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THIS WEEK
Putting a Premium on Your Business
ALSO IN THIS EDITION
Putting a Premium on Your Business
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Over the past few weeks we have looked at ways to cut costs in your business. This week we will look at ways to increase your profits through premiums. What is a premium? A premium can be many things such as an additional level of service, additional products, additional attention, reduced waiting times, faster turnaround, greater access, higher standards of products or increased results.
In any business there will always be people willing and keen to pay more and receive a premium level of service. If your business doesn't offer a premium level service, you will be leaving money on the table and not meeting the needs of potentially some of your best customers.
People who are willing to pay a premium often are or become your strongest fans and your staunchest allies, provided you meet your end of the bargain and deliver outstanding value. A premium offer is more than just fancy branding or cool looking design – it needs to trickle through to premium service and results for the best outcomes for your business.
Value Based Fees
Premium fees are not just for everyday businesses. This issue has been hotly debated in the accounting and legal professions, many of whom are moving away from standard time based billing to value based fees. Work by authors such as Alan Weiss & Ronald J Baker have pioneered a re-thinking of how these very traditional industries package their services. If you currently bill by the hour for your business, it would pay to buy some of Weiss & Baker's books to understand how value based fees work.
Upselling
If you are in a non-hourly billing business, then you need to look at how you can add a premium. Let's start with the simplest premium service – upselling. If you are a retailer, the concept of upselling is not a new one. It doesn't have to be as blunt as "would you like fries with that", but upselling can and does make additional profits.
If someone buys a dress – then upsell the customer that great necklace that perfectly matches the dress. If someone buys cough medicine – then upsell the customer with soft tissues and a thermometer. The challenge is a recent study showed that less than half of all shop assistants routinely practice upselling during transactions. Look at setting up automatic prompts on your point of sale cash register to help remind them, and reward employees who regularly upsell if you want this behaviour to change.
For an online business you can also upsell through your sales process – recommending additional products that the customer may find useful either at point of sale or through follow up emails.
Bundling
Bundling is another way to create premium products. Look at goods or services you normally provide separately and create a logical "bundle" of pre-packaged products in one convenient transaction. If you bill by the hour – bundle your hours into different levels of packages that people can purchase rather than just your flat hourly rate.
Adding value
Adding value is an easy way to add a premium. Your e-book or report can be supported by MP3 or video training, which is also supported by transcribed notes and copies of overhead transparency slides. Record your training sessions and make the session available for purchase or download. You can also record your interviews or brainstorming meetings and provide copies to the client, or simply add a new or different level of service (for example we provide on-page web optimisation as part of our premium level service for our web copywriting).
Time premium
Place a value on your time. Many freelance businesses or small businesses find they will move mountains to help clients meet tight deadlines. The trouble is by doing this all the time you train your clients to expect you to always be able to do this for them. A "rush job" surcharge is one way around this. You are compensated for burning the midnight oil and missing out on family time and your client learns to either give more lead-time or is willing to pay the premium.
Access
Increased access is an interesting premium. People value interaction with knowledge experts – think of celebrity auctions or fans going to extraordinary lengths to meet their idols. In business, direct access to the key person or knowledge owner is a valuable commodity. The ability to ask questions and have them answered by an expert can't be underestimated. Many premium products include unlimited access to the expert, or some increased level of access.
Contacts
Have you ever read about "million dollar rolodex's?" That is not just marketing hype – access to contacts is a great resource for people. Being introduced to people in the know, forging alliances and finding great other businesses saves time and builds income. Granting people access to your contacts is another great premium service.
The trick is to realise that people buy value. If you make a great offer packed full of demonstrated value then you will attract significantly more higher end buyers.
How can you create a premium product for your business?
| HR Tip of the Week - Don't settle for the cheapest option |
Many businesses try to hire people with the lowest possible salaries as a way to lower their salary costs. In my experience this is false economy.
If you advertise your low wages then good people will self select not to apply. You then end up with people who need training to bring them up to speed, people with lower initiative and drive, or people who need a lot of supervision. All of this takes time and money - so you trade off on the salary budget for lost time and your training budget.
If you only tell people of the wages when the person is at interview and then encourage them to take a drop in pay or less than they were wanting, then you start your working relationship on a low experience. The person may take your job because they have to pay their bills, but they already have one eye looking for a better paying role.
Of course not all people with higher salary expectations are up for the job either - but there is a lot of truth in the old saying "if you pay peanuts you get monkeys". If you want the best person for the role - perhaps a premium wage will attract them to you.
 Given our theme of premium products, my business of the week is one of the best pool builders in Australia (and they have the awards to prove it).
Stuart Bevan is an unassuming bloke with one passion - creating the perfect pool. He loves a challenge, so give him the most difficult block or the most troublesome access and he's right onto it. Stuart creates pools where others can't even begin to imagine them - how about a lap pool sticking straight out of the side of a mountain?
Get him talking and you will learn all about the extra depth of concrete he uses and why it makes for a sturdier pool, or the extra wide pipes and why you will love them after storms. He can talk for hours about his zinc coated steel frames which is why in 25 years of building pools not one of his pools has rusted from the standard steel coming into contact with ground water. You can write a book about his knowledge of pumps and what it takes to keep your pool sparkling without slaving for hours each day.
One of the other things about Stuart is his finicky perfectionism. If you are having tiles in your pool you will never see a cut tile - the pool is designed so it is exactly 250 tiles long and 280 tiles wide. You see - he really sweats the little details as he knows that it is this level of detail that makes the difference. In my mind he create pools in the same way designers create haute couroure gowns.
Yes, it costs to have Stuart create a pool for you. But what you end up with is a stunning work of art that perfectly reflects the light on your block, that matches the landscape and is easy to look after.
Stuart can charge appropriate fees because his knowledge, love of his job, amazing attention to the little details and engineering skill creates miracles. Check out the Stuart Bevan Pools website to get a sense of what makes his work so brilliant, and to get some ideas on how you too can create a premium business.
Many businesses try to cut costs and provide deep discounts as a way to attract customers. But smart businesses look for ways to increase value and service and so create a premium level product with a price to match. In this post I dissect how cinemas created premium products for their business.
exuberantly yours
Ingrid
Heart Harmony
PS: This week's Small Business Tips blog included posts about "Work Life Balance" & "A Personal Reflection on the Psychology of Aging"
Legal stuff: This newsletter is intended only a general guideline for Australian businesses. You should seek specific advice for your situation rather than relying only on this newsletter
Earnings disclaimer. Some of the content may include advertorial information, which means I may receive financial compensation for the products I recommend. But - unless I know and trust the product, I will not recommend it.
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