A Very Special Year Needs Just Two Words: Good Profits
Happy New Year, for 2006!
For all our Clients, associates, prospective Clients and business friends, our wish is a very prosperous New Year for you and yours.
We will certainly do all we can to make it your best on record!
Lot’s to do in 2006
No one we know is expecting 2006 to be any easier than the last few years, but everyone is anticipating success. Now that’s good thinking!
With so much to do to build this success, remember you don’t have to do it all yourself. If you can’t delegate it, at least get help with it - and remember we are here to help. See how.
One thing to do in 2006 to make sure it’s the best on record, is to get your pricing right. If you think your pricing is “pretty right” anyway, go on to read the case study for this month. You can always pitch your pricing more finely!
Case Study for the first Management Memos of 2006
From time to time, we publish case studies to help clients and others take a different view of some specific management issue. For January 2006, the case study is on pricing.
All our case studies are based on real issues faced by real clients. Of course you can’t identify the client, our confidentiality record is too good for that! Remember though, that this case, like all the others, is real.
Read the case study below, then click through (on the link) to read the response.
[If you are not used to reading case studies, remember this. Real life business unfolds like a story. So the case study is written as a story. At the end, all you have is a story. Finding what issues are in play, and how to get the best outcome, is the art of management. Read the story below, see the response, then see what you think afterwards.]
Stan Trethowick has operated
“Kanmantoo Kovers” for almost thirty years. He is a
specialist window covering
retailer, and he sells blinds and drapes of all kinds.
Long ago, Stan realised that
there are some terrific fabrics for drapes, and they make a most
provided that you know what you are doing, and help the customer make
the right selection for their particular
home. Doing this is not a cheap exercise, and to make a
“reasonable profit” on these more expensive
have to charge a “reasonable price”.
For the early years, Stan did
quite well, and he attributed this to his willingness to “go
the extra mile”, and especially
to help customers choose fabrics they could afford. He would rather
spend a little extra time with a prospect to
know they had made a right decision, than to have someone choose a
fabric they couldn’t afford, and cancel the
order. In his region, he became well
established as the leading supplier of window coverings, and his
reputation for quality
and fair trading was unsurpassed. His profit was good enough to keep
him happy, and he enjoyed most of the
good things money can buy.
Stan always felt a sense of
pride when he visited a home he had helped decorate with window
apart from the odd, inevitable grumpy customer, word of mouth about
“Kanmantoo Kovers” was very good
Other curtain shops opened in
town, and two of them managed to survive, leading to a slight, but
change in customer behaviour in Stan’s shop. The comment
“Gee, that sounds a bit dear!” began to be heard
much more often than in the past. Customers seemed less willing to
commit to placing an order, and making a sale
became much harder than just helping them choose a fabric they liked
and could afford. Much harder indeed!
A major discount curtain
retailer opened in his town. Stan did not see this as a problem though,
because he was
confident of the quality of what he sells, and he knew that what he
sells gives real value for money to his customers. Confident that
sensible buyers will choose quality over discount, Stan kept on doing
what had worked for him for
years and years.
Like many small business
people, Stan had felt the increasing pressure of business, and he was
finding it harder to
make the profits he had been accustomed to in the past. The once
sparking, proud showroom was packed with all
kinds of fabric swatches to help capture every prospect who walked in
the door; he would install at any hour to
make sure no-one said “No” because of inconvenient
fitting times; his display lights were missing bulbs and so were
turned off because there isn’t time to do everything; and the
shop began to look like it needs a repaint.
What really began to niggle
Stan, was that the people who had always bought the “top
shelf” items from him,
began to appear less frequently, and he was hearing of jobs he had
missed out on, without even getting chance to
quote. In years gone by, this was unheard of! Stan did some checks on people
who were still coming to his store. He was shocked to hear that his
shelf” customers were saying, “Not really sure, the
quality doesn’t seem quite what I’m looking
for”. Sometimes he
got the order, but it was no longer a sure thing like it had been.
It had really hurt him to hear that some of his clients had
that the "quality was not quite what they were looking for".
clients' needs had always come first, and he had always made sure that
he provided the very best that money could buy - in every price segment.
Like so many others, Stan had found his sales
representative a good source of information, and had taken on board all
the recommendations the sales reps had provided. Not that he
them blindly - sometimes he modified their price and ranging
recommendations. But one thing he did know, was that sales
reps are a
good way to keep abreast of the market. Their advice on pricing was
usually worthwhile, because it showed what the market could bear.
As a result, his prices were much the same as other people's
(as far as he could tell), but
his margin was being squeezed and expenses always seem to keep rising.
He always tried to be competitive, despite rising costs of
buy-ins, and while he had no problem applying his usual mark-up, it was
a real struggle getting the margin he was targeting. The
squeeze on margins, coupled with the remorseless rise in expenses, was
taking its toll on both Stan and the business.
While Stan was niggled by his
loss of standing with “top shelfers”, he really
ballistic one day when a sales rep. told
him he was about to be overtaken in volume in the economy lines by the
discount store that had ben trading there
now for five years. His budget customers were still saying
“Gee, that sounds a bit dear!”, but price checks
that he was significantly cheaper than the brand name discounter.
Now Stan was in a bind. In the
middle of losing his original, traditional “top
shelfers” because “the quality doesn’t
seem quite what I’m looking for”, he was also
losing economy shoppers because his prices seemed too dear -
despite being the cheapest in town. Profit was down, and now for the
first time in some years, he was operating
with an overdraft.
What is wrong with Stan’s business, how did he get it so wrong, and what can he do to get back on track?
Click Here to see the response of The Red Zebra
HAPPY NEW YEAR!
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Any advice, information or comment contained in this document is general in nature, and should not be relied on as the basis for any specific commercial, business, employment, or financial decision. Specific advice should always be obtained for each individual circumstance. Accordingly any advice, information or comment contained herein is for general guidance only.