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Digg it UP - Understanding Value
I know! You got an incredible product and you're about to lauch it. But there is one problem: because the product is so new, you don't have testimonials from anyone. Remember: what other people say about your product worths a zillion times more than you could ever say! This article will show you how do it and how to convince everyone about the quality of your business. One option is to have people testing the product: get some friends or colleagues and tell them about your new goal, give them a price discount. This will gain some profits for the beggining. Another technique is to give the product for free to a certain number of people in exchange for testimonials. Quickest method! Tell them about the price, and ask opinions. Remember: if your product has reseller rights, disable them if you share the product for free. Start a seminar or a conference and invite different individuals that might be interested about your product. Make it interactive, test it live, ask them to give you a hand on testing and revealing it's functionality. After you're done, ask for feedback. There are lots of fellows out there which will love to have your product. A small discount always works! Your first clients will guarantee the best testimonials. The direct approach is the best, writing mails doesn't work as well as calling or meeting live with your "target". Fact #1: if you get testimonials from important people you dramaticaly increase your credibility. If you trust in what you do, why not letting other people trust you also? If you decide to ask for a testimonial from a very respected persons it is recommended
Let’s say you run a lemonade stand and you are using lemonade mix, glasses and a whole bunch of other stuff that puts your cost per glass of lemonade at 20 cents. You decide you will charge 50 cents a glass for your fine lemonade, so you have a profit picture that looks like this:
Price=$0.50
-Cost=$0.20
Profit=$0.30
When we look at any enterprise with more than one sale, we have to add up all of the sales and all of the costs to get a total profit picture. A good way to think about this is:
I’m sure you’ve heard every “rags to riches” story out there and of course some are a little more believable than others. But, the best stories are those that actually show proven results and exactly how to go about obtaining them. Most of the time author’s don’t give this information because the secret to their money making methods lies within the money making package itself. The real mystery behind their millions is having you pay for a web package that teaches you how to promote the “free” website provided in the package. Most of the time the website is just a landing page that leads people directly back to their product.Terrific money making strategy if I do say so myself; however, most of these programs don’t hold up to their end of the bargain. The fact of the matter is you will never get as rich as the author because the only skills you are actually acquiring are the one’s the author needs you to know to push their products and no knowledge as to exactly how the system works. Ultimately, you and hundreds of people just like you end up competing for the top spot to sell the same product while the author simply sits back and collects. Genius, right? Many of us have been scammed by products like this simply because we were blinded by the promises of riches with little or no work. The truth is unless you gain knowledge about the field and implement those skills to create you own business you will forever remain in this category. Don’t look at those mishaps as failure, but rather opportunity.When looking for a program to make money online stop falling into unrealistic figures and invest in a product that actually expands you knowledge of the business so that you will one day be in a position to create your own information
Value is the key to profit. Understanding value can tell you a lot about how to generate greater profits in any business.
Profit is the difference between your costs and the price you get for something – anything – in the marketplace. A good way to think about this is:
Price
- Cost =
Profit
This means that great profits always come from a good understanding of your costs and pricing, but that can be much more difficult than it sounds.
Profit can be thought of in a lot of different ways, but it’s important to understand the role that profit plays in capitalist societies to really get a handle on the thing. The purpose of profit – in a free market – is to attract people and investment to activities that are valuable to others. Period. This means that most businesses that have issues with profitability are most likely having issues with one of the following items:
1) Pricing
2) Getting customers
3) Controlling cost
4) Creating value.
Many people in business get hung up on the concept of controlling cost, and cost is given far more attention than it deserves. The reality in most industries is that cost, while usually important, is not the MOST important factor in the customer’s buying decision. The reason people tend to focus on cost cutting is that it’s easy. This is exactly the wrong sort of thing to do if you want to make insane profits.
The secret of insane profits
As you might have guessed from the previous paragraph, insane profits are simply a matter of creating huge value for a group of customers who have money to spend. By the way, that last bit about having money to spend is really important. I know people who have built grand schemes of enterprise around customers who basically have little or no money to spend, only to fail because the money just isn’t there. Remember what Willie Sutton said when asked why they rob banks:
“Because that’s where the money is”
Creating value can be simple and easy, or it can be difficult. Many people can do simple and easy value creation, while very few will do difficult or complicated value creation. The difficult stuff will almost always make you more profit, if you understand how to charge for it. This is really important to you because you need to be aware of the effects of competition. Consider this question: What is a glass of water worth? If you are sitting at home or in your office right now, a glass of water probably isn’t worth all that much to you. Maybe a nickel, on the outside. Why? Because you can easily walk over to a faucet and, for less than a nickel, fill a glass with water without spending a lot of time or having a lot of knowledge about water. Let’s consider, on the other hand, what that water would be worth to you if you were in a plane crash in the desert. The alternative wouldn’t be there, and the need for water definitely would be there. If I were standing next to you with the only glass of water for 100 miles, you’d put a much higher value on that glass of water. This leads to an important concept about value:
Your available alternatives define value
In other words, where there is an easily available substitute for anything – goods or services – most customers will value them about the same. This is one reason why banks tend to offer very similar interest rates and airlines tend to offer very similar fares. If you don’t see a difference between two options, why would you pay more for one than another? This is exactly where competition comes in. When you do something easy that creates value, a competitor can do the very same thing – and might do it for a nickel less just to get the customer. The limit to most competitors’ willingness to cut price is almost always defined by cost. This means that most competitors will cut their prices to take customers away from you up to the point where they start losing money on the deal. Of course, if you look at this another way they are giving up their profits for customers, but most competitors in most industries will actually do this, thinking that volume sales will somehow make up for the loss. The reality of this situation can easily be understood by considering a lemonade stand.
Let’s say you run a lemonade stand and you are using lemonade mix, glasses and a whole bunch of other stuff that puts your cost per glass of lemonade at 20 cents. You decide you will charge 50 cents a glass for your fine lemonade, so you have a profit picture that looks like this:
Price=$0.50
-Cost=$0.20
Profit=$0.30
When we look at any enterprise with more than one sale, we have to add up all of the sales and all of the costs to get a total profit picture. A good way to think about this is:
<China is kicking America’s butt and will easily surpass our economic output. And you know what they deserve to win. Do you know why? Because we are so caught up in our BS and political correctness; so quick to over regulate and condemn our corporations and business leaders that we have put in place an unworkable situation for increasing industrial output. Further more we have cut off the necks of those entrepreneurs and innovators who were running at breakneck speed.Some say the shift in the economic powerhouses of the world. The United States which has 5 times the GNP of the next five countries combined is about to get passed and then lapped by China. As an entrepreneur in the current greatest country in the world it is obvious, oh, so right out in the open it sometimes amazes me no one else can see it. The hoops you have to jump thru to sell a product or deliver a service in this country is unbelievable indeed.It all starts out as consumers who have never had to make a paycheck in their life, start wanting something for nothing, which I suppose is in fact human nature. The media picking up on this tells the consumer “You deserve to have something for nothing” and it is not your fault, you should not be responsible for your actions, you should kick back and sue anyone who makes your life tough? Then these consumers start believing in fact that yes they do deserve something for nothing and then vote for politicians who promise them something for nothing. Free is everyone’s favorite price and now their leaders and TV sets are saying; “you deserve it.”Then the irresponsible masses say all those who are working are getting all the good stuff. Those who produce and innovate get all the great toys; yachts, fancy cars, big
3) Controlling cost
4) Creating value.
Many people in business get hung up on the concept of controlling cost, and cost is given far more attention than it deserves. The reality in most industries is that cost, while usually important, is not the MOST important factor in the customer’s buying decision. The reason people tend to focus on cost cutting is that it’s easy. This is exactly the wrong sort of thing to do if you want to make insane profits.
The secret of insane profits
As you might have guessed from the previous paragraph, insane profits are simply a matter of creating huge value for a group of customers who have money to spend. By the way, that last bit about having money to spend is really important. I know people who have built grand schemes of enterprise around customers who basically have little or no money to spend, only to fail because the money just isn’t there. Remember what Willie Sutton said when asked why they rob banks:
“Because that’s where the money is”
Creating value can be simple and easy, or it can be difficult. Many people can do simple and easy value creation, while very few will do difficult or complicated value creation. The difficult stuff will almost always make you more profit, if you understand how to charge for it. This is really important to you because you need to be aware of the effects of competition. Consider this question: What is a glass of water worth? If you are sitting at home or in your office right now, a glass of water probably isn’t worth all that much to you. Maybe a nickel, on the outside. Why? Because you can easily walk over to a faucet and, for less than a nickel, fill a glass with water without spending a lot of time or having a lot of knowledge about water. Let’s consider, on the other hand, what that water would be worth to you if you were in a plane crash in the desert. The alternative wouldn’t be there, and the need for water definitely would be there. If I were standing next to you with the only glass of water for 100 miles, you’d put a much higher value on that glass of water. This leads to an important concept about value:
Your available alternatives define value
In other words, where there is an easily available substitute for anything – goods or services – most customers will value them about the same. This is one reason why banks tend to offer very similar interest rates and airlines tend to offer very similar fares. If you don’t see a difference between two options, why would you pay more for one than another? This is exactly where competition comes in. When you do something easy that creates value, a competitor can do the very same thing – and might do it for a nickel less just to get the customer. The limit to most competitors’ willingness to cut price is almost always defined by cost. This means that most competitors will cut their prices to take customers away from you up to the point where they start losing money on the deal. Of course, if you look at this another way they are giving up their profits for customers, but most competitors in most industries will actually do this, thinking that volume sales will somehow make up for the loss. The reality of this situation can easily be understood by considering a lemonade stand.
Let’s say you run a lemonade stand and you are using lemonade mix, glasses and a whole bunch of other stuff that puts your cost per glass of lemonade at 20 cents. You decide you will charge 50 cents a glass for your fine lemonade, so you have a profit picture that looks like this:
Price=$0.50
-Cost=$0.20
Profit=$0.30
When we look at any enterprise with more than one sale, we have to add up all of the sales and all of the costs to get a total profit picture. A good way to think about this is:
We rely on all kinds of tools and advice to help our businesses grow, from accounting and legal advice to graphic design and sales seminars. But what are we doing for the important job of building our business's reputation in the community?Public relations skills and techniques are a powerful part of any growing business, but many small organizations believe that the cost of getting into the PR game will cost them thousands NOT hundreds of dollars. If you take the traditional approach to public relations, you may be right PR Agencies are known for high hourly rates and retainer payment plans.But the INTERNET has changed all that, empowering business owners with a host of tools they can deploy to enhance all parts of their business including building a strong public relations program.Like many business owners, you may feel that your regular monthly ad in the newspaper is enough publicity for the month and all you have to do is sit back and wait for the customers to show up at the door. NOT so! Running any kind of business - no matter how small - without a dynamic PR program is leaving something that can rapidly grow your business in the lap of the gods.Take the first step - talk to someone who knows something about PR - many companies such as www.prmadeeasy.com offer a free introductory consultation to help you get started. AND then, believe it or not, you can start doing your own PR.Would your business benefit from a strong PR campaign?Would media coverage help promote your product or service?Do you need sales and marketing assistance?Are you trying to build your company's image in the community?If the answer is yes to any of these questions,
“Because that’s where the money is”
Creating value can be simple and easy, or it can be difficult. Many people can do simple and easy value creation, while very few will do difficult or complicated value creation. The difficult stuff will almost always make you more profit, if you understand how to charge for it. This is really important to you because you need to be aware of the effects of competition. Consider this question: What is a glass of water worth? If you are sitting at home or in your office right now, a glass of water probably isn’t worth all that much to you. Maybe a nickel, on the outside. Why? Because you can easily walk over to a faucet and, for less than a nickel, fill a glass with water without spending a lot of time or having a lot of knowledge about water. Let’s consider, on the other hand, what that water would be worth to you if you were in a plane crash in the desert. The alternative wouldn’t be there, and the need for water definitely would be there. If I were standing next to you with the only glass of water for 100 miles, you’d put a much higher value on that glass of water. This leads to an important concept about value:
Your available alternatives define value
In other words, where there is an easily available substitute for anything – goods or services – most customers will value them about the same. This is one reason why banks tend to offer very similar interest rates and airlines tend to offer very similar fares. If you don’t see a difference between two options, why would you pay more for one than another? This is exactly where competition comes in. When you do something easy that creates value, a competitor can do the very same thing – and might do it for a nickel less just to get the customer. The limit to most competitors’ willingness to cut price is almost always defined by cost. This means that most competitors will cut their prices to take customers away from you up to the point where they start losing money on the deal. Of course, if you look at this another way they are giving up their profits for customers, but most competitors in most industries will actually do this, thinking that volume sales will somehow make up for the loss. The reality of this situation can easily be understood by considering a lemonade stand.
Let’s say you run a lemonade stand and you are using lemonade mix, glasses and a whole bunch of other stuff that puts your cost per glass of lemonade at 20 cents. You decide you will charge 50 cents a glass for your fine lemonade, so you have a profit picture that looks like this:
Price=$0.50
-Cost=$0.20
Profit=$0.30
When we look at any enterprise with more than one sale, we have to add up all of the sales and all of the costs to get a total profit picture. A good way to think about this is:
The work that was done in the early 90's and subsequently in the field of corporate practice by Peter Senge and his Associates in the Sloan School of Management at MIT and by Chris Argyris and his Associates at Harvard have flowed from academia in to the world of successful corporate management. Senge's theories and experience in his consulting practice at MIT have become the foundation for the theory and practice of what is now known as the learning organization. Senge's work came to the fore through his ground breaking book "The Fifth Discipline" published by Doubleday in 1990.In that book Senge, introduced the concept of five new components which he believed were gradually converging to innovate learning organizations. The five technologies which Senge listed are: Systems Thinking; Personal Mastery; Mental Models; Building Shared Vision and Team Learning. If the learning organization were an engineering innovation , it would be termed a "technology" but since the learning organization is an item of human behavior these components need to be seen as disciplines. In Senge's mind that discipline is not an enforced order but a body of theory and technique that must be studied and mastered to be put in to practice.Senge goes on to say that to practice a discipline you have to be a lifelong learner. You can never say "We are a learning organization" any more than you could say 'I am an enlightened person". Practicing a discipline is different from emulating a "model". When these new management innovations are described as the "best practices" of the so-called leading firms, Senge defers. In his opinion, great organizations are not built by emulating others. In his opinion, as the five component learning disciplines conver
Your available alternatives define value
In other words, where there is an easily available substitute for anything – goods or services – most customers will value them about the same. This is one reason why banks tend to offer very similar interest rates and airlines tend to offer very similar fares. If you don’t see a difference between two options, why would you pay more for one than another? This is exactly where competition comes in. When you do something easy that creates value, a competitor can do the very same thing – and might do it for a nickel less just to get the customer. The limit to most competitors’ willingness to cut price is almost always defined by cost. This means that most competitors will cut their prices to take customers away from you up to the point where they start losing money on the deal. Of course, if you look at this another way they are giving up their profits for customers, but most competitors in most industries will actually do this, thinking that volume sales will somehow make up for the loss. The reality of this situation can easily be understood by considering a lemonade stand.
Let’s say you run a lemonade stand and you are using lemonade mix, glasses and a whole bunch of other stuff that puts your cost per glass of lemonade at 20 cents. You decide you will charge 50 cents a glass for your fine lemonade, so you have a profit picture that looks like this:
Price=$0.50
-Cost=$0.20
Profit=$0.30
When we look at any enterprise with more than one sale, we have to add up all of the sales and all of the costs to get a total profit picture. A good way to think about this is:
Nowadays film photo cameras swiftly replace by digital ones. Despite of all advantages of digital over film cameras, professional photographers claim that photos from film cameras are better. But professionals of photography present the minority on the market of photo cameras and most customers on this market are unsophisticated amateurs, which most often do not see the difference between film and digital cameras photos. Moreover, amateurs consider digital photos better and of course they appreciate all other advantages of digital cameras such as: LCD, memory cards, additional functions, digital zoom, sound and video record etc.Customers’ preferences drive the supply and thus camera manufacturers produce more digital cameras. Kodak Company, which is one of the world leaders of photo cameras, is not an exception and “is preparing a big strategic move away from traditional film and plans to bet its future on new digital markets”. Kodak’s administration claims that Kodak stops most investments into film technology and enter the digital market of photography. This market is already saturated with such companies as Nikon, Olympus, Canon, Fuji etc. So which arrangements will Kodak apply to occupy a worthy place on the market?First of all Kodak decided to behave more aggressively in order to fulfill more market segments. Earlier Kodak used the following targeted marketing scheme: goods- complex commercial activities- receiving income because of satisfying customers – I mean that Kodak didn’t pursued customers and sold expensive goods. Nowadays it looks like Kodak shifts to another targeted marketing scheme – receiving income from the sales volume. Thus Kodak diversified its range with cheap digital products.Secondly, Kodak d
Let’s say you run a lemonade stand and you are using lemonade mix, glasses and a whole bunch of other stuff that puts your cost per glass of lemonade at 20 cents. You decide you will charge 50 cents a glass for your fine lemonade, so you have a profit picture that looks like this:
Price=$0.50
-Cost=$0.20
Profit=$0.30
When we look at any enterprise with more than one sale, we have to add up all of the sales and all of the costs to get a total profit picture. A good way to think about this is:
Sales=Units X Price
For lemonade, the “unit” is a glass of lemonade, so:
Sales=Glasses of lemonade X Price
Let’s say that there are 100 customers who buy lemonade every day in this neighborhood. Yeah, my neighborhood was never that good when I was a kid, but we are pretending so work with me on this. This means that your total profit picture looks like this:
Sales=$50.00
-Cost=$20.00
Profit=$30.00
Let’s say one day Evil Egbert sets up a stand right next to yours. Let’s assume that you have the same costs – you both run to the corner store and buy lemonade mix that ends up costing you about 20 cents per serving. When you open your lemonade stand, your profit picture may look like this:
Price=$0.50
-Cost=$0.20
Profit=$0.30
Now, of course, Egbert, being a competitor, is evil and cannot abide the thought of you making money. So Egbert decides to steal your customers by lowering his price. Customers, being who they are, will sometimes switch for a lower price – but some will not. Let’s say Egbert decides he is happy with this profit picture:
Price=$0.40
-Cost=$0.20
Profit=$0.20
You will almost certainly lose some customers to Egbert over this. And who can blame them? The customer is getting exactly the same lemonade for 10 cents less – what a bargain! Now here is where the real world gets tricky: some customers will not switch, and will prefer to buy from you. Why? I’ve given up trying to understand, but it’s absolutely true. Some people, given the choice, will still pay more for something than the lowest price available. Perhaps they like your eyes. Or they just can’t be bothered to go the extra 5 steps over to Evil Egbert’s stand. Who cares? You keep those customers even though you have a higher price. Sound good? It is. All other things being equal, most of the customers will buy from Evil Egbert, let’s say he gets 80 of them. You, due to your charm, witty sales banter, and excellent location, still hang on to 20 customers. This means that your total profit picture looks like this:
Sales=$10.00
- Cost=$4.00
Profit=$6.00
While Egbert’s total profit picture looks like this:
Sales=$32.00
-Cost=$16.00
Profit=$16.00
As you can see, Egbert is making more money than you are. Since evil never wins, you want to get some of those customers back. You cut your price to 40 cents, just to match Egbert. What happens? Very likely, you and Evil Egbert end up splitting the market right down the middle, with 50 customers each. This leaves both of you with a profit picture that looks like this:
Sales=$20.00
-Cost=$10.00
Profit=$10.00
Think about what has happened here. When you started, you were making $30.00 a day selling lemonade. Egbert came in and cut your profits to $6.00 a day – so he could make $16.00 a day. And when you matched his price, you both ended up making $10.00 a day. In this example, the total profit that ALL lemonade sellers in your neighborhood made went from $30.00 (when it was you alone), to $22.00 (when Evil Egbert came in a cut prices) and finally to $20.00 (when you were both priced the same and had $10.00 of profit each). The lemonade didn’t change, and the customers didn’t change, so what ate up that profit?
Competition Eats Profit.
A. Creating Value
One of the most important elements of profitability is value creation. If you go to a grocery store and buy something from that store (say a box of dog treats), you won’t be able to stand outside the store and sell the box of dog treats for more than you paid for it. This is simply because the box of dog treats sold just outside the store isn’t worth much more or less than the same box inside the store. In one sense, this is because you are competing
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