|
Your EnterQuest Bulletin - 23 November 2005
| Thought for the week: "A man can succeed at almost anything for which he has unlimited enthusiasm." Charles M. Schwab |
In this week's issue:
Small business answers
If
you have any questions about your business idea or target market,
or need help tracking down a grant, subsidy or business support
in your local area, then send an e-mail with your query to the EnterQuest
information team and we'll do our best to help.
Send
your question to enterquest@cobwebinfo.com.
To
access over 800 factsheets, guides and small business reports, go
to www.scavenger.net.
Weekly stir 
Five pricing strategies for small businesses
When any small business has to price a new product or service, they tend to do so without any clear objective in mind. While it's true that the main objective of setting a price is to make as much money as possible, it's also worth pointing out that there are different routes to reach that objective.
In other words, being clear about your objective will have a significant impact on the price you set for your product or service.
Without getting bogged down in too much detail, here are five pricing strategies that small businesses can use to meet different business objectives. Each strategy can result in a totally different price to meet those objectives.
1) Pricing low for market penetration
The objective here is to gain as many customers as possible, for example when you are entering a new market. You would use this strategy if you have a big 'back-end' product or service that you plan to sell as a follow-up to your lower priced 'front-end'.
2) Pricing to be market competitive
You'd consider this when your objective is to be competitive in your market and ensure you're being considered for tenders, proposals, auctions or other competitive pricing situations. You would use this strategy when your product is very similar to your competitors' and you're limited in the methods you can deploy to differentiate your service.
3) Pricing high to maximise your profits
Known as price 'skimming', the objective is to generate the maximum amount of profit per unit that you sell in the shortest amount of time. You would use this strategy when your product or service is unique or new with no competition, and you have a short-term window of opportunity to skim the maximum profits before copycat products start flooding your market.
4) Pricing to make a 'normal' profit
The objective is to set a price that is perceived by your customers as being honest and reasonable. You might use this strategy when you have a key major customer or group of customers, and where gaining their trust is of vital importance to you. In this case, you could use a cost-plus pricing strategy where you price your product or service to ensure you make a 'reasonable' profit, but your customers still think you're offering them very good value for money.
5) Pricing for maximum profit and maximum sales
The objective here is to generate the maximum amount of profit possible, but not at the expense of losing customers along the way. You might use this strategy after the initial introduction of your product onto the market, but where you have gained the ability to start differentiating your offer from your competitors' services.
Whatever your own situation when it comes to pricing your product or service, hopefully after reviewing these five strategies you'll realise that your price is not simply just a function of the cost to produce your product or deliver your service.
It's more a function of what you want to achieve in your market at that particular time.
Download our guide to pricing a manufactured product for more detailed information. And for hundreds more practical marketing tips, ideas, tactics and strategies, check out the UK Small Business Marketing Bible.
Marketing
tip
How to write killer headlines in your mailshots
Sales letters are a low-cost way of promoting your products or services. One of the most important aspects is getting your readers' attention as soon as they open the envelope.
The opening headline is one of the first things your prospects will look at. If the headline doesn't call out to them and excite their interest, they will ignore the rest of the letter and throw it away.
Here are three headline-generating templates that are proven to get attention.
People love to know how to do things. When combined with a powerful benefit, the 'How to' headline always gets people's attention.
People always want to know 'insider secrets'. They love to know things that other people aren't privy to. Besides that, most people enjoy a good mystery, especially in the end when the 'secret' is revealed.
Remember that people are motivated by the fear of loss more than the promise of gain. The word 'warning' demands attention and, combined with something of interest to the reader, is a very powerful headline.
You can find more advice on writing an effective sales letter in our practical factsheet. You can also find step-by-step advice and techniques for writing sales letters at the Marketing Magic portal.
Legal
tip
Business premises use and local authorities
One obstacle many new businesses face appears when they reach the stage of choosing premises. Having analysed the local volume of passing trade, measured the distance to the local bus stop, counted the number of parking spaces nearby and finally chosen the perfect spot, it sometimes turns out that only certain types of business are allowed to use certain types of premises.
This is because local authorities classify commercial premises according to their use. Typical classifications include:
A1 - retail shops
A3 - food and drink
B8 - storage and warehousing
You can find a full rundown of classifications at Landlord ZONE.
In some cases, it can be easy to change the classification. Applying to change A2 (professional and financial services) to B1 (other types of office) is usually quite straightforward. But starting a hot food business in premises that have been classified as a retail shop might cause problems.
The best approach is to think about the type of premises you need even at your early planning stage, and to consult the planning department of your local authority before you make a firm decision on location. They'll ask for details of your proposed business and should be able to advise you on the likelihood of receiving permission to change the classification. You can find a full list of local authorities and their contact details at DirectGov.
You can also check out this step-by-step guide to choosing commercial premises from our Scavenger research website.
And the UK Red Tape Buster offers plenty more information about planning and premises, as well as hundreds of factsheets, frequently asked questions and legal scenarios for small businesses.
IT
tip
Skype - what's all the fuss about?
Here's another reason for sole traders and small businesses to sign up for a broadband Internet connection (if you haven't already), and a suggestion for one way to make the best of your connection if you already have broadband.
We've previously discussed VoIP several times in EnterQuest - it stands for Voice over Internet Protocol, and is a technique for transmitting sound over the Internet without losing too much quality.
- Skype is a small piece of software which uses VoIP and which you can download and install on your computer. It allows you to make free telephone calls to anybody else who also has the software (and there are over 200 million who do, according to Skype's website).
- As well as the software, you'll also need a USB telephone - most normal handsets can't be used with VoIP because they need a USB connection, but shops such as Comet now have a small range of suitable phones.
- Elsewhere, BT now offers an adapter that allows you to use a normal phone, but note that you have to sign up for BT's service to take advantage of it.
Naturally, people have thought up all sorts of accessories and extras for those interested in Skype, and you can keep up with the latest developments at the Skype Journal.
And if you're looking to develop your own business website to sell to customers via the Internet, why not check out the Small Business Builder, a unique tool to enable a complete novice to set up a website or online store.
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:
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.
Do you know what the term 'due diligence' means?
a) testing a new product before it is released onto the market
b) careful checking of your self-assessment tax return
c) a background check to assess the viability of another business
d) a legal assessment of how closely your business complies with the law
Answer at the end of the Bulletin.
Website review
The Association of British Insurers (ABI - www.abi.org.uk)
This is the website of the professional body that oversees the insurance market, but it also offers a range of information for small businesses. So how user-friendly and accessible is it?
- Navigation
and presentation - a slightly cluttered homepage makes it difficult to establish what is news and what is the ABI's advertisements, but the business information section is clearly signposted and, once you get there, is set out comprehensively into sections dealing with different types of insurance cover, different business issues and even different sectors.
 
- Accessibility - the site uses lots of images, and there aren't any options to view these in text-only format. The site does offer an advanced search function, but some information in foreign languages and a bit more assistance for users with disabilities or even different browsers wouldn't go amiss.
- Content
and usefulness - from key facts and reports about the UK's insurance market to a very useful section covering frequently asked questions, tips and advice for protecting your business, and links to useful sources of further information, the site is a goldmine of good information on the topic of business insurance.
- Relevance - there's a frequently updated news releases section, and the ABI also publishes responses to consultations, and articles and speeches on key political issues.
A generally very useful and relevant site for small businesses leads to a reasonable score of 13 for the ABI. Some work on the site's navigation and accessibility options would see this score improve.
Our rating - 13/20
Did
you know?
Online retailers should watch out for customer denial fraud
If you trade online, it's worth being aware of the phenomenon of 'customer denial' fraud taking place on the web. The scam involves a customer placing an order, receiving the goods and then disputing their credit card bill and requesting a refund - which is usually charged back to you. Fraud protection firm Early Warning reports a 30% rise in this fraud over the past month, and has developed a database of known scammers, along with practical tips on avoiding fraud.
The Sober worm has struck again
The Sober worm is again wreaking havoc among Internet users, with at least three new variants of the damaging e-mail worm circulating on the web. The worm arrives in the form of an e-mail with a malicious attachment, which infects users' PCs and spreads via their address books if they click on the link. Antivirus firm Kaspersky is offering tips on how to get rid of Sober, if you're unlucky enough to get infected.
Worth
a visit
Start up capital matching resource
Zopa is an online service that matches private lenders with borrowers. The idea is it replaces the hassle of having to go through the bank, and makes it easier for lenders to hook up with suitable businesses. Zopa claims to have the lowest interest rates in the UK - something which is corroborated by the well-regarded Money Supermarket site.
Web processor tool for sharing your work online
Writely is a useful resource for freelancers and sole traders that work from home, allowing easy collaboration on documents over the web. It's totally free, and works like this: you write a new document using Writely or Word, use the editor to format the text as you see fit, and then share your work by entering the e-mail addresses of the people you want to access it. Writely then e-mails everyone on your list, and you can collaborate over editing and other amendments.
Business Start Up 2005, ExCel, London, 25-26 November
This exhibition is aimed at new business owners and people who are thinking of starting their own enterprise. It showcases a range of services and information to help firms get off the ground and will feature dozens of free seminars on key business issues. The EnterQuest Team will be presenting a seminar about finding business information and researching your market, and we'll be exhibiting on stand 518, so come along and visit us if you're planning to attend the event.
Worth
a read
This book offers an at-a-glance guide to the jargon in the financial sections of the daily papers, allowing you to make a better-informed judgement about your industry, your market and your customers. Like the rest of the '30 minutes' series, this is very much a guide for busy people, but it claims it will give you just enough information to gain confidence in interpreting financial information. Check out:
Just one word answer
The answer is c).
Due diligence is the background research you should carry out before signing a contract with a new client, supplier or marketing partner, or buying an existing business. |
Visit www.enterprisequest.com to access all back issues of the EnterQuest bulletin.
If
you have any feedback or suggestions for us to make this service
more relevant please e-mail your comments to enterquest@cobwebinfo.com.
If
you wish to discontinue your subscription to EnterQuest please click on the 'SafeUnsubscribe' link at the bottom of the bulletin.
Remember
that we guarantee never to sell or give your e-mail address to anyone
else.
Good
luck
The EnterQuest Team
This information is meant as a starting point only. Whilst all reasonable
efforts have been made, the publisher makes no warranties that the
information is accurate and up-to-date and will not be responsible
for any errors or omissions in the information nor any consequences
of any errors or omissions. Professional advice should be sought
where appropriate.
|
