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Sell more and close more deals with Behavioural Economics

25 Feb, 2021
In order to sell more products or gain more clients, you need to understand how your target audience thinks and behaves. This is what behavioural economics is all about. It’s the study of consumer psychology and how it affects their purchasing decisions. Once you understand common patterns in consumer behaviour, you can find ways to increase your conversions and maximise your profits. Here are 7 valuable insights that behavioural economics gives us. Exclusivity & Scarcity By making a product, service or experience exclusive you increase desire for it. When something is rare, consumers tend to act with more impulsivity. Similarly, scarcity tactics like “sale ends today” and “only 4 spots left” can drive up a sense of urgency, encouraging customers to make action immediately. Rule of three If people are presented with two options, they will tend to go for the cheaper option. However, when you introduce a third, more expensive option they will tend to choose the middle option. For example, a mobile phone service provider could offer three packages: $40 / month for 40GB $70 / month for 80GB $110 / month for 120 GB The middle price point acts as an anchor – the third option is too expensive and the first option isn’t perceived as good value for money. Pricing like this will help drive customers to the second option. Reduce the number of choices Having a wide range of options to choose from sounds like a good thing, but it can end up backfiring. Presenting a potential customer with too many options can actually result in choice paralysis. When making a decision is too hard, people will often choose the easy way out – not buying anything. Consider reducing the number of options you offer to encourage more conversions. The Power of Suggestion A small suggestion or nudge can influence what and how much people buy. For example, when you offer group pricing like “3 items for $15” people will tend to buy 3. If you label one of your packages “best value”, you encourage more sales of that package. By using language like “luxury”, “deluxe” and “premium” you can influence the way customers perceive your product. “Free” “Free shipping”, “free gift with every purchase”, “buy 1 get 1 free” – using the word “free” is a highly effective way to attract potential customers. Often more so than a discount. Studies h ave shown that people tend to choose the free option even if a discounted option represents more savings or more value. Rewards Receiving gifts or rewards for making a purchase can help encourage customers to engage with your business again. Offering customers additional value is a good way to generate loyalty and drive up repeat sales. For example, you could offer loyalty cards or discounts to customers who have previously made a purchase in your store, encouraging them to buy from you again. Social Proof Before people invest in a product or service (particularly if it’s a high price point) they look to what others are saying and doing. In other words, you want to show potential customers that other people like what you offer. Ways to use social proof include positive reviews, customer testimonials, social shares, awards and credentials, celebrity endorsement and positive media stories. In addition to collecting positive reviews, it’s important that you act on bad reviews directly and swiftly. One bad review can outweigh a hundred good reviews, so it’s paramount that you handle them appropriately. Need advice about smarter business tactics? Get in touch wit h D e sign Financial Advisory today.

Am I Charging Enough For My Services?

23 Jun, 2020
Knowing what to charge for services is really difficult for a lot of small and medium business owners. Overcharging comes with the risk of not getting enough work, while undercharging can lead to overwork and burnout just to make enough income. Unfortunately there is no golden rule for how to price your services correctly. There are, however, a number of strategies that you can implement to help you get the balance right. How to price your services correctly There are many ways to price your services, such as charging according to a fixed amount for a project, an hourly fee or a sales commission. Choosing the right method will depend on your particular service type, industry and market, and of course your pricing strategy should help you move towards your business goals. Three of the most common ways businesses approach their pricing are: Calculating expenses plus a profit percentage Pricing according to what the customer is prepared to pay Pricing according to what competitors are charging While a lot of businesses might choose and stick to one method, it’s best to incorporate all three approaches and review your pricing strategy regularly for the optimal outcome. Let’s take a closer look at some of the key factors that should be considered. Expenses plus profit Boiled down to basics, pricing should be a combination of covering your expenses plus earning a profit. When considering what to price your services one of the first things you should do is calculate all the expenses involved. Expenses can cover a whole range of things including: Equipment Office supplies Rent & utilities Travel expenses Insurance Legal and accounting fees Advertising and marketing costs Postage and packaging costs Credit card fees Phone expenses Labour expenses One method of pricing would be to add up all your expenses, including labour and overhead costs, add on the profit you want to earn and then divide the total by how many hours you worked. Price of services = (total expenses + desired profit) ÷ (hours worked) What the customer is prepared to pay When deciding what to price your services, you must consider what your potential customers think they should be paying. Who are your potential customers? Whether they are bargain hunters or people prepared to pay more for quality should play a role in your pricing strategy. Market research is an important step every business should take. What competitors charge Most customers shop around. That’s why it’s important to understand what your competitors charge and why. This doesn’t mean you need to price match your competitors. If you charge a different price, you need to communicate to customers why your price is different. For example, your services might be more expensive because you offer higher quality and a better service experience. Remember that your competition might also find pricing a struggle, so you should never assume they’ve got it right. 

Setting Business Goals & Objectives for 2019

30 Aug, 2019
When it comes to running a business, ensuring you allocate time to assess your current goals and create new ones is pivotal to your ongoing business success. Why? Reviewing your business as a whole allows you to gain a more expansive view or your business, your progress and how well your goals are being achieved. More specifically, reviewing your business objectives and goals allows you to: Scale in a more efficient way and timely way Track and achieve your goals and the time each goal takes to accomplish Optimise collaboration & assist with better teamwork efforts Improve the overall understanding of your business direction Help to determine the effectiveness of previous strategic efforts Guide future strategies find any bottle-necks in finances, operations and processes Mid-year is a great chance to re-evaluate and reset your goals for the next six months. It will ensure you make the most of the remaining months 2019 / 2012 financial years has to offer. Your goals when done correctly can propel your business to new heights in a far shorter period of time. Your goals should also be reflected in your business plan as your objective. Review your current situation first Before you write down your goals, a good practice is to determine how your business is currently doing. You should determine areas your business could improve on and determine the priority of each area in relation to the direct effect each problem area has on your bottom line and your scalability. Here are a few quick activities to help you get a better handle of your business’s current situation: S.W.O.T Analysis: Identify your strengths, weaknesses, opportunities and threats. Another handy one is the shortened S.W.T to identify strengths, weaknesses and trends. Competitive Analysis: Researching similar businesses in your industry to compare industry averages on expenses, revenue, staff turnover, profits etc. which your business advisor can assist you with. Now that you’ve got a better understanding of where you are in relation to the industry, your competitors and your goals, you can now get to work on the fun part – goal setting! How to Set Goals Not all goals are made equal, in fact, believe it or not, there’s a formula to create effective goals. It’s an industry standard and many business advisors will offer you this acronym to help you determine your goals. It’s called ‘S.M.A.R.T Goal’s. What’s a smart goal? It’s: S pecific. Meaning you’re clear on what you’re trying to accomplish. M easurable. Meaning it has a value attached to allow you to recognise that you’ve achieved it. A chievable. Meaning it’s not unrealistic or outside of your current financial, time and skill abilities. R elevant. Meaning it ties in with the direction of your business and where you want it to go. T imely. Meaning it’s bound with a due date in order to achieve the goal. How to Achieve your Goals Now that you’ve learnt how to set goals and made a list of your own business goals, you’ll need to create a clear action plan to achieve them. Why? Action plans break each goal down into smaller, more manageable steps. Here is what you should consider when you’re breaking down your goals into these action steps. – Responsibilities – Actions – Timeframe We call it the ‘Who, what, when’ chart, and it’s really that simple. Simply determine who’s responsible for that step, what actions they’re required to complete, and when they need to complete it by. How to determine whether you’ve met your goals? Implement a simple system to help you track and monitor your goals progress – like the who, what, when charting or a Project Management system for more complex tasks. Implement more catch-up meetings within small businesses or between departments for bigger businesses to realign with the mission and the goals at hand. Lastly, reward employees for taking initiative, achieving goals and contributing to the overall mission. Design F inancial Advisory are experts in their field , helping small to medium size businesses experience year on year growth. Please get in touch with our team today on 6263 9933 to see how we can help you grow. This article is general information only. It does not give business, accounting, taxation, financial planning or other professional advice or service. It does not consider your specific situation, objectives or needs and if personal advice is required, a detailed analysis of your particular circumstances would need to be sought. Please see our Privacy and Disclaimers page for further information.
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