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competing

Cutting prices

Image courtesy of xedos4 at Freedigitalphotos.net

This article was written by Ed Hatton and appeared in the October November edition of Destiny Man magazine

The economy is uncertain, business is slow and your competitors have slashed prices. Should you follow suit?

The simple answer is yes if that increases profit or improves cash flow through more sales. Also yes as a defensive move to retain irreplaceable market share and that retention is worth sacrificing profit for. Be careful of emotions here. Clinging to things that should go can kill your business.

No if your products are price inelastic, so a price reduction does not materially increase sales. Also no if it would be more profitable to reposition and increase prices and value to your customers, and take higher margins for lower sales. Continue reading

Competing with giants

This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in July 2011 and is posted here by their kind permission.

Start ups must respond to aggressive and bullying tactics to survive
By Ed Hatton

The challenge
A small concrete pipe manufacturer with great customer service opened a factory in East London to support the local demand from local contractors and government. This reduced the cost and delays in transporting pipes and was an immediate success; turnover increased rapidly. The large and powerful manufacturers in this industry lost market share and reacted by slashing prices dramatically, absorbing reduced or negative margins with their substantial resources to attack the upstart. The new factory cannot match these prices and there is no product differentiation. Their question: how do they compete?

The Solution
Voltaire wrote that “God is on the side of the big battalions”, but I wonder if the Almighty would want to be associated with some competitive practices of large and predatory organisations. Entrepreneurs starting new ventures in competition with powerful organisation often face the kind of threats experienced by this questioner. The competition may be price based as in this case or it could be massive increases in marketing spend, cornering the raw materials supply, buying key staff from the start up and others. Many believe that free competition and entrepreneurship are the best routes to more employment, but sadly practices on the ground are often very different.

How can this entrepreneur compete? Continue reading

The Somali lessons

image courtesy of Freeimages.co.uk

Humble shopkeepers can give lessons in marketing strategy

I recently read an article about the lives of Somali shop owners operating in a Cape Town township. They lived a very stressful life, with the continual fear of xenophobic attacks from community members, and the criminals who used the simmering xenophobia to provoke attacks and loot their stores. Insurance is not an option for them.

They described how they chose their location in the poorest sections of the communities. Residents have almost no income, and so travelling to a distant shop consumed too much of their discretionary spend, and they wanted the lowest prices for staples. Unit sales were small values, and at times a shopper would appear with a single coin. All he could buy with that would be one cigarette or a sweet. And he made the most of his purchase – choosing a sweet then changing his mind for a cigarette then rejecting the cigarette and choosing some gum.

The Somali shopkeepers treated him with dignity and patience, knowing that shopping was a rare treat for him. Many local shopowners would have chased him away. Going to a supermarket was simply not possible for this customer.

Lesson 1

They chose their target market location carefully, selecting areas which put them in considerable danger and not very pleasant circumstances, but free of competition, and better able to service their customers. And then they gave wonderful customer service to even the least significant customer, treating him like a millionaire. How many entrepreneurs have been as visionary, and how many can say hand on heart that they treat all customers with equal respect and service? Continue reading

Marketing with a limited budget

pic courtesy of imageafter.com

How do you get noticed if you have no money?

 Imagine a business with expenses rising, the turnover static or falling. The entrepreneur realises that the business simply has to find new customers, but there is  little or no money available for marketing. What should the business do next? In desperation maybe the entrepreneur has thought of doing something like:

  • Agreeing to place an advert in a supplement of a publication which will be relevant to their products;
  • Printing flyers and putting them in post boxes;
  • Hiring a new web designer to make the website more attractive.

Sadly the outcome is likely to be a poorer and sad entrepreneur. One time advertising may bring a few enquiries occasionally but is almost always a waste of money. The post is probably collected by a messenger who will discard the flyer, and a prettier web site will not bring more enquiries if nobody visits the site.

A smarter way is for the entrepreneur to realise that if he has limited funds, he needs to reach the people likely to buy from him as efficiently as possible; he cannot afford to market to people who will never be his customers. It is amazing that this simple piece of logic is so often ignored. The very first step is to identify who his most likely customers are, and then to figure out the best way he can communicate a marketing message to them. For most businesses in this situation this will be a highly focused message, getting to the right people with as little as possible waste. Sometimes this may be as simple as forming an alliance with a non competitive supplier to the target market. This would apply to photographers, event managers, courier companies and many more – maybe almost every business. To make this work the alliance must benefit both parties. The allies could agree to introduce each other to their customers, share exhibition or other marketing costs or offer bundled products. Continue reading

Starting over

This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in May 2011 and is posted here by their kind permission.

 Moving a business to a new location can be like starting all over again. By Ed Hatton

Challenge

An entrepreneur moved his event management and wedding planner business to a new province where no-one knows his business. He needs to attract clients but isn’t sure where to begin. He has been distributing pamphlets, but so far no-one has gotten back to him.

Solution

This entrepreneur had a thriving business doing wedding planning, parties and corporate event management and then he moved to a different province. When he started operations in his new location he realised just how much personal reputation and word of mouth had meant. In the new location he is unknown and potential clients are wary of entrusting important events to him.

The business must be started again in the new location. As before, he has to build a client base and a solid reputation to provide a platform for growth. He has the advantage of being experienced in running events and weddings, so he does not start quite as ‘cold’ as he did originally. Against this are a number of part-time wedding planners and event managers who are established and compete with him for business. Continue reading

Sell more to your customers

image by Ambro

Working smarter to plan increased turnover without needing new business

Most businesses would like to increase their turnover, but often struggle to do so. One reason is businesses simply set a growth target with no focus on where that growth should come from, or why people would buy more from the company. Increasing turnover means more sales to existing customers, more new customers or higher prices, and for now I will focus on growing existing customers.

Selling more by being a great supplier

Before you even start to think about selling more to customers you have to examine if you really understand your customer’s goals, plans, needs and likes, and if the communication channels are open at the right levels. If you are dealing only with a junior buyer who gripes continually about your quality, prices and service don’t expect any of the stuff below to work. Start again and build a relationship of understanding their culture, needs and systems. Then deliver what meets those requirements. Get the communication channels working effectively at the right levels and address their concerns promptly. Then you can think about growing your business with them.

Fighting the lowest price

pic courtesy of imageafter.com

This is the first of a series of sales and marketing tips drawn from my long experience of trying different things. Some could call these street fighting ideas…

Say you operate in a market with many small competitors. Price will become a major decision factor and price competition will be fierce. Some competitors will pitch their prices at levels where they cannot give the service they promise, but they will establish a low price perception in the minds of customers.

People in courier services, stationers, web site development car repairs and a host of other business types will have experienced this problem.

Your company wants to be there for the long haul and give good customer service, but you cannot compete with the prices offered by those who promise the world and don’t deliver, or those new entrants who are still to discover how costly customer service is. How do you compete? Continue reading