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You’re the Boss Blog: Sometimes, Customers Want You to Charge More

May 20, 2013 by Leave a Comment
She Owns It

Portraits of women entrepreneurs.

Deirdre Lord: Suzanne DeChillo/The New York Times Deirdre Lord: “I don’t think people value what they don’t pay for.”

At the most recent meeting of the She Owns It business group, we discussed pricing a new product or service, the dangers of giving something for nothing, and the reasons customers may prefer that you raise your prices.

Deirdre Lord, who owns the Megawatt Hour, talked about the particular challenges of pricing a new product or service. Her start-up offers an online platform that helps business clients manage and control their energy costs. Energy consultants offer some aspects of this service, but she is unaware of any direct competitors.

Ms. Lord said she initially thought that as a new company offering a new service, the Megawatt Hour should have a new pricing model. At first, the company charged customers based on a percentage of their projected energy bills. But businesses that purchase energy are accustomed to paying energy brokers and consultants rates that reflect a percentage of their actual energy use and not just the cost of that use. Ms. Lord’s customers began to ask how the company’s rates translated — how many tenths of a penny per kilowatt hour were they paying?

As a result, the Megawatt Hour adopted the use pricing model as well. It’s a small change, Ms. Lord said, but one that makes it easier for customers to experiment with the unfamiliar. “Asking customers to do too many new things just doesn’t work,” she said.

And there will be another change. Effective June 1, the Megawatt Hour will stop making certain features available free. “We’ve gotten people on that product and now that we’re re-evaluating products and pricing, we’re taking it away for the reason we’ve discussed: I don’t think people value what they don’t pay for,” she said.

“It’s true,” said Beth Shaw, who owns YogaFit.

The Megawatt Hour invited users of its free version to call to learn about switching to a paid offering. “We’ll see what happens,” Ms. Lord said. But regardless of whether there are any takers, she said, “We’re not really getting anything by having it be out there.”

Offering a product or service free without a specific goal in mind can be as detrimental as indiscriminate discounting, Ms. Lord said. “If you’re going to give a discount, you need to get something from the customer,” she said.

“You’re absolutely right,” Ms. Shaw said. “They need to fill out a survey or something.”

“Or you need to get them from the 30-hour training to the 50-hour training, or create some trade-off,” Ms. Lord said.

“I think it also depends on who your customer is,” said Alexandra Mayzler, who owns Thinking Caps Group, which offers high-end tutoring. “Certain people expect certain prices.”

She recalled Thinking Caps’ early prices: “I was charging a nominal amount. I must have made like minimum wage.” But then she had an “aha moment.” She recalled a parent who told her she was doing a great job, but would not be taken seriously because her prices were too low.

If you’re in a market where people are used to paying a certain price for something, they may be happy to get it for a little less, Ms. Mayzler said. That’s considered a deal. “But if it’s a lot less, you’re like, ‘What’s wrong here?’” she added. “Three times in 10 years, I had people say to me, out of the goodness of their heart, ‘I’m going to go with you, but I’m a little alarmed at the pricing, because what am I not getting?’”

Ms. Mayzler, who started her business from her college dorm room, explained why it was hard for her to raise her prices. “I had started at like $25 an hour or something as a student,” she said. “Mentally, how do you go from that, to charging the going rate, which is anywhere from $150 to $400?” She said that while she valued her time and knew she was good at what she did, “It’s very hard to wake up one day one September and charge $50 and the next charge $350.” Nonetheless, she did manage to raise prices — to $150 to $195 in New York, and less in Texas.

Still, she realized she had to increase her prices, and that Thinking Caps would serve a particular type of client. “That means that a lot of our clients do have higher expectations,” she said.

You can follow Adriana Gardella on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/05/20/the-delicate-balance-between-charging-too-little-and-charging-too-much/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

She Owns It: Sometimes, Customers Want You to Charge More

May 20, 2013 by Leave a Comment
She Owns It

Portraits of women entrepreneurs.

Deirdre Lord: Suzanne DeChillo/The New York Times Deirdre Lord: “I don’t think people value what they don’t pay for.”

At the most recent meeting of the She Owns It business group, we discussed pricing a new product or service, the dangers of giving something for nothing, and the reasons customers may prefer that you raise your prices.

Deirdre Lord, who owns the Megawatt Hour, talked about the particular challenges of pricing a new product or service. Her start-up offers an online platform that helps business clients manage and control their energy costs. Energy consultants offer some aspects of this service, but she is unaware of any direct competitors.

Ms. Lord said she initially thought that as a new company offering a new service, the Megawatt Hour should have a new pricing model. At first, the company charged customers based on a percentage of their projected energy bills. But businesses that purchase energy are accustomed to paying energy brokers and consultants rates that reflect a percentage of their actual energy use and not just the cost of that use. Ms. Lord’s customers began to ask how the company’s rates translated — how many tenths of a penny per kilowatt hour were they paying?

As a result, the Megawatt Hour adopted the use pricing model as well. It’s a small change, Ms. Lord said, but one that makes it easier for customers to experiment with the unfamiliar. “Asking customers to do too many new things just doesn’t work,” she said.

And there will be another change. Effective June 1, the Megawatt Hour will stop making certain features available free. “We’ve gotten people on that product and now that we’re re-evaluating products and pricing, we’re taking it away for the reason we’ve discussed: I don’t think people value what they don’t pay for,” she said.

“It’s true,” said Beth Shaw, who owns YogaFit.

The Megawatt Hour invited users of its free version to call to learn about switching to a paid offering. “We’ll see what happens,” Ms. Lord said. But regardless of whether there are any takers, she said, “We’re not really getting anything by having it be out there.”

Offering a product or service free without a specific goal in mind can be as detrimental as indiscriminate discounting, Ms. Lord said. “If you’re going to give a discount, you need to get something from the customer,” she said.

“You’re absolutely right,” Ms. Shaw said. “They need to fill out a survey or something.”

“Or you need to get them from the 30-hour training to the 50-hour training, or create some trade-off,” Ms. Lord said.

“I think it also depends on who your customer is,” said Alexandra Mayzler, who owns Thinking Caps Group, which offers high-end tutoring. “Certain people expect certain prices.”

She recalled Thinking Caps’ early prices: “I was charging a nominal amount. I must have made like minimum wage.” But then she had an “aha moment.” She recalled a parent who told her she was doing a great job, but would not be taken seriously because her prices were too low.

If you’re in a market where people are used to paying a certain price for something, they may be happy to get it for a little less, Ms. Mayzler said. That’s considered a deal. “But if it’s a lot less, you’re like, ‘What’s wrong here?’” she added. “Three times in 10 years, I had people say to me, out of the goodness of their heart, ‘I’m going to go with you, but I’m a little alarmed at the pricing, because what am I not getting?’”

Ms. Mayzler, who started her business from her college dorm room, explained why it was hard for her to raise her prices. “I had started at like $25 an hour or something as a student,” she said. “Mentally, how do you go from that, to charging the going rate, which is anywhere from $150 to $400?” She said that while she valued her time and knew she was good at what she did, “It’s very hard to wake up one day one September and charge $50 and the next charge $350.” Nonetheless, she did manage to raise prices — to $150 to $195 in New York, and less in Texas.

Still, she realized she had to increase her prices, and that Thinking Caps would serve a particular type of client. “That means that a lot of our clients do have higher expectations,” she said.

You can follow Adriana Gardella on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/05/20/the-delicate-balance-between-charging-too-little-and-charging-too-much/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

You’re the Boss Blog: This Week in Small Business: Gordon Ramsay Calling!

May 20, 2013 by Leave a Comment
Dashboard

A weekly roundup of small-business developments.

What’s affecting me, my clients and other small-business owners this week.

Must-Reads

Tim Duy explains what Japan’s growth means for the rest of the world. And here are the social media lessons from a Gordon Ramsay nightmare gone viral.

The Economy: Cash Is Not Safe

Retail sales rise and household debt declines, driven largely by lower housing and credit card balances. Corporate earnings are at a historic high. The latest small-business confidence index ticks up. Builder confidence improves, too. But April’s producer prices and industrial production both fell, and the latest business inventories and sales numbers continue to show little improvement. A forecast predicts a plunge in gasoline prices. Business conditions in the New York region (pdf) deteriorate, and the New York Federal Reserve Bank says tight credit is restraining small-business growth. David Rosenberg explains why cash is your least safe bet, and Rex Nutting is convinced that everything is overvalued: “No one’s sure when the reckoning will take place, but it’s likely to be ugly when it does.” Joseph Biden agrees with a 7-year-old’s suggestion to make the world a better place.

Washington: Sequestration Watch

The Congressional Budget Office says the deficit problem is solved for the next 10 years. Paul Krugman says the case for austerity has crumbled, but Keith Hennessey says it’s too soon to celebrate. Jared Bernstein submits the fourth installment of his “sequester watch.” The Federal Reserve, whose policy has pushed some start-ups to be valued at a billion dollars, may ease up on monetary easing this summer. Here are a few buzzwords to watch as the Fed plots its exit strategy. Joe Weisenthal reveals the real reason people bash Ben S. Bernanke and John Maynard Keynes at conferences. A bunch of economists offer advice to graduates.

Your People: Hourly Workers

Alex Befekadu lists seven employee types that you should fire. Joanne Sammer takes a look at what constitutes a healthy work/life balance and how companies can achieve that goal. A study finds that freedom is the top reason for quitting and that millennials want to be entrepreneurs (but that doesn’t always mean starting businesses). Here are four steps to hiring hourly workers this summer. Crispin Jones explains the benefits of having a diverse workplace. Here are five ways to deliver bad news to employees (and the best ways to open a beer).

Finance: A Trip to Mars

André Mouton believes that if venture capitalists aren’t interested in crowdfunding, maybe you should be (apparently, Donald Trump is interested). Jeff Hindenach explains why credit cards remain a viable option for small businesses. Kabbage expands its small-business financing (using QuickBooks data), and NASA is offering $9.8 million to small and midsize businesses for a trip to Mars. Joe Taylor gives advice for building a profitable banking relationship, but here are some alternatives if you cannot. And here are two helpful online valuation tools to find out how much your business is worth. Bayer HealthCare goes on a start-up hunt. Retiring baby boomers are driving the sales of small businesses.

Start-Up: Controlling Fear

Ken Oboh says start-ups should ditch their “go big or go home” mentality. Peter Thiel’s first investment in Europe has gone to a London-based start-up in financial technology. A life coach explains how to control the fear of starting a small business. Two start-up founders were not afraid to sleep in a van for months on end. Here’s how start-ups can get cheap office space and three ways to jump-start your dreams. Morgan Hartley and Chris Walker explain why your city needs a start-up scene. A venture capital firm is eager to invest in start-ups in Charlotte, N.C. A start-up “dream team” is looking for 45 young aspiring entrepreneurs from around the world to join a nine-week summer program in Silicon Valley. This is how one entrepreneur started three businesses by age 32.

Management: Go to Bed

Todd Wasserman explains key performance indicators. Julia Kirby says that if you want to change the world, you should get to bed by 10 p.m. Here are eight easy ways for your business to go green, and Jim Smith explains what your business can learn from the $1 cups at Starbucks. Communicating with energy is one of the five most important business skills. According to an American Express study, 70 percent of entrepreneurs say they purchase and source goods and services from other small businesses. A survey reveals the DNA of America’s small-business owners.

Marketing: The Ultimate Pitch

Here is how Lowe’s is making its customers smarter with six-second videos on Vine. Pamela Wilson has suggestions for getting customer testimonials that will convince even the most skeptical prospects. Mark Emond writes that there are four foundational elements of marketing analytics success. Suren Ter-Saakov explains what is important about competitive analysis. Diane Carlson warns not to make these business card mistakes. Jill Konrath says this is the ultimate sales pitch. A contract manufacturer shares eight marketing tips.

Around the Country: A $50,000 Challenge

An Alaskan town will vanish by 2017. In tornado-hit Joplin, Mo., employees of local businesses chip in again to rebuild. A new Colorado law provides recourse for discrimination against workers at companies that employ fewer than 15 people. Constant Contact joins with Staples and Score to host free webinars. CNBC’s new small-business show introduces a $50,000 challenge. In Chicago, mothers are showing their children the real estate ropes. In Pennsylvania, four businesses receive energy-efficiency and pollution-prevention grants, registration opens for a small-business expo on government contracting and a small-business conference plans a summer debut in Philadelphia.

Around the World: Manufacturers Coming to U.S.

The euro zone recession continues into its sixth quarter, and the social mood darkens. The United States oil boom leaves OPEC sidelined from demand growth. Japan’s economy expands faster than expected. A youth hockey brawl breaks out in Russia. China’s industrial production grew 9.3 percent in April. Jeffrey Telep and Joshua Snead report that global manufacturers are moving production to the United States. The proportion of British-based small businesses targeting the growing international market for low-carbon products has doubled in the past two years.

Social Media: Exclamation Points

Amanda McCormick wants to know how you are using social media to market your business. Dan Zarrella finds that exclamation points get more retweets but fewer clicks. LinkedIn bans users from promoting prostitution and escort services, but this is not why the social media service annoys Benedict Evans. Christopher Null wonders if Google Plus matters for small businesses.

Red Tape: Deficiencies

The Government Accountability Office finds 60 deficiencies in the Internal Revenue Service’s internal controls, and Jon Stewart weighs in. The Obama administration announces three advanced manufacturing innovation institutes. A survey reveals a lingering uphill battle for the new health care law, but Emily Maltby and Angus Loten wonder whether the law may create new entrepreneurs. Sarah Kliff explains what will happen if you don’t pay the tax penalty, and a small-business owner explains the hard facts of the health care law to employees.

Online: Call to Action!

Seth Godin explains why they call it a browser: “Call it attention inflation. More time spent looking, less time spent clicking.” A company that provides legal services to small businesses is now accepting Bitcoin as payment (and Amazon introduces its own virtual currency). OpenSky becomes another “interesting competitor” in the online marketplace. Here are some keyword strategies to draw people to your site, and here is how to use calls to action in your next e-mail campaign. Roger Kohl tells you everything you need to know about “the scariest search engine” on the Internet. Here are Time magazine’s best Web sites of 2013, and here are 16 steps to hosting a successful webinar. Did you know that 70 percent of consumers trust online reviews?

Retail: Bike Lanes Are Good

Square unveils hardware for its point-of-sale iPad registers, Groupon officially introduces its own point-of-sale system, and PayPal unveils a program to compel small merchants to throw away their cash registers. Also, keep your eyes on these shopping-cart-mounted tablets that will detect nearby items and offer recipes in real time. Fred Lizza says cloud retail can transform your business, and these are the benefits of a cloud-based inventory management system. A survey finds restaurant sales and traffic improved in April. Restaurant marketers are waking up to a $50 billion breakfast opportunity, and millennials are propelling the growth of the sandwich industry. Bike lanes happen to be good for local businesses.

Mobile: Dead in the Water

Nearly 75 percent of all smartphones sold in the first quarter were Android-based, and this chart shows that the iPhone’s market share is “dead in the water.” It is now estimated that the mobile marketing industry may employ 1.4 million people by 2015. Tobin Dalrymple suggests five ways to publish content on mobile. Here is a guide to mobile productivity apps, and Brian S. Hall shares six mobile apps created by nontech companies. Jon Gold explains why everyone is still confused by mobile management. BlackBerry will introduce BBM for iOS and Android this summer. A coming webinar looks at small-business adoption of mobile.

Technology: Texting to Landlines

Google is offering free unified storage across its services along with a way to send money by Gmail. Here is everything Google announced at its developer’s conference (which is also where the company’s chief executive said he wanted to start his own country). A company introduces texting to landlines. Michael del Castillo shares the lessons learned from five huge tech flops. Megan Totka suggests five customer relationship management tools for small businesses. Windows Blue may leave customers seeing red.

Tweet of the Week

@dansinker – How long does a keynote have to last before it’s considered a hostage situation?

The Week’s Best Quote

Charlie Hamilton shares a few lessons from the lemonade stand: “Successful adults often worked when they were young. They mowed lawns, baby-sat, or had a lemonade stand. Learning how to work hard, provide good customer service, overcome challenges, ask for the sale, and understand the value of a dollar are invaluable life lessons that kids simply can’t get from a textbook.”

This Week’s Question: Would you buy a point-of-sale system from Groupon?

Gene Marks owns the Marks Group, a Bala Cynwyd, Pa., consulting firm that helps clients with customer relationship management. You can follow him on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/05/20/this-week-in-small-business-gordon-ramsay-calling/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

Dashboard: This Week in Small Business: Gordon Ramsay Calling!

May 20, 2013 by Leave a Comment
Dashboard

A weekly roundup of small-business developments.

What’s affecting me, my clients and other small-business owners this week.

Must-Reads

Tim Duy explains what Japan’s growth means for the rest of the world. And here are the social media lessons from a Gordon Ramsay nightmare gone viral.

The Economy: Cash Is Not Safe

Retail sales rise and household debt declines, driven largely by lower housing and credit card balances. Corporate earnings are at a historic high. The latest small-business confidence index ticks up. Builder confidence improves, too. But April’s producer prices and industrial production both fell, and the latest business inventories and sales numbers continue to show little improvement. A forecast predicts a plunge in gasoline prices. Business conditions in the New York region (pdf) deteriorate, and the New York Federal Reserve Bank says tight credit is restraining small-business growth. David Rosenberg explains why cash is your least safe bet, and Rex Nutting is convinced that everything is overvalued: “No one’s sure when the reckoning will take place, but it’s likely to be ugly when it does.” Joseph Biden agrees with a 7-year-old’s suggestion to make the world a better place.

Washington: Sequestration Watch

The Congressional Budget Office says the deficit problem is solved for the next 10 years. Paul Krugman says the case for austerity has crumbled, but Keith Hennessey says it’s too soon to celebrate. Jared Bernstein submits the fourth installment of his “sequester watch.” The Federal Reserve, whose policy has pushed some start-ups to be valued at a billion dollars, may ease up on monetary easing this summer. Here are a few buzzwords to watch as the Fed plots its exit strategy. Joe Weisenthal reveals the real reason people bash Ben S. Bernanke and John Maynard Keynes at conferences. A bunch of economists offer advice to graduates.

Your People: Hourly Workers

Alex Befekadu lists seven employee types that you should fire. Joanne Sammer takes a look at what constitutes a healthy work/life balance and how companies can achieve that goal. A study finds that freedom is the top reason for quitting and that millennials want to be entrepreneurs (but that doesn’t always mean starting businesses). Here are four steps to hiring hourly workers this summer. Crispin Jones explains the benefits of having a diverse workplace. Here are five ways to deliver bad news to employees (and the best ways to open a beer).

Finance: A Trip to Mars

André Mouton believes that if venture capitalists aren’t interested in crowdfunding, maybe you should be (apparently, Donald Trump is interested). Jeff Hindenach explains why credit cards remain a viable option for small businesses. Kabbage expands its small-business financing (using QuickBooks data), and NASA is offering $9.8 million to small and midsize businesses for a trip to Mars. Joe Taylor gives advice for building a profitable banking relationship, but here are some alternatives if you cannot. And here are two helpful online valuation tools to find out how much your business is worth. Bayer HealthCare goes on a start-up hunt. Retiring baby boomers are driving the sales of small businesses.

Start-Up: Controlling Fear

Ken Oboh says start-ups should ditch their “go big or go home” mentality. Peter Thiel’s first investment in Europe has gone to a London-based start-up in financial technology. A life coach explains how to control the fear of starting a small business. Two start-up founders were not afraid to sleep in a van for months on end. Here’s how start-ups can get cheap office space and three ways to jump-start your dreams. Morgan Hartley and Chris Walker explain why your city needs a start-up scene. A venture capital firm is eager to invest in start-ups in Charlotte, N.C. A start-up “dream team” is looking for 45 young aspiring entrepreneurs from around the world to join a nine-week summer program in Silicon Valley. This is how one entrepreneur started three businesses by age 32.

Management: Go to Bed

Todd Wasserman explains key performance indicators. Julia Kirby says that if you want to change the world, you should get to bed by 10 p.m. Here are eight easy ways for your business to go green, and Jim Smith explains what your business can learn from the $1 cups at Starbucks. Communicating with energy is one of the five most important business skills. According to an American Express study, 70 percent of entrepreneurs say they purchase and source goods and services from other small businesses. A survey reveals the DNA of America’s small-business owners.

Marketing: The Ultimate Pitch

Here is how Lowe’s is making its customers smarter with six-second videos on Vine. Pamela Wilson has suggestions for getting customer testimonials that will convince even the most skeptical prospects. Mark Emond writes that there are four foundational elements of marketing analytics success. Suren Ter-Saakov explains what is important about competitive analysis. Diane Carlson warns not to make these business card mistakes. Jill Konrath says this is the ultimate sales pitch. A contract manufacturer shares eight marketing tips.

Around the Country: A $50,000 Challenge

An Alaskan town will vanish by 2017. In tornado-hit Joplin, Mo., employees of local businesses chip in again to rebuild. A new Colorado law provides recourse for discrimination against workers at companies that employ fewer than 15 people. Constant Contact joins with Staples and Score to host free webinars. CNBC’s new small-business show introduces a $50,000 challenge. In Chicago, mothers are showing their children the real estate ropes. In Pennsylvania, four businesses receive energy-efficiency and pollution-prevention grants, registration opens for a small-business expo on government contracting and a small-business conference plans a summer debut in Philadelphia.

Around the World: Manufacturers Coming to U.S.

The euro zone recession continues into its sixth quarter, and the social mood darkens. The United States oil boom leaves OPEC sidelined from demand growth. Japan’s economy expands faster than expected. A youth hockey brawl breaks out in Russia. China’s industrial production grew 9.3 percent in April. Jeffrey Telep and Joshua Snead report that global manufacturers are moving production to the United States. The proportion of British-based small businesses targeting the growing international market for low-carbon products has doubled in the past two years.

Social Media: Exclamation Points

Amanda McCormick wants to know how you are using social media to market your business. Dan Zarrella finds that exclamation points get more retweets but fewer clicks. LinkedIn bans users from promoting prostitution and escort services, but this is not why the social media service annoys Benedict Evans. Christopher Null wonders if Google Plus matters for small businesses.

Red Tape: Deficiencies

The Government Accountability Office finds 60 deficiencies in the Internal Revenue Service’s internal controls, and Jon Stewart weighs in. The Obama administration announces three advanced manufacturing innovation institutes. A survey reveals a lingering uphill battle for the new health care law, but Emily Maltby and Angus Loten wonder whether the law may create new entrepreneurs. Sarah Kliff explains what will happen if you don’t pay the tax penalty, and a small-business owner explains the hard facts of the health care law to employees.

Online: Call to Action!

Seth Godin explains why they call it a browser: “Call it attention inflation. More time spent looking, less time spent clicking.” A company that provides legal services to small businesses is now accepting Bitcoin as payment (and Amazon introduces its own virtual currency). OpenSky becomes another “interesting competitor” in the online marketplace. Here are some keyword strategies to draw people to your site, and here is how to use calls to action in your next e-mail campaign. Roger Kohl tells you everything you need to know about “the scariest search engine” on the Internet. Here are Time magazine’s best Web sites of 2013, and here are 16 steps to hosting a successful webinar. Did you know that 70 percent of consumers trust online reviews?

Retail: Bike Lanes Are Good

Square unveils hardware for its point-of-sale iPad registers, Groupon officially introduces its own point-of-sale system, and PayPal unveils a program to compel small merchants to throw away their cash registers. Also, keep your eyes on these shopping-cart-mounted tablets that will detect nearby items and offer recipes in real time. Fred Lizza says cloud retail can transform your business, and these are the benefits of a cloud-based inventory management system. A survey finds restaurant sales and traffic improved in April. Restaurant marketers are waking up to a $50 billion breakfast opportunity, and millennials are propelling the growth of the sandwich industry. Bike lanes happen to be good for local businesses.

Mobile: Dead in the Water

Nearly 75 percent of all smartphones sold in the first quarter were Android-based, and this chart shows that the iPhone’s market share is “dead in the water.” It is now estimated that the mobile marketing industry may employ 1.4 million people by 2015. Tobin Dalrymple suggests five ways to publish content on mobile. Here is a guide to mobile productivity apps, and Brian S. Hall shares six mobile apps created by nontech companies. Jon Gold explains why everyone is still confused by mobile management. BlackBerry will introduce BBM for iOS and Android this summer. A coming webinar looks at small-business adoption of mobile.

Technology: Texting to Landlines

Google is offering free unified storage across its services along with a way to send money by Gmail. Here is everything Google announced at its developer’s conference (which is also where the company’s chief executive said he wanted to start his own country). A company introduces texting to landlines. Michael del Castillo shares the lessons learned from five huge tech flops. Megan Totka suggests five customer relationship management tools for small businesses. Windows Blue may leave customers seeing red.

Tweet of the Week

@dansinker – How long does a keynote have to last before it’s considered a hostage situation?

The Week’s Best Quote

Charlie Hamilton shares a few lessons from the lemonade stand: “Successful adults often worked when they were young. They mowed lawns, baby-sat, or had a lemonade stand. Learning how to work hard, provide good customer service, overcome challenges, ask for the sale, and understand the value of a dollar are invaluable life lessons that kids simply can’t get from a textbook.”

This Week’s Question: Would you buy a point-of-sale system from Groupon?

Gene Marks owns the Marks Group, a Bala Cynwyd, Pa., consulting firm that helps clients with customer relationship management. You can follow him on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/05/20/this-week-in-small-business-gordon-ramsay-calling/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

You’re the Boss Blog: A Start-Up Struggles to Market Its iPhone App

May 16, 2013 by Leave a Comment

Wanderable founders: Jenny Chen, left, and Marcela Miyazawa.Courtesy of Wanderable Wanderable founders: Jenny Chen, left, and Marcela Miyazawa.

Site Insight

What’s wrong with this site?

“No one has told me that they got into mobile too soon,” is what a savvy venture capitalist told me recently during a meeting in my office. And that’s why so many Web site owners are trying to create the right smartphone experience.

Most companies are either optimizing their entire site so it appears clearly and is easy to navigate on a phone screen, or they are building a dedicated iPhone or Android application. Many are playing catch up.

Today we meet Marcela Miyazawa, a founder of Wanderable, a gift registry for honeymooners that makes it easy for couples to send personalized, old-fashioned, physical thank-you notes — and, yes, avoid the pain of spending months trying to get through a pile of notes. Ms. Miyazawa and her co-founder, Jenny Chen, introduced the Web site in January, 2012 and have been satisfied with the number of users it has attracted, especially through organic search.

Last fall, they coded an iPhone app themselves and released it in November, believing that it would be the ideal extension of the site and quickly attract downloads. Instead, after an initial few hundred, the app has found few takers.

Here’s how it works: Wanderable’s mobile app lets honeymooners perform two key functions. First, they can create a registry where they list things they would like to receive as presents. Then, when they take their honeymoon, they can upload a photograph of themselves enjoying their honeymoon gifts — a massage, a bicycle tour, a room in a hotel, a bottle of Champagne — and Wanderable will “auto-magically” transform the photo into a postcard with a printed thank you that will arrive at the giver’s home a few days later. When the very happy couple returns home, their thank-yous will have already been sent.

Ms. Miyazawa and Ms. Chen say the feedback from those who have used the app has been positive, with users appreciating the ease and personal touch. As a result, they say they are content with the functionality and the user interface, and they have decided to wait until they are able to collect more user data on the app before investing further. For now, their challenge is to find a larger audience.

The well known channels for marketing a new iPhone app include:

Pay-per-install: working with a third-party marketer who only charges the company when a user downloads the app. The quoted prices have been too high, Ms. Miyazawa said, explaining that there is a fear that Apple will pull apps that pay for downloads from its App store.

Facebook ads: One advantage of advertising on Facebook is the ability to target the audience using filters for things like location, education and Facebook followers. But Ms. Miyazawa found she was unable to get the Facebook audience to download. “People use Facebook as a social tool,” she said. “They don’t pay attention to the ads. We can target effectively, but we don’t see action.”

Bloggers: Getting a mention in a highly trafficked wedding blog, Ms. Miyazawa said, can cost $1,000 to $2,500, and there is no guarantee of effectiveness. Plus, one of the best known publications in the wedding industry, The Knot, has a somewhat competitive app, which has ruled it out as a marketing channel.

In hindsight, Ms. Miyazawa and Ms. Chen  stand by their decision to design and build the app in-house — in part because it gave them the ability to update features and fix bugs quickly. But they acknowledge a lack of focus on a cohesive marketing plan before the introduction. I have a mobile-savvy friend, Ariel Seidman, founder of Gigwalk, who says, “The Web is where you acquire users, and apps are where you engage and retain them. You need to figure out that funnel before you design your app. If you are counting on App Store promotion and pay-per-installs, you have already lost.”

What do you think? Does this app have a future?

Richard Demb is co-founder of Abe’s Market, an online marketplace for natural products that is based in Chicago.

Article source: http://boss.blogs.nytimes.com/2013/05/16/a-start-up-struggles-to-market-its-iphone-app/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

Thinking Entrepreneur: For Local Businesses, the Internet Threat Isn’t Just the Sales Tax

May 15, 2013 by Leave a Comment
Thinking Entrepreneur

An owner’s dispatches from the front lines.

I am a third-generation retailer. My father and grandfather owned a “dime store” (Google it), and working there gave me a foundation that would allow me to become a successful entrepreneur.

Because my father was unable to teach me anything about management (only one nonfamily employee), marketing (didn’t do any) or finance, I learned most of what I know about business through trial and error. But I did learn something more valuable, something more basic from my father. What I learned has since been termed customer service, but it is something I have been giving since I was 7 years old.

My father was good at it. But in the end, it couldn’t make up for the competition from bigger stores that slowly put him, and thousands like him, out of business. All of these years later, I wonder whether specialty stores like mine — picture framing, art, a furniture store — will be put out of business by the latest version of bigger stores, the Internet retailers.

Small retailers have been under attack for 40 years. The number of local hardware stores, shoe stores and clothing stores has fallen drastically. Other small businesses — privately owned drugstores, office supply shops and small electronics stores — have all but disappeared. But some small businesses are at least holding their own, and some are even doing well. The local bakery, locksmith, jewelry store, shoe repair store, bike shop, frame shop, cleaners, hair salon, pizza parlor, tailor and florist still occupy space in strip centers across America.

Many of these businesses have a strong service component, which means they don’t really have Internet competitors. But some do. In particular, I think of the local shoe store. Customers can come into the store, try on numerous pairs of shoes and walk out empty-handed — only to go home and order online, perhaps saving sales tax and maybe a few dollars more. Great customer service may help the local retailers, but nothing is going to stop some people from stealing their time.

A recent You’re the Boss blog post on this topic got quite a response, with many people agreeing that “showrooming” is wrong. But the responses also reminded me that many people do not understand what happens on the other side of the counter. There are many misconceptions about why there are cost savings from buying on the Internet, with some of them stemming from the phrase “bricks and mortar.” There is a common assumption that local retailers charge more because they have to pay more in rent. But that generally is not the case. As a retailer who sells both on the Web and off, I can assure you that competing on the Web is not free. The cost of building and maintaining a Web site can easily eat up whatever savings you enjoy paying warehouse rent instead of retail rent.

So what are the differences? Well, the big Internet businesses are going to have lower costs because of their economies of scale. And labor can be a huge savings. Web retailers don’t have to pay commissions, and they don’t pay people to stand around and wait for the opportunity to serve customers. But much of this cost advantage can disappear if the site offers free shipping.

On the other hand, the advantage Internet retailers have enjoyed by not having to collect sales tax has been greater than many realize. If you have bought from Zappos, you may have noticed that its prices are often the same as the local shoe store’s — until the local store charges for sales tax. Forcing Internet retailers to collect this tax will do much to level the playing field. But there is another reason that some of these big companies charge less, or more accurately choose to charge less, and it is one that is poorly understood. They charge less because they are O.K. with not making a profit. Most small businesses can’t afford to do that.

Why would a company choose to operate without a profit? Because it wants to provide great value? Check. Because it wants everyone to love the brand? Check. Because it wants to gain market share? Check. Because it wants to put everyone else out of business, so that it can one day flick a switch to raise prices and make a fortune? CHECK!

Don’t believe me? Well, here is Jeff Bezos of Amazon, explaining why making a profit isn’t important. Of course, he doesn’t say he’s planning to raise prices after he puts a lot of people out of business, but let me translate something for you: Gaining market share by not taking a profit makes the most sense if you are planning to raise prices later when you have less competition.

If this competition with giant Internet companies seems like some kind of Brave New World, it’s really not. It’s pretty much the same strategy the robber barons employed in the 19th century. Today’s combination of tax avoidance and profit delay enjoyed by the Web retailers has made it very difficult for some local retailers. But is the end near?

Well, the Internet’s free ride on sales tax may be. And I believe that if that ends, the game will change. It may be too late for some, but it will make it easier for local companies to compete. Of course, there will continue to be some casualties because of inventory levels, buying power, and maybe even service. And make no mistake: not all local retailers learned the customer-service lessons my father taught. Meanwhile, some Web retailers do give great service, including Zappos.

But here is some sobering math — and perhaps the ultimate misconception. When a local store loses 10 percent of its business to Internet competition (or for any other reason), it doesn’t sound devastating. But that 10 percent decline in revenue can easily mean a 100 percent decline in profit. Here is the (simplified) math. Let’s say a store has $1 million a year in revenue and a 5 percent profit at the end of the year, or $50,000. If sales fall 10 percent, to $900,000, and the business’s cost of goods sold is 50 percent, the $100,000 drop in revenue will wipe out the entire $50,000 in profit. And if sales should fall 20 percent, the store will post a $50,000 loss. That can’t last long.

People are often surprised when a local store or restaurant that seemed busy closes down. But would an outsider even notice a 10 percent drop in business? Of course, the person paying the bills — or not paying the bills, in this case — will always notice.

So what is the moral of this story? If you are a retailer facing Internet competition, the new sales tax law — if it passes — should help, but it may not solve all of your problems. And if you are a customer, please think twice before you use the services of a local retailer without any intention of buying. We all may pay a hefty price for your “savings.” Empty storefronts don’t help a neighborhood.

Jay Goltz owns five small businesses in Chicago.

Article source: http://boss.blogs.nytimes.com/2013/05/14/for-local-businesses-the-internet-threat-isnt-just-the-sales-tax/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

You’re the Boss Blog: Has LinkedIn Changed the Way You Hire?

May 15, 2013 by Leave a Comment

Steve Uster: “I’m a huge fan of LinkedIn for small-business owners, and I’ve never paid them a dime!”Chris Young for The New York Times Steve Uster: “I’m a huge fan of LinkedIn for small-business owners, and I’ve never paid them a dime!”

Today’s Question

What small-business owners think.

A small-business guide we’ve just published discusses several examples of how companies are using online tools to revamp their hiring processes. One example is Eldridge Capital, an asset-backed lender based in Toronto that recently introduced an offshoot, Zillidy, to issue small loans to small businesses.

Because those loans are backed by personal assets like luxury watches, jewelry and fine art, Steven Uster, chief executive of Eldridge Capital, needed to hire a chief appraiser. He placed ads in local media outlets and inquired at area gemology programs, but after several weeks had failed to find any viable candidates. Then he went on LinkedIn and typed “gemologist or jewelry appraiser Toronto” into the search bar. Within an hour of reading the profiles that appeared in the search results, he had four candidates, one of whom he hired a week later. “I don’t know why it didn’t occur to me sooner,” he said. “It should have been obvious.”

The guide suggests other tools and other less obvious tips, and it points out that LinkedIn has multiple levels of membership. In Mr. Uster’s case, he used his free basic account to find the appraiser. Once he spotted the abbreviated listings for a handful of promising candidates, including their current and most recent previous employers, he simply searched for them online to find out more. “I’m a huge fan of LinkedIn for small-business owners,” he said, “and I’ve never paid them a dime!”

Please read the guide and tell us what has worked for you.

Article source: http://boss.blogs.nytimes.com/2013/05/15/has-linkedin-changed-the-way-you-hire/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

You’re the Boss Blog: How a Fast-Growing Start-Up Practices Decision-Making

May 15, 2013 by Leave a Comment
Building the Team

Hiring, firing, and training in a new era.

Last week in my post — “If Practice Makes Perfect, Why Don’t Companies Practice More?” — I described the types of training programs and practice sessions that we use at H.Bloom. The comments that I received at the end of the column were especially insightful and offer a great segue to today’s post.

From James Watson: “Practice,” in my experience, is the most underutilized resource in the world of business. Anyone can practice anything to get better results.

From DanShannon: Deliberate practice is practice with a coach capable of criticizing your performance objectively, specific goals for each practice session, and assessment of how well you reach those goals during each practice session. Deliberate practice is an incredibly powerful way to improve.

From Sheila Bulthuis: I think the key to the approach described in this post is the assignments that are given after each meeting. If those assignments are a chance for the managers/employees to actually apply the skill that was discussed, and apply it in a realistic and job-relevant way, that’s the way you’re going to see actual skill improvement and behavior change.

These comments were a concise summary of the post:

  1. Practice will yield better results.
  2. The best type of practice is when someone gives a specific goal and then provides feedback on the attainment of that goal.
  3. In the H.Bloom training sessions, the assignments after a particular training course are critical for applying a newly learned skill to improve on that subject matter.

As a followup, I thought I would provide details of a recent H.Bloom University management training class.

Reading assignment

In last month’s class, the topic was “data-driven decision-making.” We assigned a reading ahead of time: Chapter 4 of Jim Collins’s  “Good to Great,” which is titled, “Confront the Brutal Facts (Yet Never Lose Faith).”

It tells a story about the grocery chain Kroger, and how its executive team used data-driven decision-making to outpace its competition, the larger retailer AP. Mr. Collins describes the competition between the two companies as follows: “From 1959 to 1973, both companies lagged behind the market, with Kroger pulling just a bit ahead of AP. After that, the two companies completely diverged, and over the next twenty-five years, Kroger generated cumulative returns 10 times the market and 80 times better than AP.”

The chapter goes on to say, “Here’s what’s interesting: Both Kroger and AP were old companies … Yet one of these companies confronted the brutal facts of reality head-on and completely changed its entire system in response; the other stuck its head in the sand.”

Finally, the author interviewed the then-current chief executive of Kroger, Lyle Everingham, to understand the divergence of performance between the two companies. His response was straightforward, “Basically, we did extensive research, and the data came back loud and clear … once we looked at the facts, there was really no question about what we had to do. So we just did it.”

The data that Mr. Everingham was referring to suggested that American consumers, as Mr. Collins writes in the book, “no longer wanted grocery stores. They wanted superstores – offering almost everything under one roof, with lots of parking, cheap prices, clean floors, and a gazillion checkout lines.” The executives at Kroger used the data to make a decision to become this type of superstore. The folks at AP did not.

Presentation of a topic

I broke the class into two separate sessions – one for our market managers and the other for sales managers – so that each person would be visible on the videoconference. The presentation began with Mr. Everyingham’s quote from above: “But once we looked at the facts …”

After reviewing the reading, I provided two examples of recent decisions we had made as a company based on the analysis of  data. The first example was about churn, or turnover, in our corporate subscription business. Our director of sales operations had provided a detailed review of the dynamics of our corporate churn and highlighted anomalous behavior in one particular type of company, which led us to make the decision to stop selling to those companies.

The second example covered our sales pipeline, the exceptional close rate that our account executives have exhibited once they secure an in-person meeting, and the need to supply more leads at the top of the funnel. I’ve written about this analysis and the strategy we developed in previous posts: “How Data Analysis Led Us to Reassess Sales and Open a Lead Generation Center” and “What One Company is Doing to Generate Sales.”

The slide presentation ended with another quote from the book: “This is a very important lesson. You must never confuse faith that you will prevail in the end – which you can never afford to lose – with the discipline to confront the most brutal facts of your current reality, whatever they might be.”

Putting the learning into practice

I ended the class with an assignment: a) identify a problem or opportunity in your market, b) analyze any data about that problem/opportunity, c) use the evaluation of data to draw a conclusion, and d) present your findings to the group. The class participants could work on this assignment individually, or in teams, and they were given two weeks to complete the project.

Follow-up

Two weeks after the initial class, I scheduled multiple sessions to review the assignments. These were done by videoconference again, but this time, the participants presented their findings to me. The sessions provided immediate follow up to the classroom training; a chance to put the new skills into practice; real-time feedback on how they had done; and sometimes, the opportunity to adopt a new strategy based on the presentation.

Next, I’ll review some of these presentations, the feedback that I gave to the presenters, and how they provided opportunities to practice the skills of data-driven decision-making.

Bryan Burkhart is a founder of H.Bloom. You can follow him on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/05/15/inside-a-management-training-class-at-h-bloom/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

You’re the Boss Blog: For Local Businesses, the Internet Threat Isn’t Just the Sales Tax

May 14, 2013 by Leave a Comment
Thinking Entrepreneur

An owner’s dispatches from the front lines.

I am a third-generation retailer. My father and grandfather owned a “dime store” (Google it), and working there gave me a foundation that would allow me to become a successful entrepreneur.

Because my father was unable to teach me anything about management (only one nonfamily employee), marketing (didn’t do any) or finance, I learned most of what I know about business through trial and error. But I did learn something more valuable, something more basic from my father. What I learned has since been termed customer service, but it is something I have been giving since I was 7 years old.

My father was good at it. But in the end, it couldn’t make up for the competition from bigger stores that slowly put him, and thousands like him, out of business. All of these years later, I wonder whether specialty stores like mine — picture framing, art, a furniture store — will be put out of business by the latest version of bigger stores, the Internet retailers.

Small retailers have been under attack for 40 years. The number of local hardware stores, shoe stores and clothing stores has fallen drastically. Other small businesses — privately owned drugstores, office supply shops and small electronics stores — have all but disappeared. But some small businesses are at least holding their own, and some are even doing well. The local bakery, locksmith, jewelry store, shoe repair store, bike shop, frame shop, cleaners, hair salon, pizza parlor, tailor and florist still occupy space in strip centers across America.

Many of these businesses have a strong service component, which means they don’t really have Internet competitors. But some do. In particular, I think of the local shoe store. Customers can come into the store, try on numerous pairs of shoes and walk out empty-handed — only to go home and order online, perhaps saving sales tax and maybe a few dollars more. Great customer service may help the local retailers, but nothing is going to stop some people from stealing their time.

A recent You’re the Boss blog post on this topic got quite a response, with many people agreeing that “showrooming” is wrong. But the responses also reminded me that many people do not understand what happens on the other side of the counter. There are many misconceptions about why there are cost savings from buying on the Internet, with some of them stemming from the phrase “bricks and mortar.” There is a common assumption that local retailers charge more because they have to pay more in rent. But that generally is not the case. As a retailer who sells both on the Web and off, I can assure you that competing on the Web is not free. The cost of building and maintaining a Web site can easily eat up whatever savings you enjoy paying warehouse rent instead of retail rent.

So what are the differences? Well, the big Internet businesses are going to have lower costs because of their economies of scale. And labor can be a huge savings. Web retailers don’t have to pay commissions, and they don’t pay people to stand around and wait for the opportunity to serve customers. But much of this cost advantage can disappear if the site offers free shipping.

On the other hand, the advantage Internet retailers have enjoyed by not having to collect sales tax has been greater than many realize. If you have bought from Zappos, you may have noticed that its prices are often the same as the local shoe store’s — until the local store charges for sales tax. Forcing Internet retailers to collect this tax will do much to level the playing field. But there is another reason that some of these big companies charge less, or more accurately choose to charge less, and it is one that is poorly understood. They charge less because they are O.K. with not making a profit. Most small businesses can’t afford to do that.

Why would a company choose to operate without a profit? Because it wants to provide great value? Check. Because it wants everyone to love the brand? Check. Because it wants to gain market share? Check. Because it wants to put everyone else out of business, so that it can one day flick a switch to raise prices and make a fortune? CHECK!

Don’t believe me? Well, here is Jeff Bezos of Amazon, explaining why making a profit isn’t important. Of course, he doesn’t say he’s planning to raise prices after he puts a lot of people out of business, but let me translate something for you: Gaining market share by not taking a profit makes the most sense if you are planning to raise prices later when you have less competition.

If this competition with giant Internet companies seems like some kind of Brave New World, it’s really not. It’s pretty much the same strategy the robber barons employed in the 19th century. Today’s combination of tax avoidance and profit delay enjoyed by the Web retailers has made it very difficult for some local retailers. But is the end near?

Well, the Internet’s free ride on sales tax may be. And I believe that if that ends, the game will change. It may be too late for some, but it will make it easier for local companies to compete. Of course, there will continue to be some casualties because of inventory levels, buying power, and maybe even service. And make no mistake: not all local retailers learned the customer-service lessons my father taught. Meanwhile, some Web retailers do give great service, including Zappos.

But here is some sobering math — and perhaps the ultimate misconception. When a local store loses 10 percent of its business to Internet competition (or for any other reason), it doesn’t sound devastating. But that 10 percent decline in revenue can easily mean a 100 percent decline in profit. Here is the (simplified) math. Let’s say a store has $1 million a year in revenue and a 5 percent profit at the end of the year, or $50,000. If sales fall 10 percent, to $900,000, and the business’s cost of goods sold is 50 percent, the $100,000 drop in revenue will wipe out the entire $50,000 in profit. And if sales should fall 20 percent, the store will post a $50,000 loss. That can’t last long.

People are often surprised when a local store or restaurant that seemed busy closes down. But would an outsider even notice a 10 percent drop in business? Of course, the person paying the bills — or not paying the bills, in this case — will always notice.

So what is the moral of this story? If you are a retailer facing Internet competition, the new sales tax law — if it passes — should help, but it may not solve all of your problems. And if you are a customer, please think twice before you use the services of a local retailer without any intention of buying. We all may pay a hefty price for your “savings.” Empty storefronts don’t help a neighborhood.

Jay Goltz owns five small businesses in Chicago.

Article source: http://boss.blogs.nytimes.com/2013/05/14/for-local-businesses-the-internet-threat-isnt-just-the-sales-tax/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

You’re the Boss Blog: YogaFit Tries to Escape the Discount Trap

May 13, 2013 by Leave a Comment
She Owns It

Portraits of women entrepreneurs.

Beth Shaw: Suzanne DeChillo/The New York Times Beth Shaw: “We’ve undervalued ourselves.”

At the last She Owns It business group meeting, Beth Shaw, who owns YogaFit, started the discussion by sharing some painful lessons she has learned from discounting her company’s yoga teacher training.

“We have been running so many different discount codes, many of which have no expiration date, that we had people using the same code for multiple trainings when they shouldn’t have,” she said. “The customer service team is using those discounts as a way to make the sale, as opposed to focusing on the quality of our service, and so it’s a huge problem right now.” But with the help of a sales consultant who pointed out the dangers of indiscriminate discounting, she is devising solutions. Effective June 30, the open-ended discounts will end, Ms. Shaw said.

She said she had discovered that some of YogaFit’s training courses were run in a way that left the company no possibility of making a profit. “You can’t stay in business like that,” she added. When she reviewed what customers paid for her training, factoring in the discount codes, she said she found YogaFit’s offerings were “ridiculously underpriced.”

To fix the problem, she plans to assess the real costs of running YogaFit’s training and price it accordingly — steps, she concedes, she ideally would have taken sooner. But she said learning how to build a business has been an evolving process. Additionally, her customer-service team will need to be educated.

Susan Parker, who owns a dress manufacturer, Bari Jay, wondered whether simply ending the open-ended discounts on June 30 might solve the problem. “I assume every training is slightly different?” she asked.

Yes, Ms. Shaw said.

Ms. Parker said Ms. Shaw might have a bigger problem if she were selling, for example, a dress with a price that suddenly went from $100 to $120. She said Ms. Shaw is selling more of an experience, and may wipe the slate clean by ending the discounts.

Not necessarily, Ms. Shaw said, noting that the company does a lot of repeat business. “We have trained our customers in a bad way,” she said. “A lot of people were taking advantage of those discount codes.”

“How did you price these originally?” asked Alexandra Mayzler, who owns Thinking Caps Group.

Ms. Shaw said she looked at comparable offerings and “kind of undercut.” She went on to describe YogaFit’s product as unique because the company provides training across the country and internationally. This gives customers the chance to continue their training with YogaFit even when they move or travel.

“What’s the purpose of undercutting the competition?” asked Jessica Johnson, who owns Johnson Security Bureau.

“That’s a good question,” Ms. Shaw said. “I think we’ve undervalued ourselves dramatically.”

“I don’t have that problem — most of the time,” Ms. Johnson said. Sometimes, she said, “People expect me to have lower rates because they’re like, ‘Oh, you’re small, you’re a woman, you’re a minority, you’re in the ‘hood.’” She said prospects were often surprised to learn her prices. “I had a potential client say, ‘Well, I can get that for $14.’” Her standard response? “If you can get it for $14, get it for $14. And then when that doesn’t work out, call me back.”

Ms. Johnson said potential clients even approach her by stating they are unhappy with their current security firm and wonder if Johnson Security can give them a better price. In fact, this happened just last month. “I’m looking at the guy, like, ‘Really? I’m not going to match those numbers,’” she said.

“Because you get what you pay for,” said Deirdre Lord, who owns the Megawatt Hour, an energy start-up.

“Exactly,” Ms. Johnson said.

Ms. Mayzler said she had had similar experiences with prospective clients who told her they could get the same service for less. “If you think it’s the same service, then maybe we’re not the right fit for you,” she said she told them.

“It’s one thing to negotiate for better rates, but then it’s another thing when potential clients or clients try to use that as leverage and shop just the price,” Ms. Johnson said. “There are competitors that will take the business at any cost — even if it’s at a loss. It sends the wrong message.”

Ms. Shaw agreed: “When you draw a line in the sand, it’s funny how many people will actually come to that line and come over it, but you have to hold strong.”

In future posts, the owners will discuss the challenges of pricing a newly created product or service.

You can follow Adriana Gardella on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/05/13/yogafit-tries-to-escape-the-discount-trap/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,
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