March 29, 2024

You’re the Boss Blog: Trying to Take the Sting Out of a Price Increase

She Owns It

Portraits of women entrepreneurs.

Susan Parker, owner of Bari Jay.Suzanne DeChillo/The New York Times Susan Parker, owner of Bari Jay.

At the last She Owns It Business Group meeting, the owners talked about several pricing issues. Susan Parker, who owns Bari Jay, recently discovered that customers react not only to a price increase but also to the way it is presented. When she learned her factories were raising her prices, she thought she would pass along a 10-percent-per-dress increase to all of customers. But then she had another idea.

Bari Jay customers who paid their invoices within 30 days had been receiving an 8 percent discount. Rather than increasing dress prices for all customers, Ms. Parker decided to discontinue the discount. This seemed like a good idea because it would affect fewer accounts, and the timely payers would still end up paying less than they would if she increased prices 10 percent across the board. But when customers learned they would be losing their discount for prompt payment, they were angry and confused, Ms. Parker said.

“I could see that,” said the group member Alexandra Mayzler, who owns Thinking Caps Group. “I’d feel like I’d been being so good, paying early, and you’re taking that opportunity away from me.”

With hindsight, Ms. Parker realized where Bari Jay went wrong. When she and her sister sent letters to the discount recipients, they said simply that Bari Jay was eliminating the 8 percent discount. The news might have been better received had they stressed that the discontinuation was in lieu of a 10 percent increase. “We only gave them the negative without giving them the positive, so the perception was that we’re taking something away,” she said.

“I think understanding that these things are going to happen, and building contingencies into your contracts — if you have a contract-type business — helps,” said Jessica Johnson, owner of Johnson Security Bureau.

Shifting gears, Ms. Parker said Bari Jay’s biggest pricing challenges are in Europe and Australia. While the company sells directly to stores in the United States, it sells through distributors in Europe and Australia, and the relationships with those distributors were in place before Ms. Parker and her sister took over the company. 

Recently, Ms. Parker’s Australian distributor claimed it could increase Bari Jay’s business if it received a bigger discount. Ms. Parker said she was glad to offer one given the promise of more sales. But Bari Jay found that the change resulted in a decline in revenue. “The distributor must have made more money but it came from our pockets, not from increased sales,” she said.

Ms. Parker had agreed to offer the bigger discount for a trial period that ended about six months ago. But because Bari Jay didn’t speak up when the trial ended, Ms. Parker said she and her sister now feel stuck with the discount.

“Did they know it was a trial period?” asked Deirdre Lord, who owns the Megawatt Hour.

“They did,” Ms. Parker replied. Sometimes, she added, she wonders whether she and her sister are “suckers.” She said they walked into a meeting with the distributor saying, “We’re going back to our original discount.” But they found neither of them had the nerve to push for the result they wanted.

“Are you afraid that they’re going to stop carrying your line?” Ms. Lord asked.

Ms. Parker doesn’t think that would happen — it doesn’t cost the distributor all that much to keep the line. But she said she has learned from her experiences with stores in the United States that they seem to promote the lines of their favorites. So, she said, she is wary of becoming “the person they don’t love dealing with.” Already, Ms. Parker suspects her Australian distributor isn’t promoting Bari Jay as much as it does other lines. For example, she said the distributor advertises other lines in all four issues of Australia’s leading bridal magazine but only advertises Bari Jay in two issues.

Ms. Lord said it sounds like Bari Jay may have a marketing issue, not a pricing one. That is, it’s not Bari Jay’s prices that are affecting sales, but the way in which the distributor is marketing the company’s dresses.

In Europe, Bari Jay’s distributor claims he needs a bigger discount to improve sales, which have fallen significantly. Ms. Parker is considering offering a discount that incorporates a minimum order. But she’s not sure. “If I do this and it doesn’t work, well then how do you renege?” she asked.

Why wouldn’t Ms. Parker just conclude that Europe isn’t her market? Ms. Mayzler asked. “You don’t want to have a price that’s not actually working,” she said.

But Ms. Parker stressed that Bari Jay has been successful there. At their peak, she said European annual sales were about $500,000, or one-fourteenth of Bari Jay’s revenue — with minimal labor costs. The dresses ship directly from Asia, at the distributor’s expense, so Bari Jay isn’t responsible for packing and unpacking. She said her labor is basically limited to order entry and invoicing. “So, it’s mostly profit,” she said. But now, European sales are close to zero — not profitable at any cost.

“What happened?” Ms. Mayzler asked.

“Europe keeps saying the market changed,” Ms. Parker said. She acknowledged that the region’s economic woes aren’t helping. But she suspects other issues are at play. She recently learned the distributor buys all of his other lines directly from factories, not retailers like Bari Jay, which mark up the factory’s price. “I can’t compete when he’s getting direct from a factory and I’m a middle man,” Ms. Parker said. “He’s selling my dresses next to a dress for half the price.”

Ms. Mayzler suggested that the problem is the distributor, not the discount amount. Ms. Parker acknowledged she is searching for a new European distributor. But until she finds one, she said she would like to see at least some European business. A bigger discount may offer her current distributor an incentive.

“Dare I say it’s not worth being in Europe?” Ms. Lord asked.

“It is though, because I can do half a million dollars, why wouldn’t I want that?” Ms. Parker replied.

“It depends how much it costs you,” Ms. Mayzler said.

You can follow Adriana Gardella on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/06/05/trying-to-take-the-sting-out-of-a-price-increase/?partner=rss&emc=rss

You’re the Boss Blog: How Much Training Do Sales Representatives Need?

She Owns It

Portraits of women entrepreneurs.

Beth Shaw: Why aren't you performing?Earl Wilson for The New York Times Beth Shaw: Why aren’t you performing?

During the last She Owns It business group meeting, Beth Shaw, who owns YogaFit, wondered why her new sales representative wasn’t selling what she was brought on to sell — YogaFit conference sponsorships, and the company’s branded merchandise, which includes clothing, yoga mats and DVDs. Initially, the conversation focused on compensation and learning curves. But as the discussion continued, a group member, Alexandra Mayzler, the owner of Thinking Caps Tutoring, raised the issue of training.

Specifically, she asked whether YogaFit had trained its new salesperson.

“If you’re a salesperson, I’m assuming …” Ms. Shaw began to answer.

“Uh uh,” said Deirdre Lord, who owns the Megawatt Hour.

“You’re shaking your head,” Ms. Shaw said to Ms. Mayzler, who replied that she makes no assumptions regarding the ability of new people to sell Thinking Caps’ services. She said sales at her company were relationship-driven. In fact, Thinking Caps doesn’t even use the term “sales.” Instead it describes that function as “networking and outreach.”

“We have a sales deck, we have a whole sponsor proposal,” Ms. Shaw said, protesting.

“So do we,” Ms. Mayzler said, adding that that’s not enough. For example, Thinking Caps just opened a Dallas office, which will be run by a clinical psychologist who has worked within schools. “She knows how to talk about this stuff,” Ms. Mayzler said. Still, the Dallas employee will go through extensive training designed to teach her how to have conversations that sell Thinking Caps’ services in a style consistent with its mission.

“Do you train her?” asked Susan Parker, the group member who owns Bari Jay.

“I’m not doing everything,” Ms. Mayzler said, adding, “I’m finally focusing on delegating.” One aspect of training involves learning the information in the Thinking Caps manual. Next, come conversations with three different Thinking Caps staff members. These include extensive role-playing and direction on points that must be hit when talking about Thinking Caps. Ms. Mayzler holds the final conversation with the trainee, who then shadows an experienced Thinking Caps staff member during meetings with potential clients.

“There’s a difference in how you sell sponsorships and how you sell merchandise,” said Jessica Johnson, who owns Johnson Security Bureau. For example, a deck may help YogaFit’s sales representative sell sponsorships, she said, but not apparel or videos.

But, said Ms. Shaw, the salesperson received leads for pro shops locating within health clubs and offering YogaFit trainings. “It’s not too much of a stretch to be like, ‘Hey, you’re carrying yoga mats, we’ve got yoga mats. Hey, you’ve got workout pants, we’ve got great workout pants,’” Ms. Shaw said.

Ms. Johnson said that, while Ms. Shaw’s suggestions were valid, she had to be sure the sales rep understood YogaFit’s “unique selling proposition.” A new salesperson must establish relationships with pro shops, while recognizing that they may already sell “29 different yoga mats,” she added.

“I understand your frustration because you’re responsible for your entire business,” Ms. Johnson said. Additionally she said, “You’re incenting this woman and giving her good compensation, and she’s come to you with what you think is credible experience, and you’re like, ‘Why are you not performing and what’s not working?’”

“Exactly,” said Ms. Shaw.

In terms of training, Ms. Shaw said the sales representative attended a YogaFit conference where she learned about YogaFit’s products and met several instructors. Additionally, she attended some of the company’s yoga trainings.

Ms. Johnson suggested that it might be beneficial to have the new salesperson make weekly or monthly presentations to YogaFit’s staff. These could take the form of a sales call, with role-playing.

“We’ve actually tried to get her to do that, and for some reason she’s been reluctant to even make a sales call in front of the sales team that she’s trying to train,” Ms. Shaw said.

Ms. Johnson and Ms. Lord agreed this was a bad sign. Still, Ms. Johnson wasn’t giving up. “My next suggestion would be to model to her an example sales call,” she said. “This is what a cold call looks like, this is what a warm call looks like, this is what a warm letter looks like, this is what a face-to-face looks like,” she continued. After a certain amount of repetition, Ms. Shaw could accompany the salesperson on a call to see how she does.

“Yeah, yeah,” said Ms. Shaw, who is no longer sure anything will work. “I now have given her a month and a week and the training period is up,” she said. Instead of continuing to bang her head against a wall, Ms. Shaw is ready to simply assign her salesperson to the customer service department for the duration of her contract, which is up on Feb. 18.

“Why not take until Feb. 18 to try to make her a better salesperson?” asked Ms. Parker. “Then either you have, hopefully, a good salesperson on Feb. 18, or you cut your losses,” she said.

“I agree with that,” Ms. Lord said.

As Ms. Shaw considered this, Ms. Johnson pointed out that the more important issue is, how she handles the issue going forward.

You can follow Adriana Gardella on Twitter.

Article source: http://boss.blogs.nytimes.com/2013/01/31/how-much-training-do-sales-representatives-need/?partner=rss&emc=rss