Mine Your Own Business

It's All About the Prices

I don’t know about you, but if I want to see my kids roll their eyes, all I have to do is mention the way things used to be. Somehow, I don’t think they believe that I walked to school through waist-deep snow, year-round, five miles, uphill, both ways. We all want our kids’ lives to be better than ours were, and in most important ways, they probably are. But, you can’t blame us if we exaggerate just a little bit sometimes.

But, everything isn’t better in the twenty-first century. Some things are actually more difficult; maybe much more difficult, which brings me to the topic of setting prices. Many of you responded to a Tacony Corporation survey that this is a topic of great concern, as well it should be. The price you charge for your merchandise will make or break your business. If your prices are too low, you won’t be able to cover your expenses and you’ll go out of business. If your prices are too high, you won’t sell anything and you’ll go out of business. It’s critical that you get this part of your business right.

Setting prices is something that is much more difficult today than it was in the “good old days.” Consider great-great grandpa (and grandma) who ran the town general store. They were the original “mom and pop” business. They were the owners and the employees. If they had anyone else on the payroll, it might have been a kid who came in after school to sweep up and stock the shelves. Chances are that “employee” was your great grandpa.

There was no competition. If you wanted to buy a sack of flour, or a shovel, or a pair of overalls, you went to the general store. The price was what great-great grandpa said it was. Not that your worthy ancestor was out to gouge the public, after all, in those days, people navigated by a moral compass. But, he knew that he could charge a fair price, enough to pay the bills and provide a living for himself and the missus. The traveling salesmen who called on him kept him up-to-date on what merchants in other towns were charging.

As time went by, the general store got competition. Everyone got the Sears and Montgomery Ward catalogs, so they had a better idea of what a shovel should cost. People started traveling to Capital City to shop and they would brag to their neighbors about what a good deal they got. But, there was still a value for convenience and local stores continued to make a reasonable profit.

Slowly, but surely, the amount of competition has ratcheted up. Chains like J. C. Penney and Western Auto began to open in small towns. Kroger and A & P were just two of the national grocery chains that started showing up all over the country. Pricing, while still not rocket science, was getting harder.

As great grandpa and great grandma, then grandpa and grandma took over the family business, one of two things happened. Either the business grew and prospered or it shrank and eventually disappeared. Don’t forget that Sam and Helen Walton’s 5 & 10 cent store in Bentonville ,AR became the biggest retailer in the world. Sam had this strange idea that if you lowered prices, even in small towns, you would make more sales and more profits. It was (and still is) all about the prices.

Of course his idea was a success and Wal*Marts started sprouting up all over the south and Midwest, eventually going national and now even international. For the independent retailer, pricing became even more of a challenge.

This brings us to today. Wal*Mart is just one of many obstacles we face in remaining competitive. With the advent of the Internet, every consumer becomes an “expert.” Now, instead of a local market, we all operate in a world market. As a consumer, I can find the lowest price for an item, not just in my town, but in the entire world.

Type the phrase “digital camera” into Froogle (Google’s shopping service) and you get more than 1.3 million hits. “Sewing machine” returns more than 31,000 and “vacuum cleaner” returns almost 27,000. There’s no doubt, in the twenty-first century, the consumer has the power. If we’re going to compete, we’d better be on our toes.

Over the next few days, we’ll be discussing both the art and the science of retail pricing. How do we arrive at a price that’s fair for the consumer and that allows us to make a fair profit? We’ll look at questions like:

What is your retail strategy?

What is your pricing strategy?

Do they go together?

Stay tuned.

The "Small Stuff"

I know you've heard the expression, "don't sweat the small stuff."  Sometimes it may be good advice, but in running our businesses, it's often the small stuff that can make a big difference.  From Seth Godin's blog comes an interesting story about a bread shop.  The shop opens every day at 6:00 am.  That seems very early, especially in the small town where this business is located.

But, every morning at 6:00, 20 to 50 people board a bus, headed for a day at the shore.  That's 20 to 50 potential customers who are on the bus, leaving town when the shop opens its doors.  If the owner were to open just ten minutes earlier, the difference in sales would be substantial.  Just 70 minutes of additional work per week (assuming the shop is open and the bus runs seven days per week) could yield as many as 350 more customers per week.

Sometimes it pays to "sweat the small stuff."  Is there any small stuff that you might be overlooking in your business?

Decoration Day

The day was originally called "Decoration Day" as a day to decorate the graves of our fallen soldiers from the Civil War.  Today we call it Memorial Day.  It was first observed on May 30, 1868.  It wasn't until after World War I that it became a day to remember the dead of all wars.

In 1971, congress passed the National Holiday Act moving Memorial Day to the last Monday in May so that we'd always have a three-day weekend.  Some say that we've lost the original meaning of the day by making it part of a long weekend, and they may be right. 

Many of us can remember when everything was closed for days like Memorial Day.  It was a day of peace and rest.  Today, many of us will have to work on Monday.  The brave men and women who have given their lives for our country did so to protect our freedoms, including the freedom to work, play and shop on the day set aside to remember them.

In 2000, congress passed the "National Moment of Remembrance" resolution.  It calls for all Americans to pause for a moment at 3:00 PM (local time) on Monday for a moment of silence. 

Our lives move much faster in 2006 than they did in 1868.  We do everything in a hurry.  Under the circumstances, maybe a "Moment of Remembrance" means just as much as an entire day meant 200 years ago.

Where ever you are on Monday, whatever you happen to be doing, your friends here at Tacony Corporation hope you'll join is in remembering those who have died so that we can enjoy living in the land of the free and the home of the brave. 

In 1915, John Mc Crae wrote a poem for Memorial Day.  It was called "In Flanders Fields."

In Flanders fields the poppies blow
Between the crosses, row on row
That mark our place; and in the sky
The larks, still bravely singing, fly

Scarce heard amid the guns below.
We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved and were loved, and now we lie
In Flanders fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields.

Have You Checked Your Insurance Lately?

From MSNBC.com comes an article on business insurance, Many Small Businesses Lack Adequate Insurance.  The writer makes some important points about making sure your business is protected.  One area that is frequently overlooked is business interruption insurance.  In the event that your business is shut down due to a fire, or other calamity, a business interruption policy will cover your lost income and your on-going expenses, like employee salaries.

The article also points out that while some owners may skimp on coverage to save money, others fail to reevaluate their coverage as the business grows. 

Two web sites that provide good information on business insurance are the Insurance Institute's site and the Small Business Administration site.

Remember that flood and earthquake coverage may not be covered under your general property insurance policy and may need to be added separately.  You may also want to consider insurance for employee-related issues. 

This is one area where it's important to make sure all your bases are covered.

Trader Joe’s

Several years ago, while we were on vacation, my family and I discovered Trader Joe's.  If you're not familiar with them, Trader Joe's is a limited-selection grocery store that offers items that some folks might consider unusual. 

They sell a lot of organic items, and exotic things that you might not find at your local supermarket.  They advertise very little, relying mostly on word-of-mouth.  They opened a store here in St. Louis about a year ago.  (Now, there are two.)  The closest store to my house is a half hour drive.

Still, we go there, maybe once a month to pick up some things that we like that you can't get anywhere else.  Seth Godin writes that there are three keys to Trader Joe's success.

1. They target a customer who cares about what she buys and is very loyal.
2. Their customers have big mouths.  They like to talk about what they buy.
3. Most of what they buy is private label, therefor they make higher profit margins.

Check out their Fearless Flyer for a great example of a direct mail piece that gets results. Their "How We Do Business" page is also very interesting.

The Benefits of Doing Business Locally

An article available on the American Independent Business Alliance's web site entitled The Benefits of Doing Business Locally is a must-read for anyone concerned with their local community.  The article begins:

From rural to urban areas, an ever-growing chorus of citizens laments losing a sense of community.  This trend is considered symptomatic of our loss of community orientation, but could it also be a primary cause?  And how is our economic well-being impacted?

The article goes on to point out the social and economic void that's created when local businesses disappear. 

Local governments are often pursuaded to give public funds and tax breaks to national chains based on the promise of new jobs and tax revenues.  What the officials fail to understand is that the new jobs aren't new at all.  They're just replacements for jobs that are lost in the area.  Often these "new" jobs are part-time at lower pay and with less benefits than the jobs they're replacing.  The increased sales can also be an illusion as they just replace sales that were already occurring in the marketplace.

A 2003 study on economic impact in Austin, TX concluded that for every $100.00 spent at a national chain, $13.00 remained in the local community while $45.00 of every $100.00 spent with a local business stayed there.

Student Interns--They're Not Just For Big Business

Here's a link to a great article from the Wall Street Journal's Start-Up Journal on student interns.  We may think of interns in terms of big companies, possibly like the contestants on The Apprentice.  But in real life, they're students, normally juniors and seniors, who want to add some practical experience to their resumes before they graduate.  Often, students are required to spend a semester in an internship position and they receive academic credit based on the hours worked.

As the article points out, more students than you might think have an interest in working with independent business. 

So, what's in it for you?  A student intern is highly motivated.  Not only do they want to build their portfolios for their post-graduation job search, but if they're in a for-credit program through their school, they're being graded on their performance.  They're normally willing to work for lower pay than a typical employee because the internship is part of their education.  You get a motivated employee, someone just a few credit hours short of having a degree, for the cost of a part-timer.

As the article points out, there are other benefits as well, including developing a relationship with a local university, the pleasure of helping a young person work toward their future success, and a fertile source of future full-time employees.  The intern is eager to learn, but they're also have a wealth of freshly-learned knowledge that can help you improve your business as long as you're willing to learn as well as teach.  It can be a real win-win situation.

Managing the Customer Experience

Yesterday morning I attended a web seminar on the topic of managing the "customer experience." The point of the presentation was that it's not enough to just deliver a product or a service, you must deliver an experience to your customers and it's the quality of that experience that's all important.  The presenter was a guy named Bernd Schmitt and he gave a couple of excellent examples.

He discussed the coffee business.  Wholesale coffee beans are a commodity and are relatively inexpensive.  Roast, grind, and package the same coffee and the price goes up.  Brew the coffee and serve it by the cup, with cream and sugar and a place to sit down and drink it and the price goes up again.  But, offer music, comfortable chairs, free newspapers, wireless Internet and offer frappes and lattes with whipped cream and foam and call yourself "Starbucks" and you can charge $4.00-$5.00 a cup.  That's selling the customer experience.

He also talked about the Apple stores.  You can buy an iPod just about anywhere, but a huge percentage of them are sold at the Apple stores.  Why?  The price is the same wherever you buy them.  It's the experience.  If you buy your iPod just about anywhere and you have a problem, it can be a hassle.  But, if you bought it at the Apple store, you take it to a "Genius Bar."  It's just a service counter, but it's presented as a perk.  You're not talking to a service tech, you're talking to a "genius."  There's even a red telephone, a "hot line" to Apple Corp. in case the "genius" needs help.

What experience is your customer looking for?  You'd better find out before your competition does.

By the way, check out Schmitt's web site.  It's an experience.

212 Degrees

I received a sample book in the mail today from a company called Walk the Talk.  It's a small book called 212 degrees---the extra degree.  The premise of the book is this:

At 211 degrees, water is hot.
At 212 degrees, it boils.
And with boiling water comes steam.
And steam can power a locomotive.
The one extra degree makes the difference.

More on Closing the Sale

In a recent post, we discussed the problem of "sales people" not closing the sale.  Last night, I had an interesting experience that points out how costly this can be.  My son (the one who graduated from college last week) is looking for a new truck.  His old one has seen better days and it's definitely time.  He's done his homework and knows exactly what he wants.  So, he and I went to visit the dealer.

A young man approached us.  He was very personable and seemed to know what he was talking about when it came to the vehicle.  The dealer didn't have the exact model that my son's looking for in stock, so he checked the computer.  They're expecting one in about a week. 

He explained that if that one wasn't suitable, there were more on the way or that he could arrange a trade with another dealer.  So far, so good.  Then, he let us walk out the door without even asking my son's name!  He had the perfect opening.  "Let me call you when the truck comes in."  How easy would that have been?  But, no.  We left and he has no idea who we are.

I think we were very clear.  He wants a new truck.  He's ready to buy.  He knows the brand and the model that he wants and how much he wants to pay.  Everything was there to make a sale.  But he blew it!  Patrick's on his way back to Columbia, MO where he'll spend the summer.  There's a big dealer for this particular brand not far from where he lives.  It really doesn't matter if he buys something there, or here.  With a little effort, the salesman could have locked up the sale.

Two more things.  One, it was raining last night.  Did he really think we'd stand out in the rain looking at trucks if we weren't in the market?  And two, I picked up a brochure on one of their cars and told him that I'm in the market, too.  He didn't just lose one sale, he may have lost two.

Why is it that people are so afraid to ask for the sale?