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Practical Help to Grow Your Business
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General Words of Wisdom - Part 2 |
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No Risk, No Gain
I've spoken elsewhere about the folly of risk aversion and the desire to be risk free. As I pointed out, profit comes from entrepreneurs taking calculated risks. But of course the customer also needs to take calculated risks in order to generate their profit too.
There are seven types of risk for the customer:- Will it work?
- What will I lose financially if it fails?
- How much time will I lose if it fails?
- I absolutely have to make a choice now, so will it be the right choice?
- What if it doesn't do what I thought it would do?
- What will the 'neighbours' think?
- Will it harm me?
“The customer also needs to
take calculated risks in order
to generate their profit too”
All In The Mind
As with value it is the customer's perception of these seven risks that is important. No matter if some of them aren't actually real; in the mind of the customer if they are creating anxiety then they are real enough that you need to help the customer achieve an acceptable balance between overall risk and overall reward.
Perhaps unsurprisingly, people's views on price acceptability can vary with circumstances as well as with the issues they face and the products and services they may be thinking of buying. One set of circumstances that can vary from occasion to occasion for the customer concerns money and the way the customer is spending it.
“People's views on price
acceptability can vary with
circumstances”
Whose Money, Spent On Whom?
There are essentially four ways in which money is spent, depending on whose money it is and on whom it is being spent.
- Spending your own money on yourself - You'll want the biggest 'bang for your buck'!
- Spending your money on someone else - You'll still want the biggest bang but if you're not sure, you just give them the money - As you might with a Birthday or Christmas present. But then you've put the recipient straight into the previous category!
- Spending someone else's money on yourself - There's little incentive to economise! You just need to ensure you're not being totally ripped off.
- Spending someone else's money on a third party (for example Government programmes) - Again there's no motivation to economise as there's no incentive for spenders to evaluate Return on Investment for those providing the money, or to ensure that the expectations of the recipients are being met.
Understanding this pretty simple structure enables the supplier to set their pricing accordingly, so it is essential in your questioning to establish whose money is being spent and on whom, amongst the many other pieces of information that allow you to fully understand the customer's problems and the circumstances which surround them.
“One part of understanding the
customer's problems and the
surrounding circumstances”
 
Copyright ©2011 David Winch
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