Archive for business issues

Jun
30

How NOT to Respond To a Slowing Economy

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My wife and I went out for Chinese food today for lunch.  We went to our favorite place, just around the corner.  Usually we order the lunch special, and sometimes we order drinks along with the standard tap water.

But today was different.  When I had finished my drink, I was offered a refill as always.  I accepted, and then was told that there would be an extra charge.

This is new, and the new policy is because of “rising prices.”

And I understand.  When prices rise, the costs get passed on to the end consumer.  But there’s a right way and a wrong way to do it.

The right way would be to increase the price of the lunch special, or even the drink itself.  This is a completely understandable response to rising food prices.

The wrong way is to change a long-standing policy of “free refills with your soft drinks” and start charging for something that used to be included in the price.  (What next – an extra charge for the fortune cookie?  A separate bill for the rice?)  As a customer I don’t mind paying for the meal or for the drink, but I left today feeling “nickeled-and-dimed” instead of satisfied — and it really has little to do with the final price and everything to do with how we got there.

The refill would have cost them about 10 cents.  The result of their new policy is I will not be ordering drinks when I eat there, and I will probably eat there less often.  $1.95 for a soft drink is pretty steep – but tolerable if you can at least have a refill, and don’t have to interrupt your meal with a decision of whether to spend another $1.95.  I doubt I’m the only customer that sees it that way.  Luckily for them, I like the food enough to keep going there; but I wonder how many customers they will lose with this policy (never mind how many drink sales will be lost).  All to save 10 cents.

If business is slow because the economy is slow, then perhaps raising prices is required.  But don’t start charging for things that your customers have come to expect as part of the normal transaction.  Your customers don’t mind paying a fair price, but they will rankle if you seem desperate to get every possible cent from them.

And one final point – if the economy is truly affecting business, that means customers are looking for deals more than ever.  This means providing value (not necessarily offering the lowest price).  It’s better to increase the value of the offering (even if this means increasing the price) instead of trying to offer less for the same price.   Provide more value than your competitors and you will win, even in a slowing economy.

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For a good part of one of the busiest online shopping days of the year, the Yahoo Stores system was reportedly down, causing shoppers and merchants alike a great deal of frustration. Check out this snapshot from the Yahoo Merchant Services system log:Yahoo Stores Down on Cyber Monday

(Source: http://updates.smallbusiness.yahoo.com/)

Looking at their timeline, it took over 24 hours for them to finally say that the issue had been resolved – ouch!!

CNBC has a full story here on this issue that has generated quite a bit of angst among a certain segment online businesses (and another article here). Sounds like there are a *lot* of unhappy merchants this morning. Here’s a quote from a merchant that had SIX online stores that were down yesterday: “All of a sudden, the bedrock of our company has been replaced with quicksand. I guess its time to diversify our merchant platform.” (Tom DePrato, quoted in the CNBC story).

I’m not one of those unhappy merchants this morning, though…

My ecommerce software and hosting combination is rock-solid, and all of my online stores worked flawlessly as they processed more orders yesterday than any other day of the year. It’s been rock-solid each and every year, and I must admit I never gave it much thought — until I heard about the pain many of my fellow online merchants have been experiencing with other solutions.

So, I’d just like to take this opportunity to say…

“Thank You, ShopSite and Lexiconn!!”

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