and you must make a plan, even if it’s an outline scrawled on a cocktail napkin), you must be assured that you:

1). Have an accurate description and understanding of the customer segments you expect to buy from you and

2). Verify that your choice of prospective customers has a need, if not compelling reasons, to buy your product or service at a volume that will sustain your venture. In short, you’ll need a critical mass of paying customers.

Failure to research the marketplace

First thing you do is research the chosen industry and confirm that your sector is on an upward slope because under no circumstances do you want to enter a shrinking market. Also, search for announcements of new products and services that will soon be released, to verify that a competitor will not make your product or service obsolete. Furthermore, search for updates that may reveal potential new customer groups for you, or shifting demand for current products and services. In other words, customer loyalty can wax or wane, new iterations and uses of what’s available can develop and nothing is static and forever.

Failure to choose a good business model

Create your roadmap for customer acquisition and achieving profitability. Included in your assessment will be how you’ll source, create and bring your goods or services to customers. Decide also the payment methods you’ll accept and when payment will be made (billing after the product or service has been delivered to the customer or payment when the goods are ordered?).

Failure to develop a coherent marketing strategy

It will be tremendously helpful to create a multi-prong marketing strategy in which you’ll outline basic promotional goals for what you’re selling—-sales/marketing funnel, newsletter, blog, social media, branding, PR, website messages. All paths must travel in the same direction. All elements , text and images, must advance and support the same story.

Failure to create an effective customer acquisition and retention strategy

Identifying the customer groups that you’ve confirmed are a natural fit for your products and services is only half the story (sorry!). You then need a plan to reach out to them— that’s what your marketing and brand appeal exist to do. The value of your products and services, plus the efficiency of how you deliver to the customer, along with your diligent quality control, customer service and post-sale support impact customer retention and referrals.

Failure to anticipate required cash-flow

Posts on March 15 and April 19 addressed pricing and cash-flow, as regular readers will recall. The objective is to lay the groundwork for generating sufficient revenue to pay expenses, pay employees, pay yourself and reinvest in the business. Timing is everything and money must be available when you need it most. If there are gaps, corrective action should be taken immediately.

If invoicing is how you generate revenue, take steps to invoice on time. Insert on every invoice a polite phrase to indicate that payment is due upon its receipt. Give yourself an infusion of cash by asking for 15-20 % up front on projects where you anticipate billing $1000 or more. Worse case scenario, you’ll have to take an under-the radar unglamorous part-time job or get lucky and score an adjunct teaching gig at a local college or business incubator (BTW, I’ve done all of the above).

Failure to price appropriately

Pricing is an integral component of the marketing strategy but it often gets treated as an afterthought. Your revenue projections will underperform if you don’t price appropriately. Prices must support profitability as well as be perceived as reasonable to prospective customers. They must reflect your brand, whether luxury/premium, mid-market or discount. Think carefully about the message that your prices send to prospective customers.

Thanks for reading,

Kim

Photograph: On the rocks, aftermath of a nor’easter at Lewis Wharf in Boston Harbor, October 17, 2019

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Is It Time for a Price Increase?

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We’re here to talk about pricing today, a favorite subject of mine, but I admit the process is tricky. Pricing is more important than you might think because if you don’t get it right you either won’t sell much, because prospects and customers feel you’re too expensive, or you’ll sell but won’t make as much money as you could, because you’ve priced too low. Pricing B2B services can be a challenge. You can’t walk into a couple of stores or check on line and comparison shop your competitors, so competition-based pricing doesn’t work. Value-based pricing is the best option for B2B services.

So that you can at least maintain, if not increase, profitability in these unstable times, business leaders and owners would be wise to evaluate the pricing of their products and services and make adjustments when necessary. Revenue and profit are tied to more than sales volume. The most important driver of sales revenue, after ensuring that production or acquisition costs are covered by the price, is the value that clients assign to your products and services. I suppose that’s another compelling reason why B2B services are most successfully priced according to the value and ROI they bring to your customers.

Conducting basic market research will help you discover or confirm the purpose, must-haves, priorities and ROI that drive the confidence in and sales of your products and services. As usual, knowing the customer means everything. Whether you get them on the phone or take them out to lunch, speak to three or four of your best clients to determine which outcomes and benefits, tangible and intangible, matter most. You want to obtain insight into how your products or services bring ROI to clients. Once you understand what your offerings enable clients to do, align your price with the value they bring. Furthermore, include in your marketing messages those benefits that clients with whom you’ve spoken indicated are the most highly prized.

When announcing price increases, it may be useful to explain your increased costs and how long it’s been since your prices have been adjusted. Don’t shy away from highlighting how much your clients have raised their prices. For clients who may be struggling, consider “grandfathering” to continue the pricing for the product or service they buy most often. You could also soften the blow of price increases by designing product and service options to accommodate price-sensitive clients. No-frills, economy versions of your offerings may be welcomed by some. Consider also indirect price increases, such as adding surcharges for expedited shipping, longer payment terms, rush orders and for performing small projects.

Charging one price for your products and services is, in fact, limiting for both you and your clients. The buying decision may be simpler, but it leaves no room for clients to upgrade and you to bring in additional revenue from upselling.

Thanks for reading,

Kim

Image: The banker from the board game Monopoly ™, which was patented by Parker Brothers in 1935.