I find myself disagreeing with most of the advice I’ve read recently on how to survive this down economy as a small business. Typically the advice goes something likethis: diversify, refocus, re-double, cut expenses, network more, etc. I believe the real answer lies not in the economy, but in economics.
Several years ago I purchased Brian Tracy’s Breaking the Success Barrier audio program. It is the one program that I review frequently. One of the sessions contains valuable advice on how to use economics to create a more desirable product or service offering. The answer is not to work harder, but to get more value out of what you produce. In the process you create demand for your product. Here are the important lessons from Brian Tracy’s principles of economics for entrepreneurs.
I. People prefer more to less. If you were offered $10 thousand or $100 thousand dollars to the same job (all things being equal), which would you choose? People aren’t greedy, they just prefer more to less.
II. People prefer sooner to later. If you could receive this money on the 1st of January or the 31st of December, when would you choose receive it? Few people choose the annuity payout lottery winnings. People aren’t impatient. They just prefer to receive a benefit sooner rather than later.
III. People prefer easier to harder. If you could earn the money doing an easy job or a harder job, which would you choose? People aren’t lazy. They just want things to be easier.
IV. People prefer certainty to uncertainty. If you could be absolutely certain you were receiving this money or you could choose a degree of uncertainty, which would you choose? People aren’t afraid, they just prefer certainty over uncertainty.
Don’t Lower Your Price, Raise Your Value
Your goal is to sell free products to purchasers. That means the benefit the customer receives is perceived to be greater than the price they pay. All customers want to know “What’s in it for me?” Sometimes your customers leave for a competitor charging a lower price. Are they leaving because of price? No, they are leaving because the cost/benefit ratio is better somewhere else. They are saying that the price difference between your product and your competitors does not outweigh the benefit value you offer. What can you do about it?
Raise the value of what you offer with these economic accelerators:
I. Educate your customers – Education saves time, money, energy, effort, and resources. Education helps your customers get the benefit they expect when they purchase from you.
II. Increase the skill level of the people who work for you – The skill level of your employees will determine the quantity and quality of your results. The better your employees get at what they do, the faster and easier it is for you to grow your business. The more value you have to offer.
III. Cast a larger net – Your success is determined by the number of people who know about you and might want what you have to offer. Network with your community and employees. Encourage the spread of word of mouth. People prefer to buy from a business they “know.”
IV. Grab the right opportunities – You are only as free as your options. Options cost money. Don’t waste your money resources on things that do not directly add value the basic economic principals of your offering.
V. Instill good work habits in your employees – Good work habits result in increased efficiency. Increased efficiency allows you to offer customers services sooner, at a lower cost, with more certainty.
VI. Develop a positive image – People judge your business by the way it looks on the outside. Present an attractive image on your website, your décor, your employee dress & grooming, and your customer interactions. The first impression people have about your business greatly determines whether or not they will ever become a customer. Present your very best first impression possible.
VII. Be creative – Continuously look for newer, better, faster ways to get the job done.
You don’t need to diversify or re-double your efforts to find new customers. You need to offer your customers a product that gives them more, sooner, easier and with greater certainty. People will pay for that.