Situation: A company is concerned about increased energy expense as prices rise, and the impact on the bottom line. Pricing in their market is competitive. What’s the best way to recover these costs? Can you pass higher expenses on to customers?
Advice from the CEOs:
Businesses regularly pass on their increased gas and transportation costs to both commercial and retail customers as these costs rise.
This isn’t just true for gas and transportation expenses. As other expenses rise, companies regularly increase their pricing to account for increased costs.
Is it necessary to send out an announcement letter about the company’s intent to do this?
Some companies do. Others just start adding a line with a gas surcharge to their invoices. This is happening frequently enough so that most customers just pay it without question.
What do you do if someone objects?
If a customer objects, you always have the option to credit them the charge.
Again, most customers are so accustomed to seeing and tolerating these costs that they don’t object.
Look at the company accounting system. Are costs and performance trackable by business segment? Performance numbers show both the impact and magnitude of energy cost and improve the ability to manage the business.
If the talent is not present to either improve the current accounting system or to shift to better software, bring in part time accounting help. A good source is Robert Half International/AccountTemps. The cost of adjusting the current system will be recovered as the company gains more control over expenses by segment.
Situation: A company has recently introduced a disruptive business proposition. The immediate focus is pitching the solution as an attractive alternative and building early traction. What are best practices for building acceptance of a disruptive model?
Advice from Marc Rochman, CEO of Openbucks:
Any business, especially an innovative start-up, is bound to meet a wall of resistance; the key is finding the cracks in the wall. To do this, you must demonstrate a significant benefit to both the company and its customers. However, most important is finding a partner who has an early adopter attitude or culture.
Often the principal resistance is not with the product or solution being presented, but fear of being the first through the gate – particularly with a product and company who haven’t yet proven themselves. This stems from a perception that if the solution turns out badly the penalty may be severe, especially for the executive who made the decision.
Openbucks recently introduced a new payment solution for people who don’t have bank accounts or credit cards such as teenagers and people without strong credit and those hesitant to use credit cards online. The solution allows people to purchase a gift card from a retailer and use that gift card to buy in-store goods as well as to buy and pay for digital goods inside hundreds of online games.
Openbucks’ first partner is Subway. They are innovative, imaginative and not afraid to be first with a new concept. In addition, Subway also happens to have a subsidiary that specializes in payments and payment processing so they immediately understood the model.
Another early partner is CVS Pharmacy. To CVS the appeal was the model of convenience and a way to encourage repeat customer visits. Since people routinely visit pharmacies to get prescriptions and a host of other products, it is easy for them to buy a gift card during a routine visit.
The keys to overcoming objections to innovation are:
Be resilient and patient, especially when working with large companies. Once they begin to see a trend of success, they will more likely be ready for mass adoption.
Strike the right balance between persistence and a willingness to adapt your product when you see an opportunity. Pivot or tweak your model to take advantage of a new opportunity that you did not anticipate originally. The pivot allows you to take an easier path instead of banging against the wall too long. Sometimes you just have to go around the wall.
Subway has more stores than any other retailer in the US. Adopting the Openbucks solution came naturally for Subway because they understand payment processes and how to use them to create loyalty and foot traffic.
The program is simple and a win-win-win for the consumer, retail outlet, and merchants who can collect cash-like payments from the unbanked, under-banked and those who prefer not to use a credit card online. The purchase of a $10 Subway gift card can be used to buy a Subway sandwich, and inside mini digital stores in hundreds of online games. Fifty-four percent of those who buy a Subway gift card also get a sandwich – a clear value to the retailer. Further, since they have the card, they are more likely to be repeat customers.