BLOG: Vistage Regional Group meeting

Today (13th May 2009), I (Steve Siggs) had the privilege of attending the Vistage Regional Group meeting at the Forest of Arden Country Club along with approximately 140 other Vistage group members. It was a very well organised and thoroughly enjoyable event. The focus for the day was "Outside In - New Thinking for Extraordinary Times". Primarily ways and benefits of taking a look at your company from your customers' point of view, plus looking at yourself from both your customers' and your employees' point of view.

With keynote presentations from some of the countries leading business experts - Peter Fisk, Dale Williams, Roger Martin-Fagg, Jeff Grout and Marcus Child - plus group discussion and networking opportunities. As is always the case with Vistage: it was an exhausting, but thoroughly invigorating day. And again - as always - I left with another list of things to think about and implement to help build Hilltops IT's success!

Onwards and upwards! :-)

If you'd like any more information on Vistage, how it works and the benefits I feel that I have attained from membership, please don't hesitate to get in touch: steve@hilltopsit.co.uk

BLOG: Trainer Certification from Glasgow CC

For our Business Computing and Website / E-Commerce training services provided to businesses throughout the UK and to recognise the work which we have done with business in Glasgow specifically through their Business Training Grants Programme, Glasgow City Council has awarded Hilltops IT a Trainer Certificate. Well done to Vivienne Watts, Stephen Siggs and Steven Porter for their work in delivering exemplary training courses for our clients.

For more information on our ACT! and QuoteWerks training, plus website services please phone now on +44(0) 1782 564252 or +44(0)844 357 7360 or email info@hilltopsit.co.uk

For businesses in Glasgow and any other region, we can also help with practical advice on getting training grants for your business, plus we have all the paperwork to hand in order to move smoothly through the grant application procedures.

We look forward to hearing from you!

BLOG: Hilltops IT gets a mention in Focus Magazine

Focussing on Vistage chief executives organisation and how membership has helped Hilltops IT (and other businesses in the Staffordshire) move their business' forward, Stephen Siggs is quoted: "Vistage has helped me to power my company to new heights. I joined in 2008 after hearing about the powerful results that members derive from Vistage groups. In less than a year I am already seeing key developments such as better projection and positioning of Hilltops IT in the marketplace, a better focus upon strategic growth and improved management of staff, customers and suppliers."

We also managed to get in a cheeky box shot of QuoteWerks sales quotation tool!

View the full article by clicking the link here: http://www.hilltopsit.co.uk/resources/business/200904%20-%20Focus%20Magazine,%20Vistage.pdf

BUSINESS TIPS: Roger Martin-Fagg Economic Update February 2009

Roger Martin-Faggs: Economic Update February 2009

Summary
This is the big one, the perfect storm is morphing into a Global Recession. The mountain of debt which had sustained asset prices throughout the last decade is deflating as the banking system shrinks to greatness. The reduction in M4 lending from 14% to 4% growth is reducing nominal GDP growth from the normal 5%-6% to the shocking 1.6% in the last quarter of 2008. As companies large and small revise their sales budgets downwards unemployment has begun an inexorable rise, which will gather momentum throughout 2009 and 2010.

All western economies will be in recession in 2009 and the emerging one’s will barely grow, including China. It will be the worst contraction since 1932. We will avoid a prolonged global if countries keep their free trade agreements alive, if just one turns protectionist we are in serious trouble, please note President Obama.

Full article available here: http://www.hilltopsit.co.uk/resources/business/20090204 - Roger Martin-Fagg Economic Update.pdf

Graphs here: http://www.hilltopsit.co.uk/resources/business/20090204 - Roger Maritn-Fagg Graphs.pdf

BUSINESS TIPS: IPSOS MORI End or Year Review

Read the thoughts, facts and statistics from IPSOS MORI's Social Research Institute collated from a range of projects undertaken in 2008. Topics include the credit crunch, the world economy, crime rates, climate change and much more.

The document is available as a PDF download by clicking the link here.

BUSINESS TIPS: Five Sales 2.0 Tools that Drive Results

Re-produced from the original article by Jeremy Miller, please find below a set of useful tips for leveraging web 2.0 innovations and tools in your sales process.

Five Sales 2.0 Tools that Drive Results

For much of the 20th century the typical sales process has involved objection-handling and closing tactics. In the 1980’s solution selling, a process of developing win-win customer relationships, redefined business-to-business selling. Solution selling offered a way for sales people to move beyond pushy tactics to consultative strategies.Now, solution selling is fading in relevancy as the tools of Web 2.0 allow customers to review products and share product information online. This paradigm creates well-educated buyers, who are sometimes better informed than the product’s salespeople.


Sales 2.0 Defined
Sales 2.0 uses the tools of Web 2.0 to drive people to your products. Specifically, sales 2.0 drives sales from any and all of these avenues: a company Website, Webinars, viral marketing, online product demos, product reviews, blogs, SMS messaging, discussion boards, videos, deal sites, organic search engine listing, and paid search engine listings. Because interested customers come to you, traditional sales activities such as cold-calling and in person meetings are no longer an effective use of resources.

A buyer who finds you on Google is often a far better prospect than a company you cold call. When someone engages you from your Website they have already initiated a relationship with your firm, formed an opinion and are receptive to entering into a sales dialogue. You face none of the buyer resistance that comes with cold calling.

Sales 2.0 requires a new methodology for sales departments. Rather than a salesperson originating a sale, they now help complete a sale. Within the Sales 2.0 framework, a sales department manages the buying process online, develops meaningful customer experiences, and allows customers to engage your salespeople at the time of their choosing.


Five Sales 2.0 Tools You Should Know About
Using new sales tools creates efficiencies throughout your sales process. Here are five examples of new sales tools:

Webinars: WebEx, Placeware and other online conferencing tools enable a sales force to conduct demonstrations virtually with customers who want more detailed information about a product. The customer gains immediate gratification by seeing how the product works, and they quickly educate themselves on its benefits. The seller also benefits by reducing certain costs such as the time and money incurred from traveling for face-to-face meeting.

Videos: Posting clever videos of your product on your own site as well as video hosting sites such as YouTube, offers your product tremendous exposure at a low cost. For example, BlendTec, a blender maker, turned to videos to prove how powerful and durable their blenders are. In their “Will it Blend?” series, they blend golf balls, alarm clocks, iPhones and many other items you would never put into a blender. These videos have become online hits, attracting media attention, as well as driving a 700 percent increase in sales.

Blogs: Companies typically use two types of blogs, one where employees can post videos or write about the design, features or progress of a product, and another where customers can offer feedback and recommendations for products or services. Blogs serve to enhance your online visibility, establish expertise, create brand loyalty, increase top-of-mind awareness and influence the public conversation about your company. Recently Starbucks launched the blog site mystarbucksidea.com where customers can make suggestions for new products (such as ice cubes made of coffee so iced-drinks don’t get diluted). Other customers can vote on or discuss the ideas. Customers who feel engaged and acknowledged become loyal customers.

Search Marketing: Search marketing is one of the most powerful ways to get prospects to find you on the Web. By leveraging the power of Google and Yahoo, customers will find you. There are two types of search marketing: paid key words and organic search.Organic search marketing focuses on fine-tuning the content and structure of your website so that it comes up first in search results. This is known as search engine optimization (SEO). The key to SEO is clear categorization. Users don’t type in unique value propositions to find what they are looking for; they type in categories and criteria. For example, if you are looking for a sales recruiter in Toronto you may type “Sales Recruiter Toronto.” LEAPJob has conducted SEO on their site so they come up first, which is delivering them two to five new customers per week.Companies can further increase their exposure by purchasing key words to get top-of-page results – Google calls this service AdWords. AdWords are highly effective for getting clear search results when you can’t achieve your organic listing goals, or when you want to run targeted campaigns. They allow companies to control their advertising budgets, and to promote pages, services or campaigns in a targeted fashion. It’s often money well spent.

Publicity and Social Proof: Leveraging the media can be an effective tool for generating leads, but in a Sales 2.0 context, it’s all about credibility. Consumers are inundated by marketers and advertisers so much that they begin to tune the messages out. Buyers are cynical of case studies and testimonials on companies’ websites. They want social proof instead. Social proof occurs when consumers rate, review or discuss your product online in review or blog sites, or when the press creates a story. Being quoted in major media outlets is powerful, because it says that a trusted source views your company as reputable. A media or unbiased consumer review creates a connection that helps prospective customers get beyond the hype, and listen to what your company has to say. The above listed tools drive sales, but also require a clear sales process that serves the customer’s buying experience. Shifting into Sales 2.0 takes a real commitment to understanding your customers, and to developing a sales process that meets the needs of their buying habits.Sales 2.0 is a long-term strategy. If you can embrace your customers and develop an organization tuned to their needs, you can build a powerful sales engine that outstrips the solution selling approach. If you think Sales 2.0 tools are not applicable to your business, think one more time about how your customers want to engage with your company online in a meaningful way. The companies that deliver on those expectations will be handsomely rewarded for it.

Jeremy Miller is a partner with LEAPJob, a sales recruiting firm in Toronto, Canada. LEAPJob recruits sales professionals and sales leaders for many of Canada's most recognized companies. Their clients range from the Top 50 Employers to smaller organizations building their first sales force. For more information on LEAPJob please visit http://www.LEAPJob.com.

BUSINESS TIPS: Low-Cost Marketing Tactics for a Down Economy

Re-produced from the original article by M. H. McIntosh, please find below a set of useful tips for low-cost marketing. A useful reminder to even the most experienced marketeers, whether in a down economy or not...


Low-Cost Marketing Tactics for a Down Economy

In these difficult times, as the customer pool shrinks and budgets tighten, companies must fine-tune their marketing efforts. Here are tips on refining your marketing approach to maximize effectiveness and minimize costs.

Eliminate marginal investments
Interview your salespeople to identify which marketing tools have been most instrumental in successfully selling your products or services. Determine which marketing program has the biggest role in snaring recent sales and allocate your marketing budget toward those programs. Then take these steps:

• Eliminate marketing communications projects you might never get around to anyway. These “wish list” projects can be added back to the marketing to-do list when the economy turns around and you have the money and resources needed to do them right.
• Eliminate marketing designed only to enhance your brand. These marketing programs won’t have much affect on your short-term sales results. Instead, focus on generating leads and sales from a well-targeted group of prospects and let the quality of your marketing communications, response materials and website take care of enhancing your company’s image.
• Eliminate marketing programs that have not shown a significant positive ROI, as measured by leads or sales. Determine which programs will have the biggest impact on generating qualified, sales-ready leads and short-term sales. Make sure these stay at the top of the list for funding and implementation.

Increase direct marketing
Increase your use of e-mail and postal mail to deliver targeted offers to your most desirable prospects.

Postal mail may get through when your e-mail gets blocked as spam. To cut costs, use laser-printed business letters rather than expensive full-color mailers. Rather than doing one-time postal mailings to rented lists, improve your results by sending repeat mailings targeted at known prospects (such as your own prospect database). Save money by sending expensive literature or materials only to those who request them — not to every prospect in your database.

If you don’t have your own e-mail lists to market to, consider having publishers send your e-mail to their lists for you, or placing ads in targeted e-newsletters or e-zines. These are economical ways to get past e-mail filters, reach your prospects directly and generate a quick response.

Negotiate discounts on trade publication advertising
In these difficult times, you will likely be better off with a high-frequency or high-impact presence in one or two key publications than with an occasional presence in several. Study circulation information to clearly understand what percentage of the magazine’s readership is really part of your target market. Ask your media rep to give you statistics on what percentage of their subscribers also read competitive magazines, and consider this information when calculating your true cost per thousand.

Be sure your print ads are benefit- or solution-focused (rather than emphasizing “features”) with strong calls-to-action designed to generate leads or drive sales.

When the economy is soft, trade publication advertising sales are often weak. This allows you to negotiate an attractive rate with publishers.

Use trade shows smartly
Trade shows can be expensive, so consider eliminating those that haven’t previously shown a favorable ROI. Instead, concentrate your investments in those shows and conferences which have proven effective in generating leads and driving sales.

Then look for ways to reduce your trade show costs and boost your ROI. For example, consider hosting a smaller exhibit. Ask your dealers, distributors or resellers to help you staff the booth. Eliminate expensive cocktail parties. Send pre-show mailings to increase the number of visitors to your booth and lower your overall cost per lead. Send post-show mailings and use telemarketing follow-up to convert casual inquiries into qualified leads.

Enhance your website
A few cost-effective changes can turn your website into a sales lead generation machine. Select and use keywords carefully so your site appears in the search results for your intended audience. Post keyword-rich articles and case studies on your site. To turn visitors into leads, place offers or calls-to-action on every page of your website. Back up your claims with proof, including certifications, awards and customer testimonials.

Move to virtual seminars and workshops
You can cut some of the cost of your seminars and workshops by hosting them online. Webinars, online product demonstrations and other virtual meetings eliminate travel expenses of presenters and staff. And virtual events sometimes enjoy better attendance than live events because attendees don’t need to leave their offices. You still need to spend some of your marketing funds promoting your virtual events, but you can save a bundle on travel, meeting rooms and refreshments.

Put marketing collateral online
My research shows that three in ten requesters still want printed materials to share with their bosses, colleagues or clients. This ratio also means seven in ten will be happy and instantly gratified to be directed to your website or sent PDF files.

You can also save on printed literature production costs by avoiding expensive metallic inks, or by taking advantage of excess paper supplies your printer is willing to discount. Die cuts can be costly, but not if you use a die the printer already has created. You can also make items in smaller sizes or print two-sided materials to reduce printing and shipping costs.

Publish articles on your subject of expertise
Take advantage of inexpensive opportunities such as writing or contributing articles to industry publications, business magazines, blogs, websites and even Vistage View. Articles showcase your expertise to a highly targeted audience of your prospective clients. They can learn more about your company if you put a short biography at the end of the article and a link to a free whitepaper or how-to guide.

Use your article to gain media attention by shortening it and distributing it as a press release with a newswire service. Make sure your release links back to the full version of the article posted on your site. Additionally, you can post comments on relevant online news stories or industry blogs, and in your comment include a link to your article.

You may also consider writing a more in-depth version of the article, a white paper or special report, and offering it to website visitors.

Use newsletters
Newsletters are another great way to provide customer value and keep your company’s name top-of-mind without spending a fortune. Consider using your newsletter to help you identify and qualify prospects. That is, make newsletter subscription involve filling out a brief survey which asks questions about people’s level of interest in your products, buying authority and purchasing horizon. This information can go into your database for immediate or future follow-up, as appropriate, by marketing or sales. Be sure to also publish your newsletter on your website.

Provide speakers to meetings and conferences
Another economical marketing tactic is to promote your company’s executives as potential speakers at key meetings and conferences. Speaking at prominent events positions those executives as experts. You can also use these events to generate leads by offering audience members a copy of the presentation, a free white paper or some other valuable information if they give you a business card.

Find a marketing partner
Stretch your marketing dollars by teaming up with a company whose products or services complement yours. By pooling your resources, you and your partner can get far more mileage from your respective investments than either of you could alone.

For example, consider jointly sponsoring a mailing to promote products and services of both partners to their mutual universe of prospects. Not only do you split the costs, but you also gain access to additional prospects.Create a referral programLeverage the power of your existing customers by creating a referral program that rewards customers for sending prospects to your company. Getting referrals from happy long-term customers may be as easy as simply asking for it. Additional incentives, although worth considering, may not be required.

These ideas may trigger additional ways to cut the fat in your marketing programs and better focus your marketing efforts on driving short-term leads and sales during these difficult economic times. Doing so will help enhance marketing’s reputation with senior management as a valuable contributor to the corporate mission.

M. H. “Mac" McIntosh is described by many as one of America’s leading business-to-business sales and marketing consultants and an expert on the subject of sales leads. For more information, or to request a free subscription to his newsletter, Sales Lead Report®, visit www.sales-lead-experts.com

BUSINESS TIPS: Socially responsible downsizing

Re-produced from the original article published by Business in the Community (BITC); tips for downsizing. View the original article here.


Business in the Community: Socially responsible downsizing

Business in the Community is acutely aware of the challenges and constraints that its members are currently facing in light of the economic climate, and we are committed to supporting its members through such challenging times. We recognise that some organisations will be forced to restructure and downsize in the near future in order to remain operational. We believe that socially responsible downsizing is not an oxymoron – in today’s current economic climate, it is becoming a reality. Being socially responsible is often more than just engaging in an activity – in many instances, it is about how an organisation engages in an activity. Business in the Community believes that while not being a desirable option, downsizing can be done in a socially responsible way by putting the points below into action.

Consider all potential options
Research has demonstrated that downsizing does not always result in the desired savings, as organisations underestimate the costs of losing talent, damage to employee trust and motivation, increased stress and damaged brand image. With this in mind, it makes sense to consider alternatives to downsizing, and recent months have seen organisations adopting an innovative approach to cutting their costs:

• Permanent TSB has offered staff up to €35,000 to take a 2-3 year career break (www.reutors.com)
• As opposed to forcing redundancies, JCB entered into negotiations with its staff, which culminated in employees accepting a pay cut of £50 per week in the hope of keeping their jobs
• Michelin have asked their employees to take extended leave over Christmas to prevent a tyre stockpile situation escalating, thereby reducing costs.

Planning and implementing downsizing
If you have little other option other than to downsize, be sure to plan the process carefully. Research has suggested that almost half the effort to implement downsizing should be done before downsizing is announced.

• From the very outset, make sure you are fully aware of your legal requirements. Begin by visiting sites such as www.businesslink.gov.uk or www.berr.gov.uk for free advice on employment law. For more specific advice on the necessary steps to redundancy in Northern Ireland, visit: https://redundancyni.gov.uk/.

• Once this is done, set about giving careful thought to exactly what you hope to achieve by downsizing, and give due consideration to how you are going to provide for both departing and remaining employees. If appropriate, use Business in the Community’s ‘8 principles of CSR to guide you’: http://www.bitc.org.uk/news_media/corporate.html

• Consider all stakeholders affected by downsizing. Clearly, this will involve employees, but may also include other local organisations, politicians, government agencies and the media. For example:
• Indesit Company offered incentives to local organisations to employ the workers that it was forced to make redundant. The amount paid was relative to the skills of the individual.

• Consider how you can best cater for the needs of employees that are both leaving and remaining in the organisation. Use the expertise of other organisations, such as EGSA to help employees increase their employability. To get a greater insight into how other organisations can assist and support employees during downsizing, click on www.egsa.com or www.acas.org.uk. For example:
• In 2007, Seagate took the decision to close its Limavady branch. The site closed in September 2008. The company used the intervening time to put in place a range of support for its employees. With a strong focus on developing skills, Seagate provided its employees with independent information, advice and guidance for learning and work. Organisations, such as EGSA provided information days, in depth career guidance and tailored factsheets on training pathways in related and/or relevant career areas.
• In 2007 Sanmina SCI were employing 250 staff (200 blue collar, mostly male). Many had few or no qualifications, and some had worked at the company for over 20 years. The company wanted the employees to feel they had taken action to answer their “what next?” questions. EGSA were brought in to challenge preconceptions held by some workers about their ability to engage in learning again and to support them in seeking new career directions.
• Link with organisations such as Business in the Community to give employees the opportunity to gain valuable experience in other local community and voluntary organisations in a volunteering capacity.

• The outstanding characteristic of responsible companies are that they treat employees affected by downsizing with respect and dignity, that their policies are perceived to be fair to surviving as well as departing employees, that they over communicate throughout the implementation process, that there is continuous top management presence and support for the effort, and that the time span for realizing reductions is sufficiently long to minimize layoffs or render them unnecessary.
  

Maintaining a sense of trust
By being open and honest and truly trying to make the very best of a bad situation, organisations are demonstrating that they are trustworthy, and value their employees and other stakeholders. As Mallen Baker notes: “If an organisation can do the right thing during a lay-off, it will reap the rewards for years to come with all of its stakeholders. Furthermore, recent evidence clearly demonstrates that those organisations that demonstrate CSR are financially rewarded in the long term – organisations engaging in CSR outperform the FTSE 350 on total shareholder return by between 3.2% and 7.7% per year. Thus, while downsizing may not be a desirable option, doing it in a socially responsible way makes sense.

BUSINESS TIPS: Managing your business through challenging times

Some useful thoughts and reminders on what makes a productive sales force and how to focus your team through the challenging economic climate. Re-produced for the original article by Frank Furness. For the original, please view the post here.

Managing your business through challenging times

Right now most businesses and individuals are faced with challenging times. Every Television station, radio station and newspaper is reporting on the doom and gloom (how is it that they rarely report good news) and the more people hear it, the more they believe it. The good news is that everyone has a choice. Here are my strategies to manage your business through challenging times.

Cutting or apportioning costs - is there anywhere where costs can be cut that will have little detrimental effect on the business. Now is the time to take a good look at the balance sheet and staff and see who and what is giving the company the best returns and who and what are not, and then making some difficult but effective decisions.

Culling time wasters – we all know the Pareto principle, that 80% of your profits come from 20% of your clients. Every organisation has those wonderful 20% of clients who are great to deal with, always pay on time and will stay loyal through challenging times. These clients are pure gold! How well do you look after them and how many referrals do you ask for from them?

Here is an effective exercise – write down the names of your top ten clients and then write down ten things you know about each of these clients. Get everyone at your company to do the same thing and you might be surprised at how little they know about your top clients. How do they like to be communicated with (email, phone or face to face), how often do they like to be contacted, what are their prime motivators in doing business with you, who are their top clients (and plenty more).

This is the time to really take care of these top clients, make them feel special and let them know that you appreciate their business.

Next you have your 60% of clients who will stay with you if you look after them, but could just as easily move somewhere else if they feel neglected. Right now is the time to keep in touch and ensure that all your staff really takes care of these ‘steady eddy’ clients.

Eight percent of your problems, headaches and unpaid accounts will come from your bottom 20% of your clients. They will give you eighty percent of your hassles.Do you have a client that when you see a message from them or an email, you immediately tense up because you know it is going to be bad news. Now is the time to rid yourself of these clients and concentrate on your top twenty who will easily replace the business with no headaches and you will sleep easier.

The best decision I ever made was to stop working with two organisations that had given me a fair amount of work over the years, but more stress and hassles than you can imagine. Every time they booked me for a talk or training it would be a huge fee negotiation and then having to wait to get paid. I easily replaced them with clients that I enjoy working with.

Develop a 10 touch plan – how many times a year do you stay in contact with your clients, remember out of sight is out of mind. If you are not visible, your competition will be!The easiest way is to have an effective newsletter or ezine.

Sharpen your sales skills – right now is the time you should be sharpening the skills of all your sales people. This is not the time to cut costs on sales training, but rather the time to invest in your sales people and make sure that their skills are sharp and they will be bringing in the sales that will see you through the challenging times.

Upsell and cross sell – McDonalds are masters of this. By asking one simple question – ‘do you want to go large’ they upsell most of their customers. Are you doing the same with your customers?

Increase your marketing efforts – this is the time you cannot sit back and wait for the clients to call. You need to up your marketing efforts dramatically. Here are some ideas you can use:Create an awareness of your company:

• Sponsor a local sports team
• Sponsor local industry awards – donate a trophy for the best new business in your area with your local chamber of commerce. When the award is given, you will get great free publicity and be featured in your local newspapersLet people know exactly what you do
• Create brochures or marketing materials that are client focused and not ‘you’ focused.
• See your website as a sales and marketing vehicle. Ensure you have the right sales copy, your website is search engine optimised and you know the exact statistics of your traffic. If you need assistance in this area, please contact me for consulting that will have your website driving traffic and sales.
• Newsletter – let your clients know exactly what you do in your newsletter
• Provide ‘subject matter’ expert articles in clients trade press. Let your clients know that you can do it better than your competition
• Speaking as subject matter experts at industry conferences
• Speaking at individual client conferences and meetingsTaking actionMore face to face meetings and pitches than ever before with well qualified prospects.

Set Goals and stay motivated – now is the time more than ever to set your goals and stay motivated. Avoid all the negative press and people and reward yourself for your achievements.

Opt out of the recession – we all have a choice, mine is to opt out of the recession and concentrate on areas of my business that are profitable.

BUSINESS TIPS: Pricing your products and services right

Re-produced here from the original article by Per Sjofors - some useful tips on pricing and recognising the true value of the products and services your company supplies.


The Ten Most Common Pricing Mistakes

Here is a list of ten of the most common mistakes companies make when pricing their products and services.

Basing your prices on costs, not customers’ perceptions of value
Prices based on costs invariably lead to one of two scenarios: (1) if the price is higher than customers’ perceived value, the cost of sales goes up, sales cycles are prolonged and profits suffer; (2) if the price is lower, sales are brisk, but companies are leaving money on the table, and therefore not maximizing their profit.

Basing your prices on “the marketplace”
The marketplace is often cited as the “wisdom of the crowds”—the collective judgment of a product’s value. But by resorting to marketplace pricing, companies accept the commoditization of their product or service. Instead, management teams must find ways to differentiate their products or services so as to create additional value for specific market segments.

Attempting to achieve the same profit margin across different product lines
Some financial strategies support a drive for uniformity, and companies try to achieve identical profit margins for disparate product lines. The iron law of pricing is that different customers assign different values to identical products. For any single product, profit is optimized when the price reflects the customer’s willingness to pay.

Failing to segment their customers
Customer segments are differentiated by the customers’ different requirements for your product. The value proposition for any product or service varies in different market segments, and price strategy must reflect that difference. Your price strategy should include options that tailor your product, packaging, delivery options, marketing message and your pricing structure to particular customer segments, in order to capture the additional value created for these segments.

Holding prices at the same level for too long, ignoring changes in costs, competitive environment and in customers’ preferences
Most companies fear the uproar of a price change and put it off as long as possible. Savvy companies accustom their customers and their sales forces to frequent price changes. The process of keeping customers informed of price changes can, in reality, be a component of good customer service.

Incentivizing your salespeople on revenue generated, rather than on profits
Volume-based sales incentives create a drain on profits when salespeople are compensated to push volume at the lowest possible price. This mistake is especially costly when salespeople have the authority to negotiate discounts. Companies should define their salesperson’s “job” as maximizing profitability and then incentivize profitability.

Changing prices without forecasting competitors’ reactions
Any change in your prices will trigger a reaction by your competitors. Smart companies know enough about their competitors to predict their reactions, and get ready for them. This avoids costly price wars that can destroy an entire industry’s profitability.

Using insufficient resources to manage your pricing practices
Cost, sales volume and price are the three basic variables that drive profit. Most management teams are comfortable working on cost reduction initiatives, and they have some level of confidence in growing their sales volume. Many companies, however, only utilize simplistic price procedures.

Failing to establish internal procedures to optimize prices
In some companies, the hastily-called “price meeting” has become a regular occurrence—a last-minute meeting to set the final price for a new product or service. The attendees are often unprepared, and research is limited to a few salespeople’s anecdotes, perhaps about a competitor’s price list, and a financial officer’s careful calculation of the product’s cost structure across a variety of assumptions.

Spending a disproportionate amount of time serving your least profitable customers
Know your customers: 80% of a company’s profits generally come from 20% of its customers. Failure to identify and focus on these 20% leave companies undefended against wily competitors. Such failure also deprives the company of the loyalty that more attention and better service would provide.

The optimization of pricing strategy is as important as the management of costs and the growth of sales volume. Rigorous price optimization is a crucial source of competitive advantage and increased profitability.