Detmer's Corner: What’s Your Breakout Plan?
Unlike many of my friends, my fascination with bicycling came to a crashing halt in the sixth grade. As I was flying over the handlebars it dawned on me that I wasn't cut out for that sort of thing. But the painful experience doesn't deter me from enjoying Le Tour de France broadcasts every summer.
Seeing those spectacular cyclists compete on both physical and strategic levels fascinates me. In many ways their race can be compared to the competition you face every day. Just like the pedal-pumping titans, you are striving to get in front of your competitors. Only, when you do, winning isn't defined by wearing a yellow jersey. It takes the form of an approved job bid with deposit and contract to proceed.
In Le Tour, the breakout section is where riders try to outwit their competition. Riders who break out too soon run the risk of exhausting themselves as they sprint to the finish and give their competitors behind them a distinct advantage. Ones who don't break out soon enough allow their competitors to pull ahead and win the race. This game of cat and mouse is played in your business too. Only instead of sprinting you are adjusting the prices you charge for your goods and services you provide. If you charge too much, you may be beaten by a competitor's lower price and if you don't charge enough, your profitability erodes and threatens your company's health.
Calculate Your Break Away
There's no question that you need to have a clear pricing strategy for your company to win in today's market. But what should it be? Like the cyclists, you've got to calculate your breakaway. As you develop your pricing strategies going forward, consider that the costs of goods that you use to install systems will likely increase. That's due to several factors you have no control over. The prices of raw materials and labor at the factory level are going up. Manufacturers can't afford to absorb the entire burden themselves, which means they will have to pass some price increases on to you. As an example, the rare earth material neodymium, which is used to make high-quality loudspeakers, has more than doubled in price recently.