Rafi Mohammed

Yes, You Can Start Uncovering Your Hidden Profits Today: Here’s An Example

Posted on January 9th, 2007 (0 Comments)

Over the weekend, I gave a speech at the National Association of Senior Move Managers (NASMM) in Tampa, Florida. A funny story about how the speech came about. This fall I was making arrangements to move residences and out of left field, the moving company representative enquired “are you the Rafi Mohammed that wrote The Art of Pricing?” After answering “yes,” she relayed that she had just signed up for a NASMM conference and they were having a book club to discuss The Art of Pricing at the conference. I must admit that after toiling for two years on my book, it is a wonderful feeling to hear that managers like the book and are using it to uncover their hidden profits. After this moving “coincidence” was relayed to NASMM, I was honored to accept an invitation to speak at their conference.

Providing senior moving services is a great entrepreneurial idea that capitalizes on the graying of the boomer generation. Aging boomers are dealing with the challenge of moving from their large houses into smaller residences. The prospect of downsizing, throwing away items that had sat in the attic for decades, and arranging a move is daunting for most seniors. Enter a senior move manager; they help clients with services including weeding through every item, determining what items will fit and where they will be placed in the new home, organizing estate sales, donating items to charity, moving items to storage, shipping belongings to family around the world, ordering new services (e.g., gas, electricity, phone, etc.) and packing boxes. At the new residence, they unpack boxes and help create the new home. One of their most important services is the care they provide during an emotional time for their clients.

The NASMM speech was a great deal of fun and the crowd was amongst the most liveliest I’ve encountered! Practically everyone in the theater had read the book and they wanted to focus on how the principles of The Art of Pricing could help them price for profits and growth. Here’s a sampling of the insights that we, as a group, brainstormed to help senior mover managers price for profits and growth:

  1. Several conference participants pegged their prices to what local packing services charged. And while packing is one of the services they provide, senior move managers offer so much more. We decided to break down rates by services provided (much like a doctor does). And while the hourly rate for packing boxes would be pegged to local packing services, higher rates would be charged for other services.
  1. Instead of offering an estimate, some customers would be willing to pay an “insurance premium” to get a fixed rate. In my book I noted that in 2002, extended warranties offered by the Dixons Group (Europe’s leading electronics retailer) and Comet (a rival electronics retailer) accounted for 47% and 80%, respectively, of their pre-tax profits. As you can see, offering insurance can be extremely profitable!
  1. When a senior mover packs a box, they take responsibility for any damage that results from their packing services. Some clients want all of their belongings packed (e.g., hard-to-damage books as well as fragile items) while some only want their fragile items packed. One conference participant decided that if a client only wants fragile items packed, she would charge a higher price relative to if she was packing both durable and fragile items. This makes sense, as customers highly value someone else taking the risk of packing fragile (relative to hard-to- damage) items.
  1. The notion of peak and off-peak pricing. I emphasized that if they encounter a potential customer with a lower willingness to pay, why not book them on an off-peak day: it’s a win-win situation for both parties. A dentist friend of mine uses a similar strategy. He offers price sensitive patients a lower price if they agree to take last minute appointments. Again, this makes sense for both parties. Price sensitive patients get a lower price and my dentist friend keeps his hygienists fully booked.

At the end of the speech, a participant came up to me with a long list on her note pad. The list, she mentioned, included all of the services that she had been giving away but now was going to charge for. She happily echoed a sentiment that several conference attendees conveyed to me, they were going to make a lot of money from the ideas in my speech.

At dinner that night, I looked around the buzzing room and realized how much I enjoy my job. These hard working entrepreneurs were entitled to profit from the value they create. It is a lot of fun helping them price for profits and growth.

With the New Year just starting, I hope that one of your resolutions is to price for profits and growth. As you can tell from the insights garnered from the NASMM conference, initiatives to improve your pricing are often straightforward. Most importantly, these new pricing initiatives are easy to implement and can start harvesting your hidden profits almost immediately.

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