"Undercutting" Part 2

A few days ago I posted about setting prices with confidence but I wanted to readdress the issue with a greater focus on pricing for profitability.

The original question was about how cheap a person can set their prices without upsetting their competitors (in this case, people who are also surely friends as well). My answer was not to worry about upsetting them, but to price at a level that reflected your skill and confidence.

But I also said that you have to price for profitability.

And when you calculate profitability there are a lot of things that are almost always missed.

It is not uncommon for a birthday party magician to charge $100 and think that he's making as much as his doctor! I mean, $100 an hour is GREAT money! But it fails to recognize that it isn't $100 profit. It's $100 GROSS. Here's how you calculate how much you really make:

• Deduct the cost of all the balloons, confetti, lemons, candy, clown makeup and make up remover, and other consumables you used in the show (about $5)
  
• Deduct the cost of having your clothes cleaned ($5)
  
• Deduct the cost of travel ($5-10)
  
• Your props don't last forever. Most won't survive more than 100 shows without some major repairs or modifications. Calculate the cost of repairing and replacing your props at a rate of about 1% of the prop cost per show (about $10-25)
  
• Deduct the cost of marketing necessary to get the shows. When I tracked my birthday party advertising, I knew it took about $25-35 in advertising to book a show. ($25-35)

After deducting all your expenses you are left with NET INCOME. In this case about $20-50. Now you have to deduct the income tax you owe, at about 25%. That leaves you with $15-38 in net profit.

First inclination is to the say "Still, $15 an hour is pretty good pay". Except that you aren't making that much per hour. The work is not the work. The work is getting the work and getting to the work, and getting set up for the work. Performing is the only fun part of the whole thing!

Usually you have to leave your house AT LEAST an hour before you are supposed to start performing so that you have time to get there AND have time to set up. It will take you an hour before THAT in order to pack your stuff, load your props, shower and dress. Once you are done it will take you another hour to get home, unload, and get cleaned up.

That's 4 hours total.

Which means that you are making somewhere around $3.25 - $9.50 per hour. That hardly pays for a deck of cards!

In short, don't worry so much about undercutting your competition. Worry more about undercutting YOURSELF!

"Undercutting"?

I don't want people to think I'm undercutting them. How much should I charge so that I don't upset the full-time performers in my market?

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The whole notion of "low balling" and "undercutting" is something that gets me riled up. I am a firm believer in the free market. If people want to charge less than me, I couldn't care less. If they want to charge more than me, I couldn't care less. This is America and not only is the idea of different price levels American, the very idea of NOT having price variation (i.e. "Price Fixing") is decidedly UN-American and against the law!

There are a few factors that should come into play when establishing your price but these things should not be a factor:

· What your competitors think
· Your own guilty feelings about earning a profit

Too many people feel that earning a profit is somehow unethical. I've heard people apologize for their prices and then add "But I'm not making any money on this". Why would anyone be in business if they weren't earning a profit? Why would anyone think they need to apologize about earning a profit? You have a moral obligation to earn a profit! If you don't earn a profit then the rest of us have to support you with our taxes.

You need to earn and save and invest and you need to do without apology.

YOU and YOUR CUSTOMERS determine your price. I've found that the people who complain the loudest about "undercutting" are usually the cheapest performers in the market.

It only makes sense. If they are worried about price it is because they are competing on price. If they are competing on price, then they are among the cheapest. Which means they are "undercutting" everyone else who charges more! Ignore them. Price for profit and price with confidence.

For more on pricing, visit my web site: http://JulianSpeaks.com

There are articles on establishing your price on the link to "Free Stuff". You can also sign up for my free business building newsletter. Once a month I send out a newsletter of articles that were too short to become a full-fledged article in the magazine for which I write, or were too long for a simple blog post.

More Scout Banquets

Every February and March cub scouts across the country celebrate their annual "Blue and Gold Banguets". These award ceremonies are often enhanced with some form of live entertainment such as magic shows, juggling, and clean family comedy.

If you are a performer who works these events, the only problem, from a marketing standpoint, is the fact that it is impossible to get a mailing list of scout leaders. So you are relegated to buying a yellow page ad and hoping that a scout leader sees you and thinks to call you for entertainment.

But I recently came up with another idea that I think is much better. I don't KNOW if it is any better. It might prove to be a total waste of time and money, but it's worth it to me to find out. I feel that if it is even a fraction as effective as I think it will be, then it will be more than worth it.

Here's the idea...

I acquired a web site called www.MagicBlueAndGold.com and took out an ad that will run from October through February in Scouting Magazine. The ad cost me almost two thousand dollars, and most of the calls will come from outside my area. But I didn't write the ad for ME. I wrote it for US.

The ad is a generic ad that drives the scout leaders and decision makers to the web site where they select the area in which they live. They are then given a link to the performer(s) in that area who are members of the site. The links go straight back to YOUR site.

• You handle the phone calls
• You are responsible for handling all the paperwork
• You sell your show
• You decide what to perform
• You decide what to charge
• You keep ALL the money you earn. There is no commission or fee from the bookings.

All you do is pay a small set up fee to help cover the cost of the ad and the web site.

Not for everyone, but if you are interested in learning more, visit www.MagicBlueAndGold.com and click the link at the bottom of the page that says "To learn more click HERE".

--Julian Franklin

$200 for a 20¢ Cookie?

I overheard a very interesting conversation recently. Two women were talking about which hotel they should stay at during their next vacation. The two hotels they were contemplating were both 5-star hotels in a location that had to have charged $200 per night.

"I really like the Such-and-Such Hotel" said the first lady.

"Me too," said her friend. "But, the Hotel So-and-So has those free cookies in the lobby."

"OH-MY-GOSH! I totally forgot about that! Yes, you're right. We have to stay at the So-and-So."

And just like THAT, a several hundred dollar decision was made based on less than 20¢ worth of cookie dough.

Whoa!That's pretty amazing if you think about it, isn't it? How little, tiny, insignificant things can not only be the icing on the cake, they can actually be the entire reason for buying the cake. And ironically enough the details often don't seem (on the surface) to have anything to do with the actual product or service being sold.

Face it, in what way does fresh baked chocolate chip cookies reflect the quality of a hotel? The cookie dough was bought frozen from Otis Spunkmeyer and baked in a little toaster oven that automatically turns off at the right time to avoid any mistakes. It shows no real skill, no insight into culinary adventure, and offers no clue as to the comfort of the beds, or the amenities one pays for in a hotel.

But it is a critical clue in the essence of hotel management. It is a symbol of "hospitality". It tells the guests that they are welcome members of a family. "Here," the cookies say without words "Reach into the cookie jar and help yourself. Just like at Grandma's house"

The cookies strike a nostalgic reflection to warmer times in more comfortable settings.

Yes, everyone loves fresh-baked chocolate chip cookies, but that's not really the point. The point is not the cookies themselves as much as it is what they represent at a more visceral level.

What little, tiny, inexpensive things can you do that will make a difference in the experiences of your customers and clients? What is it that you sell, at the core? If you think hotels sell beds and a TV then you might have no idea why anyone would stay at any hotel other than a Motel 6.

Q: Why would a person pay $200 a night (or more) for a bed and a TV?
A: Hospitality.

The question you need to ask is "What do I REALLY sell?" and then figure out the answer. Once you do, THEN you need to figure out how you can better demonstrate that, elevate that, and package that for your customers and clients.Little things mean a lot.

--Julian Franklin

P.S. If you like this blog and the articles that get posted here, you should subscribe to my monthly business building newsletter. It is free and filled with trends, advice, examples, and ideas for improving and marketing your business. To get your FREE subscription just visit www.JulianSpeaks.com and sign up. We will never sell or rent your name to anyone for any reason and you can unsubscribe at any time by simply clicking a link at the bottom of each newsletter. It only goes out once or twice a month so go get your free subscription now, before you miss another issue.

Movie Review: Hoodwinked

Hoodwinked is an animated motion picture that is an example of everything children's entertainment should strive to become. The movie is based on the Red Riding Hood story re-told as a modern tale. But it is SOOooo much more.

For starters, there are many layers of humor that strike adults as well as children. This is nothing new in children's entertainment, but it is done particularly well in this movie.

What I really like about Hoodwinked, however, is the very inventive and creative way that the story is told from several different perspectives as a "mystery" seems to unfold in the telling. As each character's story is told you aren't sure if you are getting closer to the truth or farther away.

And then, just when things couldn't get any weirder or funnier, the story comes to a conclusion that makes sense of everything in a very satisfying way. I won't say anything else because I want to preserve the "whodunit" for those who haven't seen the movie yet.

I will tell you that you will enjoy this movie, even if you have no children. It is funny and engaging in a way that few movies are anymore. If you are a children's performer (as I am) then you owe it to yourself to rend this movie and study it. Notice how the humor is kept clean and yet riotously funny? Notice how the reference to pop culture are tossed out without much fan fare, to be enjoyed by those who get it, but not to become stumbling blocks for those who didn't? You don't want your audience to spend time wondering about the joke they didn't get.

Particularly, pay attention to the creative way that an old, worn-out tale (Little Red Riding Hood) has been given new life through a little bit of creativity and imagination.

--Julian Franklin

Saying "Thank You"

I am a pretty big believer in saying thank you. I don't always do it, but I try to. When people send me e-mails about my monthly business building column in The Linking Ring magazine, or some of the books or articles I've written, I try to reply with a thank you, even if it just says "Thank you for taking the time to write".

Just recently I was treated to a thank you that really reminded me of how valuable a nice thank you can be. I had a product that had sold out. I was no longer producing them and someone called asking for one. It was a $500 item but they were all sold out. I told him he might be able to get one if anyone ever returns one (I offer a lifetime, money back guarantee on everything I produce), but I told him I had never had anyone return this particular product before.

As luck would have it, someone did ask for a refund and I was able to get one of these items back in stock. Further, he happened to e-mail me three days after it came back asking if any had been returned. I told him it must be destiny and after checking to make sure everything was there and in pristine condition, I sent him the marketing system.

Two weeks later an overnight delivery company delivered a package from a chocolatier in France. Inside the insulated box the dry ice had evaporated. My wife and I excitedly broke the wax seal on the ribbon, then carefully peeled off the rich wrapping paper. Underneath was a beautiful wooden box that, when opened, revealed a tiny collection of some of the most delicious confections I'd eaten in a very long time.

I'm proud to be an American, but no body does chocolate like the Europeans. Their chocolate has flavor, not just sugar, cocoa, and corn syrup. This stuff was divine.

So this guy paid for the marketing program. I didn't give it to him. He paid me for it. He paid for shipping. And then he sent me a thank you.

It's not the first time someone bought me a gift for the help I provide in growing businesses, but it was the most recent and I thought I would share it with you.

I hope he doesn't read this entry because he might figure out how many bonus points he's earned with me.

--Julian Franklin

P.S. Since this happened I had another copy of the product returned and like fate some else called about a week after it came it and bought it. I no longer have any in stock. I've also had several requests for my licensed assembly programs which I no longer offer to the public. This is not a matter of inventory, they are simply not being sold at this time. For a complete and accurate listing of my products, you can visit www.JulianSpeaks.com

Should You Sell 'Back of Room' to Kids?

How do you feel about back of the room sales? I've seen a few performers do it and I've heard that it is a great revenue source, but I just don't feel comfortable "hocking" from the stage when I've been paid to perform. I also worry about having the kids start bugging their parents for a product and having that ruin a perfectly good mood that I had created. What are your thoughts on this?

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A few things real quick about BOR (and I could literally talk about this all day because there are a hundred little nuances).

Appropriateness: The BOR items need to relate to what you are doing. Books are very appropriate after a school or library presentation (and in fact are usually well received at almost any venue because parents like to see their kids read more). Magic sets are an obvious tie in after a fun magic show. A DVD teaching magic would also work well. Show posters, autographed pictures, and t-shirts are common at larger events.

Profitability: You need to be able to AT LEAST double your money on everything you sell or it isn't worth carrying around. This is usually the foundation of retail. In fact, it is such a standard operating pricing method that it is actually called "Keystone" pricing. I wrote about this in an article on pricing that's posted on my web site. But suffice it to say that your prices should be at least twice your costs, with only a few exceptions.

Pricing Points: Lastly, you don't want to charge $2.50 for ANYTHING! If you did, you would also have to bring along a wad of $1 bills and five rolls of quarters so you could make change. Pricing Points are very important in retail and even more important for BOR. People think in terms of $20 bills. Everyone has a $20. When selling big items, make the price breaks at the $20 marks. For smaller venues and smaller items, you want to break at $1, $5, and $10. You do NOT want to be making a bunch of change. Again, you can check out another article I wrote on pricing, also posted at www.JulianSpeaks.com under the link to "Free Stuff".

When I sell my $6 book, I also sell a $4 book to go with it, and I sell a $1 picture, but the picture is free if they buy both books. This makes for a LOT of $10 purchases. It's an easy price point, and the free gift of the picture helps make the decision even easier.

I also like books because they promote reading. I am a big proponent of children reading more so it makes it easy for me to sell those books and not feel the least bit guilty. I know that every kid who buys one of my books is doing his brain good.

Now, about "pitching" from the stage and ruining a good mood you had created.

If you are performing in a school, day care, or other venue where children don't have parents on site, there is no reason to even mention the product. If you didn't arrange for them to buy the product beforehand, then they won't be able to get it. Kids usually don't carry around that level of disposable income.

If there ARE parents present, then your decision to sell from the stage is a personal matter. When I speak to adults I always offer a product at the back of the room. If people enjoy your show they want a souvenir. This goes for children as well as adults. I don't think you have to worry about ruining a good mood by offering souvenirs. Anytime parents take their kids grocery shopping, to the movies, a ball game, carnival, or almost any other venue outside the home, there are offerings that children beg their parents for.

Parents have come to expect their kids to beg and in fact, some parents use the intensity of the begging as a "barometer" of how much the child actually wants the item. I would imagine that it would be a strange and irregular occurrence to have someone upset that you offered a product to purchase.