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May 18, 2004
Qualities of a Transformational Leader
Qualities of a Transformational Leader
"There is nothing more difficult to take in hand, more perilous to conduct, more uncertain in its success than to take the lead in the introduction of a new order of things." Inscription From Machiavelli's Tomb
I've developed the following list of qualities needed by a leader who is trying to transform their organization.
1. Focus on what's possible, rather than on what is likely.
2. Seek new ways of working, new ways of getting things done
3. Seek opportunities in the face of risk
4. Value effectiveness over efficiency
5. Don't react to circumstances, instead seek to shape and create new ones.
6. Emphasize individual responsibility for measurable results
7. Question old assumptions, because the are old assumptions
8. Reward success with customized incentives.
9. Use self interest to inspire action, then transcend self-interest.
10. Have a healthy disrespect for the prevailing politics.
If you would like to know more, and need help applying these qualities to your organization, get in touch with me via email (see my website at www.lemberg.com ) or call at +1, 858-951-3055 x5.
Posted by plemberg at 02:12 PM
May 16, 2004
Why Cutting Prices Is Like Cutting Your Own Throat
It's the oldest sales tactic in the world...
And one of the worst.
Price cutting.
Before you make your next price cut in the face of sales resistance, the question you have to ask yourself is not, "Does it work?," but rather, "Can you live with the bargain?"
If you are like most people in a selling situation, your first response to not buying is to say, "Would you buy if... ?," and the "if" is always some variant of, "...if the price was lower?"
And you ask it almost before you ask them WHY they won't buy.
Many salespeople mentally calculate the discount into their profit, and start discounting even before they try to close the deal. And almost everyone faced with an end-of-quarter crunch to "make the numbers" plays the discount game. In many industries, it's become common practice to give away all the profits -- customers are now trained to expect it.
Trouble is, people are not usually ¡®not buying' because your price is too high...
If you've taken the trouble to establish the real of your product or service, your prospect already knows that the value far exceeds the price you are asking -- otherwise why should they buy!
So if they are saying "no," or simply not "yes," it either means they are experienced buyers waiting for you to spontaneously cut your price, or it means they just do not see a sufficiently compelling value...yet.
Cutting your prices will almost never lead to new sales if they didn't plan on buying in the first place, and the effect on your profits can be devastating. Follow these numbers:
Let's say you sell a product for $100. Your cost is $70. That means it carries a thirty percent margin-your profit is $30. Now, to make a sale, you are "forced" to cut your price by twenty percent. Your new selling price is $80. All things being equal, your profit is now $10-instead of $30. That means a 20% price reduction cost you 66% of your profits.
TWO-THIRDS OF YOUR PROFITS for a 20% price reduction!
Cut your price much more and your profit quickly goes to zero. Or lower.
And that's not even the worst of it.
Once you lower prices, they tend to stay low. That $100 widget you just sold for $80 is now an $80 widget.
Even more damaging, your like-minded competitors will almost definitely lower their prices, and you, my friend, are in a price war, and now you need very deep pockets indeed.
So for these three reasons-depressed profit margins, permanently lowered prices, and the devastation of a price war-it's a bad idea to lower your prices to buy business-regardless of the economic climate.
What can you do instead?
The two main strategies are clarifying and quantifying the value, and packaging products or services to maintain higher prices.
Here's an interesting example. One of my clients-a software company-had a hot prospect who didn't want to buy the typical contract for software maintenance. Rather than 18% annually, they wanted to pay ad hoc.
My client knew that customers without maintenance are never happy. They never get the service they need, and even though it's their fault for skimping, they point the finger at you and badmouth your company.
Instead we offered the prospect a four year non-cancelable maintenance contract, with the first year free. It reduced the total price 25 percent and gave them a year's grace period, but guaranteed more revenue than the prospect's original commitment. Plus, they locked in for four years, plenty of time for upsells, resells and cross-sells.
Price cutting is the "lazy man's" response when it's hard to make sales. Unfortunately, it may not boost total revenues, and results in drastically lowered profits. Worse, it can permanently reduce prices and margins, and can often cause even a price war.
Sell the value instead. Spend the time to discover what your prospect is trying to accomplish, and make sure your product or service helps them do that. Then establish the quantifiable financial impact, and sell them that. Or package, bundle or go for the long-term, multi-year commitment.
There are other approaches that not only maintain price levels, but even support higher ones. To get an overview of those approaches, visit http://www.lemberg.com/tipsandtools.html and download "5 tactics to avoid price cutting."
--PL
Paul Lemberg is the director of the Stratamax Research Institute, (www.lemberg.com) a breakthrough consulting firm works with organizations and entrepreneurs to boost profits quickly using a system called Revenue Pulsing?, and will "turnkey" your business for increased scalability and salability. You can reach him by email at paul@lemberg.com or by phone at 858-951-3055.
2004 Paul Lemberg
Posted by plemberg at 01:24 PM