Bay Area Mastermind®

How To Develop a Luxury Product or Service for Your Business

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We love luxury. Right?

Part of us wants that high end item to up our social status or to seem special. And the stats seem to back that up.

Market research demonstrates that in most businesses 20% of the customer base wants the opportunity to buy a luxury product/service. With this is the allure of high revenue potentials that come from offering a luxury product/service. In some cases offering a luxury product/service allows a business to sell less quantity while increasing their profits. Nonetheless, when it comes to offering luxury products/ services there is a whole different set of strategies that must be implemented. As we will see, developing a luxury product/service is more than just increasing prices. In this article we examine some basic principles that any business can implement in developing their luxury offering.

Perception

Today more than ever perception equals reality for most of the population. This means that any luxury brand needs to manage and orchestrate how their luxury product or service is perceived in every aspect. The first step towards selling to a luxury buyer is understanding key differences between people who have grown up with money and those who have recently come into wealth. The old money crowd often are brought up having a full understanding of value and how luxury products and services distinguish themselves. By contrast individuals with newly acquired wealth can be more prone to impulsive buys, not understanding the true differences in the value offered by your luxury product/service.

This means you must begin communicating by preparing to delineate why your luxury product or service brand is superior to other products/services in the market place. When discussing your product/service, avoid simply listing a series of features, or describing the product/service using technical jargon or industry references. Do this only if these terms are fully understood by the target market. Demonstrate clearly how the various benefits of your product/service will meet the specific needs and desires of your market better than anything else available.

Exclusivity and Presentation

A way to increase the perceived value of your luxury brand is through an emphasis on exclusivity and how the product/service is presented. Luxury brand purchasers like knowing they are able to purchase a product/service that is limited in production or accessibility. After all we all want what we can’t have! Being able to create an atmosphere of exclusivity will increase the perceived value of any product/service.

The way that the product/service is presented to the customer also speaks volumes about the perceived value. This can be done by placing a great amount of attention to the smallest details, thereby enriching the perception and experience your customers have with the product/service. A business can start by designing their website in such a way that it conveys quality, which supports the luxury concept. Next, the writing style and descriptions used to describe the product/service needs to support the design. Finally, each touch point with the end user must be congruent and aligned to communicate the perceived value.

It is important to understand that there cannot be any aspect of the business that distracts the customer from the perceived value. Businesses that successfully launched luxury brands take the time to ensure each aspect of their business reinforces quality. For example elements such as: how the phone is answered, how an order is taken and how the the product is packaged and delivered. Their objective is to wow the customer, thereby declaring the quality and value of their offering at every turn. Emphasis on all these communications will bring out the extraordinary benefits and features of your offerings, distinguishing them from all the other commercial varieties.

Doing The Research

Determining what to import to your luxury customers, and how to meet their needs, begins with research. Understand the needs of your target market. For brick and mortar businesses this can simply mean taking advantage of being physically in front of a prospective customer, asking questions or simply noticing how they interact with the product/service. Having the opportunity to interact with customers directly can be a treasure trove of information, which helps you redesign or improve your offering if needed.

For businesses that don’t have walk in traffic, an assortment of online surveys can be utilized to obtain similar information. Always begin with your own customer base. An email sent to your customer list asking for their input, using an online survey service such as Survey Monkey, will provide you with a wealth of information. Plus, customers appreciate being asked for their opinion. In addition, there are other market research platforms that allow you to survey a group that would match your target market. Although there is a cost associated with these services, the information you obtain can save you time and money in developing or testing a new luxury concept.

Pricing your luxury offering properly

The bottom line is that providing a luxury product/service is not inexpensive. The business must price in all the costs associated with the offering in order to make it profitable. Properly priced, a luxury offering should provide a generous gross margin and enhance the profitability of the business. If you feel you can’t set the price your offering is worth, go back to the perceived value of the product and figure out how to increase it. The time invested in creating the offering will pay you back in short order.

 

Topics like this one often get covered during meetings of the Bay Area Mastermind group. The intention is to provide business owners a chance to meet, collaborate and support each other as they face the day to day challenges of running a business. If you feel called to connect in this way with other entrepreneurs, then check out a “Test Drive” in the coming weeks. Your business will thank you.

11 Sources of Information to Keep You Up to Date

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Image courtesy of NS Newsflash
Image courtesy of NS Newsflash

Having the ability to stay on top of business innovation and the news that matters is a daunting task for anyone these days. We are all constantly scrambling with the various aspects of our busy life within an ever changing environment.

Then of course, we all have to contend with the abundance of information that is available. Knowing which sources to listen to – and which to avoid – is critical in maximizing our time and getting the correct information we need.

At Bay Area Mastermind we endeavor to provide our members with the most up to date and relevant information in order for each of our busy business owners to be able to make informed decisions in their business. In order to do this, our team reviews many sources, both online and off line, and then consolidates and summarizes the most valuable facts for our meetings. [Read more…]

Exit Strategies with Steve Little

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“Begin with the end in mind” – Stephen Covey

There are only three directions you and your business can go: Your business dies; You die; You sell the business.

Of the three options, selling your business can be one of the most profitable and rewarding options, but knowing how – and when – to exit is a skill few master in their lifetimes.

Even if you don’t want to sell your business today – or ever, having a strategic exit plan helps you  build a better, higher growth, more valuable business.

Starting your business with the strategic plan to exit or changing course today to align your business’ goals for the most ideal exit can be done if you know how and our guest expert speaker at the October, 2013 Bay Area Mastermind meeting does.

Steve Little

Steve Little of Zero Limits Ventures is an acclaimed veteran entrepreneur who has founded and grown a multitude of successful ventures and understands all aspects of building successful businesses.

Beginning with his first commercial venture at the age of 13 (which sold a few years later for a handsome 6-figure sum) and after building a myriad of creative money-making commercial enterprises throughout his high-school and college years, Steve built and grew dozens of successful companies including several highly successful venture investor-backed global software companies several of which he helped grow to generate hundreds of millions of dollars in revenue, produce dramatic returns for investors and employ hundreds of people world-wide.

Specializing in accelerating growth and creating high-value exits, he has personally raised more than $700M in startup and growth funding for 9 different businesses in multiple industries. He has led 6 successful start-ups to successful private acquisitions averaging $100M each. He led the buy-side M&A team for a major technology innovator, acquired and successfully integrated 9 companies in less than 12 months.

At our Mastermind meeting, Steve will be sharing:

  • The 7 biggest myths about selling your company – and how the wrong beliefs can cost you BIG
  • The business lifecycle and how to know when to exit
  • The 6 different kinds of buyers – and which one is right for you
  • How to align your business’ goals for a profitable exit
  • The one big secret to valuation that your buyers will never tell you

Apply to Test-Drive our October 15th Mastermind Meeting today!

[button size=”large” link=”/testdrive/”]Register for this Mastermind and Presentation[/button]

How To Price Your Services and Products in A Weak Economy

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By Robert Estupinian

Last week J.C. Penny announced it would be changing the way that it will price its merchandise. No longer will the company be offering sale prices. Instead the retailer will be slashing all prices by 40% and keeping them there.

Previously, the company would hold hundreds of sales every year, and their customers began to wait for the sales before buying. The sagging numbers suggested that perhaps customers were not coming back at all.

The Challenge
In this weak economy consumers have shown they are willing to spend, but only if they find value. So, now J.C. Penny will have to get their customers to believe the prices offered everyday do provide good value without the sale tag.

What Does Behavioral Economics Have To Say About This Idea?
In this blog we have often looked at the work of Dan Ariely, behavioral economists and author of Predictably Irrational to gain some insights into these situations.
People Have trouble judging value

Behavioral economists have demonstrated that people have trouble judging the value of any given item. Therefore, consumers use “framing” as a reference point in determining if something has value or not.

We have all witnessed this behavior ourselves. When we see a washer that was $800 marked down to $400, it appears to be a great deal. However, if that same washer was priced at $400 initially, we would be less compelled to buy it.

To test this theory out, Dan Ariely and fellow behavioral economists asked MBA students to write down the last two digits of their social security numbers. Then the students were asked to bid on a number of items, including a bottle of wine. Students with the highest numbers bid 200 to 350 percent more than students with the lowest numbers.

The Lesson for Your Business
Our customers have difficulty establishing value on their own. They need a reference point in order to determine value. Without a reference point customers may be waiting for a “sale” to help them open their wallets and purses.

Many businesses have difficulty with pricing their services and products. There are a host of things that go into determining the best price. In the case of J.C. Penny they are combining this price reduction along with the introduction of new merchandise, new logo, and a new celebrity spokesperson (Ellen DeGeneres).

In their case management is combining various variables at the same time. This may make it difficult to fully understand which treatment had the biggest effect. However, given the sagging numbers this may be the only approach they can take.

Pricing issues are just one of the many items members of Bay Area Mastermind have the opportunity to discuss and develop at our meetings. Every member is provided with the latest research and strategies to grow the profit in their business in any economy. Why not take a test drive and see for yourself how your business can thrive from a professionally facilitated Mastermind Group.

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