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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: , ,

You’re the Boss Blog: Further Thoughts on Employee Rehabilitation

May 6, 2013 by Leave a Comment
She Owns It

Portraits of women entrepreneurs.

In a recent post, the members of the She Owns It business group talked about the prospects of successfully rehabilitating an employee who isn’t working out. That discussion continues in this post.

Susan Parker, who owns Bari Jay, said she had come to realize that rehabilitation simply doesn’t work. Rather, she said, you need to hire the right people from the start. To do that, Ms. Parker said she knows she and her sister, who co-owns the company, will need to improve their interviewing techniques.

“I hate how we interview,” she said. “I feel like we talk, talk, talk, and the other person barely says anything, and then when they talk, they’re kind of hearing what we want,” she said. Going forward, she plans to change that, by experimenting with the interview techniques described in “Who,” a book on hiring that she’s finding helpful.

But becoming a great interviewer isn’t guaranteed to solve the problem. “You might not always find the right people because sometimes, especially when you’re growing, you don’t know what that person looks like,” said group member Jessica Johnson, who owns Johnson Security Bureau.

“And you’re also going to settle for a lot less because you don’t know any better,” said Beth Shaw, who owns YogaFit.

“But then you don’t keep those people on indefinitely when you realize that they may be better served in a place that’s a better match for them,” said Alexandra Mayzler, who owns Thinking Caps Group.

Deirdre Lord, who owns the Megawatt Hour, said that, while an owner must set expectations for each role and employee, “it’s not something you should have to do over and over again.” People make mistakes, but they shouldn’t keep making the same ones — and if they lack the right attitude or work ethic, there isn’t much hope that their performance will improve, she added.

Ms. Shaw agreed, but stressed the importance of sharing “nonnegotiable expectations” with employees. People may need to be told — once — that they have to respond to calls and e-mails within a day, she said.

Some employees may have never worked in a corporate environment where that’s the norm, Ms. Johnson said. “Particularly when you’re dealing with younger people who are relatively fresh out of school, their norms are very different so we have to have a sensitivity to that,” she said.

Ms. Shaw pointed out that employees with a corporate background may come with their own set of problems. Sometimes, she said, “those people end up not being able to perform in an entrepreneurial environment.”

“Correct, they don’t know how to operate,” Ms. Lord said.

A related issue arises when employees who excel at their day-to-day jobs are promoted to management — and fail, Ms. Parker said.

“That’s a big one,” Ms. Lord said. Getting an employee to return calls and e-mails promptly is one thing, but “you cannot teach people emotional intelligence, people skills,” she said. “People get elevated all the time who are so ill-equipped for management. Then what do you do?” she asked.

“You can’t demote them,” Ms. Shaw said.

They’ve become overcompensated, Ms. Parker added.

In future posts, we’ll revisit the owners’ management challenges and provide updates on the issues facing their businesses.

You can follow Adriana Gardella on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/05/06/further-thoughts-on-employee-rehabilitation/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

You’re the Boss Blog: Getting Sales Representatives to Sell

January 25, 2013 by Leave a Comment
She Owns It

Portraits of women entrepreneurs.

Deirdre LordEarl Wilson/The New York Times Deirdre Lord

During a previous She Owns It business group meeting, Beth Shaw, who owns YogaFit, said she realized she had to ramp up her sales efforts. Toward that end, she brought on a sales manager with a 60-day contract that is up in February. So far, results have been lackluster, leaving Ms. Shaw to wonder whether her expectations are realistic and whether she is offering the contractor the proper incentives to sell sponsorships of YogaFit’s conferences and its branded merchandise. She asked the group how quickly they expected new sales representatives to sell and what type of learning curve they expected.

“I used to create sales quotas, and then assume people were going to hit them immediately, which is totally unreasonable,” said Deirdre Lord, who owns the Megawatt Hour, a start-up in the energy industry. Now, she said, when forecasting — especially when working with new sales representatives — she builds in a three- to six-month period for them to get up to speed.

“Do you pay them a small base plus a large commission?” Ms. Shaw asked.

Ms. Lord replied that her two sales reps were paid only on commission. She added that it was important to set targets because salespeople are competitive and want to know what they must do to succeed. She said that should drive how you manage them.

Ms. Shaw asked Ms. Lord if she had trouble finding good sales people willing to work for commission only.

It’s a challenge, Ms. Lord replied. She said the sales reps she considered typically require $100,000 to $125,000 in total annual compensation. “You have to map that out for them — if you do X, Y and Z, that’s how you get to those numbers,” she said.

Depending on how successful her outside sales reps are, Ms. Lord said she would switch things up — ultimately giving them smaller commissions and larger base salaries.

This surprised Susan Parker, who owns Bari Jay, which manufactures bridesmaid and prom dresses. “When they’re more successful, you give them lower commission and a higher base?”

“Yes,” said Ms. Lord, who is also engaged in selling for her company, “because they like to have the security.”

Ms. Parker said, “But I feel like a good salesperson always wants commission because —”

“Of the unlimited upside,” Ms. Lord jumped in. But, she explained, “We’re competing for salespeople so we need to be able to offer them greater stability.”

Ms. Shaw said, “Throughout the years, I’ve had salespeople on and off, some more successful than others, some as employees, and some as independent contractors,” But the current arrangement, a 60-day contract with expectations, doesn’t seem to be working. She said that, in a month and a week on the job, her new sales manager hadn’t done much selling.

She said she gave the sales manager clear goals. “One is to sell, two is to do sales training with my staff, and three is to handle some inventory management,” Ms. Shaw said. “Inventory management hasn’t been handled, sales training started for a while and then stopped, and she hasn’t pulled any numbers.”

Ms. Shaw wondered whether it was time to admit defeat. After all, the sales manager has sold no YogaFit conference sponsorships, which range from $5,000 to $15,000 and offer her a 10 to 15 percent commission. “I’ve given her a tremendous amount of leads,” Ms. Shaw said. These include pro shops located in health and fitness clubs that offer YogaFit trainings. Maybe, she suggested, she should just have the sales manager finish out her contract by handling incoming customer service calls, with the hope that she might manage to sell something extra to the callers.

“What was her background?” asked Jessica Johnson, who owns Johnson Security Bureau.

“She supposedly sold cars,” said Ms. Shaw. And supposedly, YogaFit’s former chief operating officer checked references.

“I guess one question would be, How important is experience in your industry when you are looking at a sales professional?” Ms. Johnson said.

“I think you’re either a salesperson or you’re not,” Ms. Shaw said.

Ms. Parker agreed.

Ms. Johnson, who worked in pharmaceutical sales before taking control of her family business, described herself as a “recovering salesperson.” “I can sell anything,” she said.

Ms. Shaw agreed: “Me, too. My background is advertising sales.”

Still, Ms. Johnson said she knew of sales reps who thrived in one context but not in another. “Some people are more relationship-driven, some are more technical,” she said.

But what’s a reasonable amount of time to give a salesperson to get up to speed? Ms. Shaw asked.

“I think it takes a while, particularly in our industry, to establish relationships,” Ms. Lord said. Unless someone comes with a book of business, it takes time to generate leads. Still, she added, she would not expect zero progress after one month, and asked: “Is there any way you can track who she’s calling?”

“I still don’t have an adequate C.R.M.” — customer relations management system — “in place,” Ms. Shaw said.

“Do you give her checkpoints to meet, like ‘For this month I want you to have 100 new touches?’” Ms. Johnson asked.

“Not in terms of daily calls, I would hope she could figure that on her own,” Ms. Shaw said. She noted that the sales manager was receiving a “pretty generous base.” With hindsight, she thinks she probably should have paid her half of that and increased her commission.

What do you think?

You can follow Adriana Gardella on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/01/25/getting-sales-representatives-to-sell/?partner=rss&emc=rss

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