Richard A. Lindsey, CPA

Lindsey & Waldo, LLC – Certified Public Accountants

  • Nov 10

    I know in polite company and business communications you’re not supposed to talk politics and religion, but I am SO tired of talking to business owners whose religion is…

    Price.

    At least that’s what some of you believe. Based on your actions – the only way you ever talk about your product or service is that you are the cheapest provider in the city/area/community/street/block — you believe you SHOULD BE and CAN BE the low price leader in your category. Don’t you know you are worshiping at the altar of shortsightedness?

    Yes, there is a place for the lowest cost provider, but that place is fraught with peril. The margins there are razor thin; you must be ever vigilant to honor the gods of cost cutting and pray that someone more committed (or with deeper pockets) than you doesn’t step into your marketplace and undercut your price by a penny.

    Remember a few years ago when Apple® released their newest (at the time) iPhones, the iPhone 6 and iPhone 6 Plus. To say there was a lot of hoopla would be an understatement, right? Apple® released the new and improved phones on Friday, September 19th and by Monday they had sold 10 million units, one million more than the first week of the 5s and 5c the year before.

    Despite the “bad” economy. Despite losing its visionary co-founder and CEO, Steve Jobs. Despite my belief that 10 million people can’t NEED a new Apple® phone. Despite that Apple® products are rarely, if ever, cheaper than the competition.

    Apple® has achieved what every business owner dreams of: the ability to charge premium prices and still attract business. Apple® has successfully refused to bow at the altar of low price—and your business can too. Here are four ways Apple® has accomplished this…

    Can you apply these principles to your business?

    1. POWERFUL BRANDING. Thanks to a well executed branding campaign, Apple® has built a brand that is trendy, cool, and technologically advanced. The iPhone, in particular, has become a status symbol for many.
    2. STRATEGIC MARKETING. Every time a new product is launched, customers line up for hours (if not days) outside Apple® retail locations. And every time, a product shortage prompts anxiety and even desperation from customers who were unable to get their hands on the product. The result is a palpable feeling of scarcity and value—customers feel privileged to fork over $200-300 for the latest model or closer to $650-750 if their plan isn’t eligible for an upgrade! While Apple® won’t admit that they intentionally create product shortages in order to create a buzz, it’s hard to imagine that they wouldn’t be able to meet everyone’s demand on day one if they wanted to.
    3. EXCELLENT CUSTOMER SERVICE. Apple Care, the company’s warranty and customer care program, provides a level of service that is unparalleled in the electronics industry. The peace of mind that comes from knowing that expert help is a phone call away is a big part of the value Apple® provides.
    4. THE PRODUCT THAT DOESN’T DISAPPOINT. Branding, marketing, and customer service don’t mean anything if the product is disappointing. Apple® doesn’t cut corners and doesn’t make promises that its products can’t keep—resulting in customers that are consistently thrilled with their purchase. At the end of the day, if a product can’t live up to the expectations set by its marketing; it won’t be successful in the long-term.

    Apple® doesn’t compete on price—and your business doesn’t have to, either. Apply these lessons… and you’ll find that you have the ability to charge premium prices and still win the business!

  • Dec 9

    Shhhh! I have a secret for you. I’m going to share it with you today, but you have to promise to keep it under wraps.

    Applied to your business correctly, this one “secret” could transform your business. If you have the faith to apply this secret correctly, it could be worth millions. Your life could change from struggling to keep the wolves at bay to successful entrepreneur nearly overnight.

    Okay, here’s your tip of the day. Well, it’s not so much a tip of the day, as it is the tip of the week, or maybe the tip of the year…

    Change your prices. That’s all you have to do. I have seen more people make more money simply by raising their prices than any other advice I’ve given them.

    Nearly every business person grossly underestimates the elasticity of price, and neglects the fraction of their customers/clients/patients who will cheerfully buy a higher priced premium option of what they sell if only it were offered. They leave a lot of money on the table by not offering a leather bound version of the paper bound product; a red door to walk through in the back instead of the blue door in the front.

    Marketing guru Dan Kennedy talks of the time he lived in Phoenix. At the time, there was a very popular nightclub in Phoenix that had a big, long rope line in the front where you could buy a card for $500 a year that allowed you to stand in the rope line in the back. Well, you say, who’s gonna buy a card for that? A lot of people did, based on the length of the line in the back. In fact, some nights the rope line in the back was longer than the rope line in the front.

    Not everyone will, but there are plenty of customers who will select a premium option. Price is very elastic. Most business people don’t understand just how elastic price is because of the manner in which they set their prices. Here’s what most people do, and I’d be willing to bet you’ve done the same thing. They look around at what everybody else in their industry is charging and set their price right in the middle. They think they’re being “competitive.” If they’re really daring, they try to be a little higher than the average; or if they think they can buy volume, maybe they set it a little lower than average.

    Alas, there are also those poor souls who attempt to price themselves at the bottom of the heap in order to proclaim they have the lowest prices on the block, in their town, their region, or whatever. It is a dangerous strategy because, as I’ve warned you time and again, there is always someone willing to go out of business faster than you are.

    Here’s the power of transaction size. Granted, it’s a very simple example, but one you might ought to post on your wall where you can see it every day. How do you get to a million dollars in sales in your business? You can get there with one transaction, if you can sell someone something for a million bucks. If you’re going to sell something for $100 it’s going to take you 10,000 sales to make it. Making a million dollar sale is not 10,000 times harder than making a $100 sale. It just isn’t. Now, I’m not saying Starbucks could figure out how to make a million dollar sale, but they did figure out how to sell a cup of coffee for $8. They didn’t do that by getting a committee together in a conference room and saying, “Let’s see, Denny’s sells their coffee for $0.55 and Dunkin Donuts is $0.72, so, let’s be courageous and go for $0.99.” That’s NOT how they got there.

    You’re familiar with Omaha Steaks, right? They come in a Styrofoam ice chest delivered to your door. They have good steaks. But, you know they also have hamburgers. And they have hot dogs. All of them delivered right to your door. So, Omaha steaks are, let’s say, double or triple the price of the best beef being sold in the supermarket or butcher shop. Maybe they’re five times as much as Sam’s or Costco. Yes, they do deliver, but a steak is a steak is a steak. Right?

    Wrong! Now, there’s Allen Brothers. Ever try theirs? I hear they are wonderful. It’s twice the price of Omaha. These guys are in the same business, catalogue selling of steaks, hamburgers, hot dogs, and they have the gall to charge twice as much as Omaha! And people are switching like there’s no tomorrow.

    I recently read about a cosmetic surgeon, Doctor Fairfield, who lives in the Philadelphia area. He does seminars to bring in new patients. At the seminar he offers a $25,000 membership in the practice for the patient to have all the cosmetic procedures they want or need for three years. So you want to come have a Botox shot every day? You can; $25,000 membership fee up front. Five people in a room of 150 chose this option, and three of them had no prior relationship with him. They showed up based on a newspaper ad and plunked down $25,000. That’s price elasticity. It’s everywhere. I promise you, most people don’t understand it and most people underestimate it.