November 2006
Good Business Deeds Can Be
Good Business Deals
Create A Network of Wealthy
Customers
Experiment To Find Your
Product's Price Flexibility
How To Conduct A Reference
Check
 
Good Business Deeds Can Be Good Business Deals
"Cause" marketing that links your company or brand to
a non-profit group or charity enables you to
promote your business while you give something
back to your community. Perhaps the most
interesting aspect of this kind of marketing is
that it’s been shown to make customers feel
better about deciding to purchase and that
translates into an increase in repurchase
intentions.
Consumers transfer their
emotional bonds
Many people have emotional bonds with a non-profit
group. They may even be regular financial
contributors or do volunteer work for a
non-profit organization. When these people see a
business that’s supporting this organization
they’ll often be predisposed to purchasing from
it. "Look at what you sell and understand the
targets you're trying to reach. Then align
yourself with causes that will bring out the
emotions of that audience, from a grassroots, a
community and a media standpoint," advises
Rodger Roeser, of Justice & Young Public
Relations in Cincinnati.
Employees feel better about
their employer
Surveys consistently show that whether candidates are
choosing an employer or employees are deciding
whether to stay with their present company, the
degree to which a business demonstrates a social
conscience is perceived as increasingly
important. In fact, a majority of employees of
companies in many industries have said they’d
work for less money if they felt their employer
was socially responsible.
It's good for
PR and community relations
Naturally, there are a lot of positives about
supporting a cause that will benefit the image
your business has in the community. You’ll be
seen as a good corporate citizen and as an
organization that contributes to the welfare of
everyone in the community.
Seek alignment
with your business and your customers
There are thousands of causes and some will no doubt
relate to your business activities. Find a cause
that has a link with your company, no matter how
tenuous, so that people will understand how your
business fits into the cause overall. The cause
needs to also be related to the interests of
your customers. It should align with their
feelings and beliefs, and not be in conflict
with other organizations they might want to
support.
Tell the world
what you're doing
Although it might seem a bit "commercial", your
business will only benefit if it tells the world
at large about your involvement with the cause.
You need to spell out what it is you’re doing
and why you’re doing it. It will also help if
your business becomes a conduit for your
customers to help the cause by making donations
through your website or at your business
premises.
• Your cause marketing activities should be part of both your
external marketing and your internal
communications. It should be featured in your
promotions, your packaging and your website, as
well as referred to in your employee
newsletters.
• Give your employees and your customers a
chance to participate in the cause by hosting a
function or sponsoring an event where the
proceeds go to the cause
• Ask the cause you’re supporting to promote
your association with them. They have every
reason to do this; the non-profit world depends
on donations and they like to tell prospective
donors that they’ll be in good company when they
part with their funds.
In today’s competitive world consumers want to know
what a business stands for. Cause marketing will
tell them about your business values and
reassure them that part of their purchase money
is going to a good cause.
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Create A Network Of Wealthy Customers
The New York-based Luxury Institute tells us there are
11 million households in the U.S. with an
average net worth of $3.1 million and an average
annual income of $256,000 - “For most luxury
goods and services firms, these are the 20% or
less of the clients who deliver 80% of the
profits.” Whether the 80/20 rule applies to
your business or not, if you can identify your
wealthy customers you can target them directly
with high-value offerings. And even if you don’t
have 20% of customers that you’d consider
"wealthy" you can create a network of customers
that will help you grow your business and
greatly benefit your bottom line.
Define your trading area
Start with an accurate definition of your trading area
– where your customers are. The geographic area
you identify as your trading area will be the
boundaries for choosing members of your network.
For some businesses it will be a neighborhood,
and for others it will be an entire city or
state. This is an important step in the process
because the demographics of your trading area
will be used to identify the pockets of wealth
that lie therein.
Find your pockets of wealth
Every area, from the size of a suburban neighborhood
to a city or state, will have parts that are
wealthy and some that are not so wealthy.
Demographic data can be used to locate the
wealthy, that is, high income segments in your
overall trading area. This information can be
sourced from local libraries and government
departments, and is generally segregated by zip
codes, electoral boundaries, place names or some
other identifier you can use in your research.
Cross reference your customer
database
How many of these "wealthy" individuals are already in
your customer database? This is the first thing
to check. You may already have the contact
details for a significant number of regular
customers who fit into this category. Because
you haven’t thought about segmenting them
according to their wealth you may never have
thought about creating high-value offers that
target them directly.
Create lists of wealthy
prospects
Now you want to obtain mailing lists and other contact
details of people who live in those areas you’ve
identified as wealthy. If it’s simply people
living in a particular part of town you could do
it by renting a mailing list from a list broker
for those neighborhoods or for particular zip
code areas. If it’s all wealthy people in a city
or state you’d be best to speak with a
commercial mailing list provider who could
create the list that you need and arrange to
have your marketing materials sent out on your
behalf.
What can your offering be?
This will naturally depend on the business you’re in.
A wine retailer might want to make these wealthy
prospects an offer of a dozen bottles of fine
red wines. A furniture store might offer them a
home decorating service. A car dealer could
offer them a test drive in a luxury vehicle.
Your offering to them should be the best
products and brands your industry has to offer
because you know they can afford it.
How do you communicate your
offer?
Because your data will probably be geographic in
nature this is a natural for direct mail that
can target specific addresses. When you have
your offer ready, create a direct mail piece
that presents it attractively with appropriate
up-market illustrations. Link this offer to your
Internet site where it can be repeated for those
who want to place their order online.
Focus your content on what your wealthy customer will
get. Show an understanding of their lifestyle
and tastes. For most of your prospects this
will be your one opportunity to make a good
impression, so demonstrate that you know what
they want and have taken the trouble to make it
available to them.
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Experiment To Find Your Product's Price
Flexibility
Pricing is an art and if you don’t get your prices
right you’ll have trouble finding either profits
or buyers for your products or services. Most
experts agree that there are just three basic
methods of pricing:
Cost-based:
You take the cost of the product and add a fixed
percentage of this as a markup or apply a fixed
multiplication factor to calculate the final
price.
Market-based:
You let the market tell you what to charge by
monitoring your competitors and matching their
pricing.
Value-based:
You price your product on the value it delivers
to customers rather than on the cost of making
it.
Value-based pricing is by far the best of these three
pricing methods. It incorporates an
understanding of the value your customers
receive and focuses your thinking on the
benefits you provide. However, of the three
basic pricing methods, value-based pricing is
the hardest to calculate.
Problems with
other methods
Cost-based pricing is severely limiting. It doesn’t
take into consideration some of the things
consumers value most – quality and service. If
your manufacturing or purchasing costs are
excessive your selling price will be too high
and your products won’t sell. Market-based
pricing is dangerous. To gain market share
either you or one of your competitors will lower
prices, leading to a price cutting spiral that
reduces margins and profitability. It’s a
lose-lose situation.
Pricing
flexibility is critical
Value-based pricing gives you the flexibility you need
to grow a business by improving your value
proposition. As the value of your product grows,
so will your revenues, so it’s worth making an
investment to add value to what you sell. There
will, of course, be less flexibility when you're
selling physical goods, especially commodities.
However, if you are selling something like a
service or an online product you have a much
wider range of possible price levels and a much
more flexible pricing structure.
Just how
flexible is your pricing?
Look at what you’re selling and think about how you
see your business. How good is your product and
what level of customer are you selling to? If
your product saves a customer a hundred hours of
drudgery a year it’s worth quite a bit,
regardless of what it costs. And if you’ve
positioned your business above its
run-of-the-mill competitors you should be
targeting a premium price for everything you
sell.
The only way to find out exactly how flexible your
pricing can be is to test the product at
different price levels in real life situations.
This will give you hard data on which you can
base your pricing decisions. Let’s use a
hypothetical example of a product that costs you
$18; you want to test three pricing levels –
‘bargain’ ($28), ‘reasonable’ ($36) and
‘outrageous’ ($49). How you market test these
three levels of pricing is another matter and
requires a great deal of thought. But let’s say
you get the following results:
• At the "bargain" price of $28, 300 units sold for revenues
of $8400 and a profit of $3000;
• At the "reasonable" price of $36, 280 units sold for
revenues of $10,080 and a profit of $5040;
• At the "outrageous" price of $49, 250 units sold for
revenues of $12,250 and a profit of $7750.
These figures indicate a great deal of pricing
flexibility and suggest that further testing at
even higher prices could produce an even higher
level of profitability. Only by testing at a
range of prices will you know how people will
respond to your offering. The aim is to optimize
the sales/profitability combination which is
just what this kind of testing will do.
If your goal is to acquire new customers you would
probably choose the ‘reasonable’ price as the
increase from $28 to $36 cost very little in
terms of volume. If your customer base is
relatively stable you could charge the
‘outrageous’ price and optimize your profits.
Only after you have the facts can you choose the
price that best suits your overall business
objectives.
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How To Conduct A Reference Check
Finding managerial talent is a difficult task in a
small business. Most small businesses don’t have
an HR department to handle the role, so the
owner winds up looking after everything from
writing the advertisement to interviewing
candidates and making the final selection. At
this point, it looks like the job is over, but
one critical task remains – checking the
candidate’s references.
Most instances where a managerial appointment has gone
wrong result from an incomplete check of
references. This could be because only favorable
referees have been included, or it can be
because the references have been fraudulently
created. The only way you’ll ever know if the
person is as they represent themselves is to put
in the time and effort necessary to check their
background. Then, and only then, should you
offer the position to the candidate.
The purpose of
checking references
A reference check allows you to gather information
about the candidate that you’d otherwise never
get. You’re speaking with people who know them,
who’ve managed them, and who’ve worked with
them; and they know a lot more about that person
than you do. Even if the person whose reference
you’re checking is appointed and settles in
well, your reference checking can provide you
with guidelines as to how best to manage and
develop them.
In the worst case you’ll discover that the candidate
who seems right for the position has something
unsavory or criminal in their background. This
can save your business from exposure to problems
like fraud, theft, lawsuits or other
inconveniences you don’t need or want.
How to handle
referees
You should ask candidates to offer at least three
referees, but more will be even better. You
naturally want confirmation of the candidate’s
background and competencies, but you also want
to gather examples of the candidate’s strengths
and weaknesses, their management style, and how
they relate to others in the workspace. The
person with whom you’re checking the reference
doesn’t know you and will be wary about giving
out any information that could rebound on them.
For this reason, it’s essential that you spend
some time establishing with them that you can be
trusted and will maintain their confidence.
Outline the position you’re seeking to fill and the
impressions you’ve had from your initial
exposure to the candidate. Cover any areas of
uncertainty, and be sure to verify anything
about that referee that’s been included on the
candidate’s paperwork or said in an interview.
Then let the referee do the talking as much as
possible, only stepping in when more information
is needed. Ask as many open ended questions as
possible, and give the referee a chance to
express their feelings and opinions. Try and
gauge their like or dislike for the candidate
and look for some emotion when they’re
describing them. If they use a word that rings
an alarm bell, don’t hesitate to ask what they
really mean.
The questions
to ask referees
You’ll naturally be interested in the candidate’s
abilities that relate directly to the
requirements of the position you’re filling.
Some sample questions are shown here, but you’ll
also want to create specific questions that
relate to your own requirements. Write them all
down before making calls to referees and be sure
to cover the same questions with each referee to
build up a complete picture.
• I’ve told you about the job we’re trying to fill; how do you
think (candidate) would fit into it?
• What would you say (candidate’s) best features are?
• What qualities do you think might help (candidate) make
greater progress in their career?
• What did (candidate) achieve for your business?
• How well did (candidate) relate to co-workers?
• If (candidate) had stayed with your business, where might
he/she have wound up?
• What advice would you give me regarding developing
(candidate’s) abilities?
• Is there anything else you’d like to tell me about
(candidate)?
Commercial
background checking
It’s also well worth paying a professional
background checking service to perform a final
check before making any appointment. They’ll
find out whether the candidate has correctly
stated all details of their employment history,
education, and whether or not they have a
criminal record.
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