How To Price Your Services and Products in A Weak Economy
January 30, 2012
Last week J.C. Penny announced it would be changing the way that it will price its merchandise. No longer will the company be offering sale prices. Instead the retailer will be slashing all prices by 40% and keeping them there.
Previously, the company would hold hundreds of sales every year, and their customers began to wait for the sales before buying. The sagging numbers suggested that perhaps customers were not coming back at all.
The Challenge
In this weak economy consumers have shown they are willing to spend, but only if they find value. So, now J.C. Penny will have to get their customers to believe the prices offered everyday do provide good value without the sale tag.
What Does Behavioral Economics Have To Say About This Idea?
In this blog we have often looked at the work of Dan Ariely, behavioral economists and author of Predictably Irrational to gain some insights into these situations.
People Have trouble judging value
Behavioral economists have demonstrated that people have trouble judging the value of any given item. Therefore, consumers use “framing” as a reference point in determining if something has value or not.
We have all witnessed this behavior ourselves. When we see a washer that was $800 marked down to $400, it appears to be a great deal. However, if that same washer was priced at $400 initially, we would be less compelled to buy it.
To test this theory out, Dan Ariely and fellow behavioral economists asked MBA students to write down the last two digits of their social security numbers. Then the students were asked to bid on a number of items, including a bottle of wine. Students with the highest numbers bid 200 to 350 percent more than students with the lowest numbers.
The Lesson for Your Business
Our customers have difficulty establishing value on their own. They need a reference point in order to determine value. Without a reference point customers may be waiting for a “sale” to help them open their wallets and purses.
Many businesses have difficulty with pricing their services and products. There are a host of things that go into determining the best price. In the case of J.C. Penny they are combining this price reduction along with the introduction of new merchandise, new logo, and a new celebrity spokesperson (Ellen DeGeneres).
In their case management is combining various variables at the same time. This may make it difficult to fully understand which treatment had the biggest effect. However, given the sagging numbers this may be the only approach they can take.
Pricing issues are just one of the many items members of Bay Area Mastermind have the opportunity to discuss and develop at our meetings. Every member is provided with the latest research and strategies to grow the profit in their business in any economy. Why not take a test drive and see for yourself how your business can thrive from a professionally facilitated Mastermind Group.
Moving forward in Tough Times
August 24, 2011
By Robert Estupinian
The last couple of weeks has been full of a lot of disheartening news. At the top of the list has been economic worries and strife around the world.
It is easy to lose sight of what we are all trying to accomplish in our lives whether it be financial, family, health, or spiritual.
Yet, despite it all there is a strength inside all of us that can never be extinguished unless we allow it.
Here is a quick video that demonstrates true courage:
Finally, let me leave you with a wonderful perspective:
In dwelling, live close to the ground. In thinking, keep to the simple. In conflict, be fair and generous. In governing, don’t try to control. In work, do what you enjoy. In family life, be completely present.”
–Lao Tzu,
Chinese philosopher
Now more than ever it is important for every business owner to surround themselves with like minded positive people. A mastermind is the best way for most business owners to get the support and inspiration to build their business and stay on track. If you are not a part of a mastermind consider taking a look at Bay Area Mastermind and take you and your business to that next level.
Managing Your Business Through a Recession
July 28, 2011
In today’s economy, the small business owner may encounter situations where one or more of the employees’ performances are affected. Because some employees may worry about not having a job a month or two down the road, their focus might not be as clear as compared to someone who had a guaranteed position. And in a situation when an individual is less focused, it could adversely affect the business, in addition to other employees.
So the question then is, how to manage your staff through a recession. Having been a manager in both private corporations and academic positions for over 20 years, I think I can offer some suggestions. Read more
The Fall Economic Outlook
September 14, 2010
Many of our readers have recently emailed and asked for an update of my previous economic outlook that I made at the beginning of the year. These days the media is reporting on just about every bit of data and very little makes sense. In fact, we would argue that much of it has nothing to do with the average business owner. In this article we will examine only a few items that do affect our business.
So, here is a brief outlook of where I see the economy at present.
This Advertising Stuff Doesn’t Work, What a Waste of Time and Money
August 30, 2010
Frustration is all around these days as many businesses struggle to get customers in.
Advertising can sometimes be black hole that simply sucks the money out of a business with no return. Therefore, it is not uncommon for business owners to feel that they may be better off not doing any advertising or marketing. Are they right? We will explore this question and find the real answer to the advertising black hole problem.
The Silver Lining for Business Owners
April 8, 2010
In the previous post, How Credit is Effecting Your Business, we discussed how the credit crises has changed the way that business owners are operating. We also discussed the value of knowing the true FICO score and where to get it.
Sure there are more things to deal with now than before as a result of the fear that many vendors have. For example only a few short years ago it was not necessary for principals or executives of a business to have to provide their personal credit information when applying for credit or services for their businesses. Today, it is a totally the opposite and many times it is very common for vendors to require a credit check of the company’s executives.
How The Credit World Is Effecting Your Business
March 30, 2010
One of the things that has effected this downturn more than 
anything else is the tight credit standards that all of us are dealing with. It is effecting the ability of business owners to expand and grow their business and it is effecting customers and client’s ability to purchase products and services. So what is really happening and what can we do about it?
Year End Economic Review and What’s in Store for 2010?
December 31, 2009
On this new year eve we are looking to celebrate not only the new year but the start of a new decade. This is a good time for us to take a look back and see what we have achieved these last 10 years, and also look forward to the next period in our lives.
In this post we will take a look at where we stand now economically speaking and what 2010 has in store for us given the current state of the economy. We will also take a brief look at the opportunities that are now present and some that will shortly be appearing. So let’s jump right into it.
Thinking Outside of the Box: Cash for Clunker Couches
October 27, 2009
Everyone always talks about “Thinking outside of the Box”, but who’s actually doing it?
Is There Really a Recovery Underway?
October 7, 2009
As we begin the final quarter of 2009 let’s take a moment to see where the economy is. By most accounts December 2007 was official day that most economist recognize as the beginning of the great recession. On the positive side looking at just GDP we are now beginning to get out of the Great Recession.