Tag Archive for 'gross profit'

Small business and the “free” stategy

If you’ve been listening to my show and/or reading my columns, you know how many times I’ve stressed the fundamental management task of generating enough gross profit to cover operating expenses and, hopefully, put net profit on the bottom line. Of course, in order to do this, you have to sell something for enough money to have something left over after cost of goods sold.

So it might seem strange to learn that I would recommend a strategy of maximizing gross profit by giving something away. But when taken in context, you’ll see that it’s not weird, but rather, just another way of looking at managing in a challenging economy.

At a time when prospects are more likely to trade down in their purchases to stretch their cash, it would be natural for a small business to react by cutting prices. And while this might do the trick of getting customers to stay with you, discounting also has the potential to do something unfortunate: diminish the perceived value of your brand.

So how do we keep customers coming in the door in a recession and protect our brand value? Develop a strategy that gives customers something when they make a purchase at the price you’ve established.

Recently, I interviewed two very smart ladies about surviving and thriving in a recession. I talked with branding expert, Karen Post, author of “Brain Tatoos,” about how to maintain brand value, and I talked with marketing expert, Lois Geller, author of “Customers for Keeps,” about how to create a solid marketing plan during a recession. Guess what? Both recommended courageously giving things away instead of wimping-out with discounts.

Take a few minutes to listen to what Brain Trust members Karen and Lois had to say on my small business radio program, The Small Business Advocate Show, as we discussed the “free” strategy and variations on that theme. And don’t forget to leave a comment or question.

For Karen Post:
For Lois Geller:




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