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Quote from Lee Alley - “Despite having an MBA, I found Tony’s practical experienced advice was absolutely spot on. As a result I now work only 50 -60 hours a week rather than the 80-90 previously and I am working much more effectively and spending 25% of my time working ON The Business. I would thoroughly recommend Tony to any Business Owner who wants to change the way he/she works in their business.”


The Price is Right

By John Sawyer on 15/11/2017 - 0 Comments

In the words of the old game show - how do you know if the price for your product is right?

Do you have a pricing strategy that maximises your competitive position in the market to get you the best results in terms of profit?

It is our experience at ICON that many companies do not have a pricing strategy, instead they tend to follow the what has worked for them well in the past and fail to update or review their pricing activity – often across their entire product or service.

However, failure to review pricing may mean that you are missing out on additional revenue gains that may potentially fall to the bottom line to increase profit.  This article describes some key pricing strategies and offers guidance as to how these may be used to have bring your pricing strategy up to date.

 

What are the Main Pricing Strategies?

Pricing for any product or service is normally based on the 3 dimensions of cost, demand and competition and a company can use any one, or a combination of these to as the basis to set pricing. The following is a review of some pricing strategy options.

Cost – Based Pricing

This refers to an approach where a desired amount of profit margin is added to the cost of the product to obtain the final price. Cost based pricing can take two key forms – cost-plus pricing and mark-up pricing.

Cost-Plus

Cost-Plus is a simple approach whereby once you calculate the cost of a good, this is multiplied by the mark-up percentage to derive the sale price. This is a simple approach but ignores the impact of competition, who may be charging substantially different prices. It also ignores replacement costs and is based on historical data that may have changed. Cost-plus pricing is also known as average cost pricing, and is widely used in the manufacturing sector.

Mark-Up Pricing

This refers to the process whereby a fixed percentage of the cost of the product or service is added to the price to get the sales price. This approach is common in retailing and is popular as most contractors are willing to accept this method for an agreement of a sale since it is assured of having its costs reimbursed and of making a profit. With mark-up pricing there is no risk on such a contract.

Target Return Pricing

This method involves identifying 3 key elements; - firstly, the price at which the product or service will be competitive in the market; secondly, the desired profit to be made, and lastly, the target cost by subtracting the desired profit from the competitive market price.

Demand Based Pricing

This refers to a method in which the price of its product is determined by its anticipated demand profile. If the demand is high then the price is set at high levels and low if the reverse is the case. The success of this pricing approach is dependent on the ability of the company to correctly determine the demand levels, and is often seen in the hospitality and travel sectors. For example, airlines use this pricing approach and have yield management teams to ensure maximum sales revenue from each class of seat sold on a plane.

Competition based Pricing

This is where the company reviews the market to identify a market pricing position compatible with the positioning of its own product or service against those of its competitors. This is a useful tool as it will oblige the company to review the market place and to identify how and where its own product or service fits in the competitive landscape. Apple computers use such an approach in order to reflect their premium positioning in the market place.

Transfer Pricing

This involves selling goods and services within and across departments and divisions within a company, and is used to manage the different profit and loss requirements within different areas within the same company. Big multinational companies use such an approach, and are often criticised for doing so, as by doing so, they are able to minimise taxation liabilities. Notable examples of this are again, Apple Computers and Starbucks.

 

Which Pricing Approach is Best?

The answer is that there is not one pricing approach that meets the needs of all business types and sectors. The above examples represent a summary of some of the key pricing strategies – there are others such as price penetration and market skimming.

A good example of price penetration is where a product is sold at a level to gain maximum sales which may be below its cost of sale, and in some cases is referred to as loss leading.

Retailers are skilled at enticing customers into shops with bargains on core staple food products such as bread, milk and eggs in the hope that customers basket spend is increased with many higher margin products.

If there is one lesson to be learned, that is to review your pricing and to have a strategy. For example, know what your cost of sales are and break-even point is. This is the sale price at which you equally offset the combination of fixed and variable costs.

Have an understanding of the competitive landscape and where you are positioned within it. You may be able to squeeze additional margin out of some of your product range, but without reviewing your approach, you will not know.

A solid understanding of what your customers are capable of bearing is also required. Don’t just focus on price increases at the start of each New Year, but look at how you can achieve marginal gains across your range of products and services at different times of year.

Research undertaken by ICON has found that the group most reluctant to increase prices is business owners themselves.

Failure to have and review a pricing strategy may lead to reluctance to change because of a perceived fear this may have a detrimental impact on sales. The reality may be that such a change may mean you lose customers that do not want to be loyal to your product or service as they only purchase on price alone. These customers may in fact cost you money to service.

So make time now to review your pricing strategy. Don’t be afraid to tackle these questions, but get an informed position, and from there take your appropriate course of action.

If you are able to squeeze extra margin from your sales by a change to your pricing strategy, just think what you could do with the incremental profit?

Get in touch with your local ICON advisor to see how this impacts on your business,

Simple Stories That Help Us To Be More Successful

By Malcolm Orchard on 14/11/2017 - 0 Comments

Today’s story is a good analogy for business owners who have been running their business for a few years and have not refreshed their working methods. Very often we continue to do the same things each day/week/month without thinking about WHAT we are actually doing and WHY we are doing it.

New technologies and new ideas are great at streamlining and improving our methods of working and can bring a number of benefits to the organisation – not least cost and time efficiencies. Sometimes you may be going through the motions without really understanding WHY you are doing it or WHAT you are trying to achieve.

It may be that when the process was first introduced it worked well, but as the business has grown the process should have been revised or changed.

I have worked with organisations that have never considered the ‘WHY’ or ‘WHAT’ when going about their business.

Business owners should always be challenging themselves to improve their working practices and not be afraid to encourage their staff to suggest better ways of working. This review should be a vital undertaking, especially when the business is growing and expanding, the processes need to follow suit.

He following story illustrates this beautifully. This story is called:

 

But we have always done it this way.

A little girl was watching her mother prepare a fish for dinner. Her mother cut the head and tail off the fish and then placed it into a baking pan. The little girl asked her mother why she cut the head and tail off the fish.

Her mother thought for a while and then said, "I've always done it that way - that's how Grandma did it."

Not satisfied with the answer, the little girl went to visit her grandma to find out why she cut the head and tail off the fish before baking it.

Grandma thought for a while and replied, "I don't know. My mother always did it that way."

So the little girl and the grandma went to visit Great Grandma to find out if she knew the answer.

Great grandma thought for a while and said, “Because my baking pan was too small to fit in the whole fish”.

Some business owners are so close to their business that they unable to take time to look at the business strategically and see that there could be a better way to do things.

So take a step back and look at the organisation as a whole and also consider the constituent parts to ensure that they work in harmony. Refer to a knowledgeable specialist that will see the business from experience and with fresh eyes and may be able to see some obvious benefits from change.

I had a classic situation last year talking with someone who had taken over the business from his parents.

He was using post-it notes and scraps of paper to take orders and make notes– because that’s how they had always done it. He did not know any other way of working because he was trained by his parents to follow suit. It just needed someone to show him another method.

He now has a proper day book and order processing system, but it was a real pain to get him to change. But what a massive difference it has made to the way the business runs.

We call this ‘not knowing what you don’t know’ and often occurs when we engage with business owners. After all most business owners are great at what they do, but do not necessarily understand the fundamentals of running a business.

Business owners need to regularly step away from their business and look at it more strategically. Do not be afraid of change, listen to ideas from your staff and advisers, embrace it and see the benefits that can be delivered. Do not be satisfied with doing something just because:


"WE HAVE ALWAYS DONE IT THIS WAY".

Do You Miss Out On Work / Life Balance

By Jon Sawyer on 12/10/2017 - 0 Comments

The National Work-Life Week 2017 took place on 2-6th. October 2017. Did you know about it and are you making the most of your work / life balance?

This week was an opportunity for both employers and employees to focus on well-being at work and work-life balance. The purpose is to get employers to use the week to provide activities for staff, and to showcase their flexible working policies and practices.

It should be the goal of any responsible employer to help their staff find a better balance between responsibilities at home and work. Does this actually happen in the work place and does it happen for the business owner?

Feedback from some ICON clients suggests that some business owner’s work-life balance is dangerously out of kilter.

According to a study by insurance provider Simply Business, almost half of the 2,000 individuals surveyed cancel social plans at least once a week, a quarter take less than 10 days’ annual leave and 25% have fallen ill due to stress and overwork.

The effects are likely to go further than physical illness, according to mental health charity Mind. With one in four people experiencing a mental illness each year, business owners need to keep a close eye on their wellbeing.

“Having a good work-life balance, including regularly having time off, is key to staying mentally healthy,” says Emma Mamo, head of workplace wellbeing at Mind. “Taking proper breaks allow staff to return refreshed and revived, and small business owners are no exception. Every business owner wants to ensure their business is a success and this can mean putting in the extra hours from time to time. But consistently working long hours and managing an excessive workload can take their toll on our physical and mental health, with the potential to negatively affect business performance.”

But for many small business owners, there simply are not the resources or support needed to enable them to create a healthy balance.

While stress and overwork in itself does not necessarily lead to mental health problems, being exposed to prolonged periods of unmanageable stress can cause or worsen a mental health problem. So how do you spot the signs that a bad week is turning into something more serious?

“The symptoms of unmanageable stress can also be similar to the symptoms of someone experiencing depression and anxiety,” she says.

Symptoms of depression and stress, can be physical as well as emotional and will differ from person to person but may manifest in feelings of isolation, lethargy, lack of self-esteem, restlessness, irritability, hopelessness or a lack of interest in the things you normally enjoy.

Typical symptoms are having trouble sleeping or sleeping a lot, eating more or less than usual, experiencing aches and pains, and drinking more alcohol.

If you are an SME business owner it may be difficult to spot the symptoms as they gradually creep on you over time, and so it may be difficult for colleagues to notice changes in your behaviour.

The key thing is to try to head any serious problems off before they stop you in your tracks. The business should be there to help deliver the rewards that you deserve from taking on the challenge of running your own business and not to put you on a downward spiral.

Often this may be the result of the business not delivering sustainable, profitable growth and so the business owner may end up constantly funding the business which further increases the level of stress. This state is often described in terms of the business owner working ‘harder’ in the business and not ‘smarter’.

It may be time to take stock of your position and to review where you are. Don’t accept a poor work/life balance as the only option available, but take a decision to do something about it before it is too late.

What is the answer? A good option is to critically evaluate your life goals and to see if your business is helping you to achieve these. If not, then time for change. If yes, then well done. In any event, time to review whether your business is helping you to achieve your life goals is no bad thing.

Three approaches to customer service

By The ICON Team on 05/10/2017 - 0 Comments

Being customer-centric means looking after the people who buy from you – a simple, desirable goal. But in an ever more complex world of software and social media, true customer-centricity that goes beyond rhetoric is no mean feat.
Broadly speaking, there are just three approaches to customer service: one is putting the customer at the heart of your business, the second is pretending to, but not really doing it, and the third is putting the customer last and celebrating the fact!

Oddly, the third of these scenarios is not packed with failed businesses; in fact it’s a growth industry. The “budget” sector – home to some of the world’s most successful airlines, supermarket chains and travel firms – offers customers the lowest possible level of service at the cheapest possible price.

In this brave new world, businesses are transparent about their limited service, and customers appreciate the opportunity to dip in and dip out without being offered a complimentary head massage or being asked to fill in a “How are we doing?” form.
Is the customer always right?

Self-styled “ultra-low cost” airline Ryanair is at the very core of this approach. As with all short-haul carriers, it has been affected by higher fuel costs and the eurozone crisis, but it still managed to pile up impressive, ever increasing sales.

This despite a string of baffling announcements from Ryanair’s senior management that seem to imply the customer is merely an inconvenient necessity. Take chief executive officer Michael O’Leary’s idea that passengers should stand on short trips to make room for more fare-payers, or his (reported) ill-fated plans to introduce on-the-spot charges for mid-air toilet use. Has anyone forgotten the recent poorly managed cancelation of flights and inconvenience to customers?

Then there are the regular complaints from customers about “hidden” charges in the booking process, and the firm’s previous plan to introduce planes with bigger doors so that passengers can be shepherded on and off in double-quick time.

But in businesses whose marketing collateral is awash with customer-centric language – where the customer is number one – the delivery often falls short of putting a smile on your face.

Fundamentally, there are three processes that ICON recommends are key to any successful customer-centric campaign,

First, an intelligent and comprehensive database is required to track and record all details of customer interactions and behaviours.

Second, you must have the tools and technology in place that will enable you to make sense of the data and maintain its accuracy.

Finally there must be a process for the ongoing capture of up-to-date consumer data, behaviour and interactions. This data provides you with the required insight into the history of the customer’s interactions, relationship and behaviours that enables the marketer to successfully adapt and target their approach for each individual.

Sounds simple enough, right? But the process is littered with complications and pitfalls that can cause businesses to do it half-heartedly, and to stop short of the thorough process that creates the fullest customer picture.

Customer-centricity then is about doing, not saying. It is capturing data, offering people more of what they like and less of what they don’t like and, above all, dealing with them as individuals and as human beings with personalities.

Get the right balance, and your organisation will benefit from a growing group of delighted and loyal customers who feel cared for and appreciated. They will tell their friends. Get it right and you won’t need to write “the customer is king” on your marketing materials, because they will already know it.

Why do Companies Need a Good Business Strategy?

By Jon Sawyer on 28/09/2017 - 0 Comments

Michael Porter (The E-Myth) describes the journey most entrepreneurs go through as they charter the course of their business.

He describes the process as the owner becoming focussed on the operational aspects of the business (becoming a ‘technician’), which can be to the detriment to developing sound business strategy.

Michael Porter (Competitive Advantage) goes further as he argues that having a sound operational strategy is simply not enough. Companies must be flexible if they are to respond to the needs of an ever changing market place, and must develop core competencies if they are to stay ahead of the pack. They must not just focus on being operationally effective. Faced with this, what are the ingredients of good business strategy and why is it so important?

Being operationally sound should be a pre-requisite of any business. Simply to focus all efforts on having operational effectiveness is essential to any business, but will not in itself set it apart.

For the past decade managers have been focussed on making small improvements in operational strategy and this has heralded the rise of programmes such as TQM and BS5750. Many companies have adopted such approaches and so any potential marginal gains against those of competitors may be nullified.

The result of such myopic focus is to even out any potential advantage for any specific operator as all face static or declining prices and pressure on costs that compromise a companies’ ability to invest in the business in the long term.

Porter argues that being operational effective is a pre-requisite to business. In essence, as the gap in operational effectiveness narrows, companies are unable just to compete on the basis of only quality and price – they must adopt a more balanced strategy.

What is the Essence of a Good Strategy?

Having a good competitive strategy is essentially about being different in some way. For example, EasyJet offers short-haul flights, based on a low cost fares whereby the whole operation is geared to fast turnaround times, and no frills so that they can keep their planes flying longer each day. Its customers include business travellers, families and students.

The strategic positioning for EasyJet is in terms of price and convenience for travellers, but their competitive edge is in the way they combine their activities to make this work.

This is why BA and other ‘full-service’ carries cannot compete profitably in this sector.

Finding a strategic position is about finding a market niche that a company can service profitably. A good example is in the furniture retail sector where companies specialise in supplying a specific type of product e.g. World of Leather and Oak Furniture World. Others such as IKEA have found an edge by offering a range of home furnishing items of good design and function, excellent quality and durability, at prices so low that the majority of people can afford to buy them.

The competitive edge that IKEA then has is the way that it combines its activities to deliver this. They offer a vast choice but merchandise a limited product range in massive retail units and product is gathered in store in flat pack units and assembled by the customers. Porter calls these areas activity systems and says that these are at the heart of effective business strategy.

It is important to recognise that the differences in customer need (e.g. price) do not translate into a meaningful competitive position unless the best set of activities to achieve this are compatible. If this were not the case then every competitor would be able to meet the same needs.

Why do Companies Fail to Have an Effective Strategy

Business owners are faced with many choices and this impacts decision making as they try to eradicate any perceived loss in competitiveness. This may lead to them imitating everything about their competition which has the effect of damaging their own competitive edge. This is where often competition becomes the race to the lowest price.

Porter argues that effective business strategy delivers sustainable business advantage and is based upon the combination of the following:

  • Having a unique competitive position for the company
  • Where activities are tailored to fit the needs of the strategy
  • Where there are clear trade-offs and choices vis-à-vis the strategy of competitors
  • Where a competitive advantage arises from a fit across activities
  • Where sustainability comes for the activity system, not the parts
  • Where having operational effectiveness is a given.

It is leadership that is the vital ingredient to drive the review of strategy. Most companies owe their initial success position to a unique strategy position that will be copied by competitors over time.

The key challenge is to start over, and review which products and services are the most distinctive and profitable and to build the strategy around this as a hub.

Failure to develop a sound strategy will run the risk of having a ‘cookie cutting’ approach to business where the chances of long term sustainability and profitability are at risk.

To ensure you are taking the *correct* approach - speak to your local Icon Advisor. 

Simple Stories That Help Us To Be More Successful

By Malcolm Orchard on 27/09/2017 - 0 Comments

I wonder sometimes if suppliers, shops or service agencies actually want my business.

How many times have you bought something and the experience is one of complete indifference?

Over the years it has happened to me on a number of occasions – and guess what, I never go back, so they have lost my custom forever. I guess the reverse is also true when I buy something and actually feel that my custom is appreciated, that I receive service with a smile and the shop keeper wishes me good morning – I keep going back. AND moreover I talk to my friends, family and colleagues about both experiences, so there is a ripple effect.

It should not be difficult to understand this and yet in my own village I can point to at least 3 establishments that clearly don’t give a damn. The good news is I can also point to a number that do give a damn and I recommend them all the time.

Perception of Indifference

Today’s story is close to home as it happened to me at a local petrol station (I cannot disclose which one). I filled up with fuel and walked into the shop to pay and as I entered I picked up a chocolate bar. I approached the counter to find the attendant on a mobile phone. He would not make eye contact with me, but waved at me to put my card in the payment machine.

Not once did he apologise for chatting on the phone or make any effort to speak to me, it was like I was an inconvenience. He then realised that he had not charged me for the chocolate bar so gave me a disgusting look as he had to cancel the payment and start again – not once did he come off the phone, acknowledge me or say thank you for the business.

Of course I will never go back and he probably will not even acknowledge that he was being rude and unprofessional – his loss.

Indifference to your customers is one of the worst traits there is, you must ensure that you are always professional, polite and appreciative of their business. Make your customer feel valued and they will come back and probably tell others.

Consider your own purchases, which ones would you recommend to friends, family and colleagues - why is this. Think about how you can get your clients to recommend you by making them feel that you appreciate their business.

A smile or a thank you costs nothing but the value to the customer is massive.

Remember, if you are indifferent to your customer they will not be inclined to return and probably look elsewhere to buy.

Don't fall into this trap - ask for an independent view on your business, by contacting your local Icon Advisor now,

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15/11/2017 -
The Price is Right how do you know if the price for your product is right... Read More