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Your EnterQuest Bulletin - 16 March 2004

In this week's issue:

• what to do when a customer asks for their money back
• a factsheet about business standards
• why you should test your pricing
• a book about why we buy things

Dealing with requests for refunds

Every now and then, like any other business, we get a complaint from a customer.

Fortunately, this doesn't happen very often, but a complaint is feedback that every small business must be prepared to deal with, and to do so in an appropriate, friendly and thoroughly professional manner.

Even if you have to bite your lip while you're doing it.

If you set out in business thinking you won't get any complaints, then think again. It will happen to you sooner or later, if it hasn't happened already, and the switched-on entrepreneur can use this feedback to the advantage of their business.

Occasionally, the complaints that we receive involve a liberal sprinkling of insults and expletives for good measure. But as much as it makes your blood boil, you have to take all of this on the chin, and handle it as if the complainant is the most important customer you have.

In our case, we sell information to small businesses, and on rare occasions a customer will feed back to us that the information they bought wasn't what they were expecting, and that they would like their money back.

So what do we do when this happens?

We thank them. We thank them for letting us know where our service is falling short of expectations, and we always give the customer their money back. We also offer them additional information for free, or advice and assistance to help them find what they are looking for. Even if they are the stroppiest so-and-so on the planet.

Why do we do this, and why should every small business deal with complaints this way?

Because it will surprise the customer, who at the time will be feeling very negative about your business, and at the end of the process will hopefully feel that they have had the personal attention they deserve, and the value they were expecting in the first place.

Put it another way: what would you rather have? A complaining customer who tells everyone he knows that your firm doesn't give you your money back when you complain, or a complaining customer that spreads the word that you thank people when they complain, apologise without question, give an unreserved refund and something else for free to make up for all the problems they have experienced?

Apart from the fact that your customers have statutory rights following a purchase from you, it's worth remembering that word spreads very quickly indeed about the standard of service a business offers, and it spreads so much faster when that service is bad.

Your business WILL get complaints and it WILL get requests for refunds. If your product and general business standards are high then these complaints will be kept to a minimum. But if your after-sales service standards are equally high, you will be more likely to turn an unhappy customer into a happy, referral-making fan of your business.

It's your task as owner-manager to set, maintain and continually improve these standards in your firm. You should be obsessed with the quality of service you offer at all times.

As well as maintaining the personal standards that you want to stamp on your enterprise, there are other officially recognised external standards that bring benefits to all kinds of businesses.

These official standards relate not just to production processes, but also to health and safety, recognised quality levels and acceptable levels of service.

Some of these are voluntary and others are legal requirements, and every entrepreneur should have a basic understanding of what they are. So this week we've included a factsheet that explains why official standards exist, what the main types are and how they might apply to your product or service.

Here is the factsheet:

A Guide to British, European, and International Standards

Weekly business tip

Testing whether your price is right

It's important for every business owner to remember that you must sell your product or service at a price that is higher than your cost to produce it and promote it. That's called a profit. But what's even more important to realise is that your customer will only buy your product or service if they determine that its perceived value exceeds the price they have to pay for it.

It's an unfortunate fact that most small businesses don't actually know their costs, so even if they wanted to use cost-plus pricing, they couldn't. If you don't know your costs then how can you mark up your prices? And in any event, your cost-plus price may have nothing to do with the value you provide and the market price of your product or service.

The truth is that people put a high value on price but they also put a high value on quality. If you lower your prices just to increase your sales, you need to do so for a good reason. For example, if you believe you have a strong upgrade route or a bigger 'back-end' offer, then your strategy is justifiable. But if you just lower your price to increase your sales, you could be just speeding up your losses.

Price is about perception of value and has little to do with actual value. The whole idea of your marketing efforts is to spread the word and convince people that the value is higher than the price they are being asked to pay.

All the price theory in the world won't tell you what your optimum price is until you let your customers test it with their wallets.

So how can you test whether your pricing is right?

You should consider starting your test with four price points:

• what you think your price should be
• the highest possible price you can imagine, but one to which you think your customers would still respond
• a low price that is a great deal for the customers, but less than you want to charge
• a fourth price that is outrageously high or low

Holding everything else constant, determine the sales from each price point. You'll probably find that the price that obtains the maximum sales AND profitability is higher than what you had originally intended.

You should regularly perform this testing on your price points or you might well be missing out on a lot of profits.

Discover how to promote your business on a shoestring Are you struggling to attract new customers to your small business? Do you have a great product or service but aren't sure how to let prospects know about you? You can attract more new customers, sell more to existing customers, and bring back your customers more often - no matter what product or service you sell. Click here to find out how The UK Small Business Marketing Bible can help you double your sales

New business idea

Each week we provide you with summaries of some popular or emerging business ideas in the UK.

Here is this week's idea:

• Pet Photographer And Portrait Painter

Just one word

Regularly improving your vocabulary is not just about learning a new word and its meaning. It will improve your general knowledge and make you feel and act smarter in all sorts of personal and business situations.

What is the meaning of the word "impecunious"?

a) difficult to describe
b) exempt from punishment
c) having little or no money
d) not responsive to an argument

Answer at the end of Bulletin.