Avionics News March 2015 - 54

BUSINESS BASICS

Continued from page 52

that guy at my airport. But in order for
you to be successful, you need those
differentiators. "You need to be able to
carve out a unique niche that you're in
a position to defend," Hurlbut said, and
you probably need to look critically at
other parts of your business, including
your marketing outreach, accounts
receivable collections, sales closing or
service delivery.
In the long run, haphazard discounts
take away your flexibility. Your ability
to selectively reduce prices should
be used sparingly and strategically,
said Mark Bergen, the James D.
Watkins chair in marketing at the
Carlson School of Management at the
University of Minnesota.

Strategic discounting is powerful
because it helps you reach a particular
audience with a message they'll react
to quickly - for example, a discount
to attendees at a trade show, or a
coupon direct-mail piece, or a reward
for scheduling work on short notice.
In each case, you can put your toe in
the water and pull it out if a particular
effort doesn't work - without creating
lower point-of-reference prices your
customers will demand next time.
Finding a mix
As bad an idea as discounting can
be, there are times when it can work
to your benefit. Some customers want
only good deals, while others want
good service - and they're not hesitant
to pay for it. That plays out in your
shop by helping you understand what to

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54

avionics news

*

march

2015

discount, when it might work, and how
to protect your margins so you're not
hurting your business.
Often, retailers or service providers
have loss leaders that get new
customers into the door. Or they have
vendor promotions. Or they find a way
to assemble a package that allows them
to sell add-ons. "The initial unit is made
with some sort of promotional basis,
and then the add-on or the trade-up is
a full-margin sale," Hurlbut said. "The
key issue here is protecting margins
- both margin dollars and margin
percentages."
The second option to consider is
unbundling your products and services,
according to Bergen. Consider how
cellphone companies price their
service; the phone is discounted, the
customer makes an agreement to keep
that service for one or two years, and
each "accessory" - minutes, texts, Web
access and other features - are added
on, unless you buy the full-feature
package at a hard-to-interpolate price.
Indeed, calling plans are intentionally
priced in such a way that it's hard
to compare apples to apples across
providers.
You can do something similar
by using segmented pricing. If the
customer makes a commodity decision
- Brand X transponder is the same
everywhere and only the installation
price is different - then, when able,
don't include the additional valueadded service that you might otherwise
provide. Attach a real value to those
services, and sell each piece by piece.
"There needs to be a recognition that
the offering includes more than just
product," Hurlbut said.
For those customers who recognize
the value you provide, have a "fullservice" price that includes those costs
(which looks suspiciously like your full
price). If the commodity purchasers pay
more in the end, so be it, according to
Bergen. They have the opportunity to
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