I'm a huge fan of 99 Cent Stores.
Yesterday, for example, it occurred to me I could use some sink stoppers, you know those super simple rubber plugs. Naturally, I thought about hitting a hardware store, where I figured I'd probably have to pay about $ 2.99 each.
Instead, I drve to an even closer 99 Cent Store, and they had them. While I was there I picked up a can opener and aa few other necessities, which would have set me back three, four, or five times as much money at other outlets.
At roughly a buck an item, this chain and similar ones have revolutionized retailing, while alerting for themselves tidy profits.
Essentially, they're focusing on what people want to pay, not on what they'd like to charge.
Along with tremendous inventory sourcing and some other trade skills, this is the real entrepreneurial lesson of 99 Cent Stores.
Negotiators usually ask the wrong questions when they prepare to transact. One of them is, "How MUCH can I get?"
Maximizing our gains is only rational, right? Is not this what we've been taught in Capitalism 101?
Usually this is true, but in retailing, for example, the traditional formula still applies. Profits result from one's margin over costs times product turns. 99 Cent Stores may be learning pennies on each item that leaves the store, but they're selling a lot of items!
If this company decided to become the $ 1.99 Store, their product turns would probably decline by much more than half, shrinking profits as a consequence.
For a very long time in my consulting practice I took pride in how much money I charged. That's right, if I had been an automobile, I would have been well into the high range of "luxury class."
To me, price indicated value. "I'm worth it!" was the unspoken motto. Indeed, when one prospect balked at my fees, he said "Why the average consultant charges only X dollars a day."
You know what I said: "I charge what I do because I'm NOT AVERAGE!"
But I was arrogant, and when a world of competitors entered the scene, ushered in by the Internet, I had to rethink my positioning. No longer was it self-evident I was the best provider of keynote statements, seminars and consulting in customer service, negotiation, communication skills, and telephone selling.
The message I was listening was clear. Adjust to charging what people want to pay, not what you want to charge; that is, if you would prefer to stay busy plying your trade.
The primary gain in business and in negotiations is achieving a profit, not in maintaining andifying premium pricing.
That's my 99 Cents worth of advice for the day!