Jan 27

Customer Retention – Part II – Pricing (Advanced)

ID-10061108Pricing your product or service can be one of the most difficult challenges  businesses and independent freelancers face. Too low and you may not be profitable, too high and you risk driving existing customers away or you fail to attract new ones.

In Germany, setting the correct pricing strategy can be fraught with danger . A pet hate of businesses and consumers in Germany is inflation. This has historical roots from the hyperinflation of the Weimar Republic in 1923, through to the late 70’s, 80’s and 90’s when Germany experienced 6-8% consumer price inflation or CPI.

german inflation

A price that is too low could cause doubts by the customer as to the quality of the product or service. Conversely, if the price is high, the product and service better be pretty darn good. Normally, most businesses aim to be somewhere in the middle.

We should also aim to establish more value by reinvesting some of the profit derived from our customers into products, technology or services that clients can benefit from. For example, you could do a YouTube/Facebook viral video featuring some of your customers, run video conferencing sessions, upgrade the website, integrate your calendar (to make scheduling meetings with your clients easier) or develop a deeper conversation with the customer though more insightful and meaningful feedback.

After you have determined your price point, you may also want to think about when to increase your price and by how much. It is always a good idea to inform customers a month or so before you increase your price. This gives them time to prepare and adjust. Even if it’s just a few cents or a €1 increase, you should write a letter or email advising customers of the change. If you establish a routine that your prices go up a little every year or by 10% every 3 years, you should still formally communicate any price increase.

If inflation behaves itself and you’re happy with your price level, you may also want to point out to the customer that there will be no price increase this year, especially if they are used to you increasing your prices a little each year.

Increasing prices can be scary in Germany, but it doesn’t have to be if we follow a few simple rules and clearly communicate how we are adding value and demonstrating the quality of our product and services.

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Jan 21

Talking about the Future Tense – Part I (Medium)

ID-1009933What is the difference between – ‘going to’ and ‘will’?

If you are like many other non-native speakers mixing up the tenses, then here are a few tips to make it a little easier.

  1. Going to (subject+am/is/are+going+to+verb) has more certainty or a greater possibility of happening i.e. an 80-100% chance.
  2. Will is often used for less certain situations or events. Let’s call them predictions that have a lesser possibility of occurring. i.e. a 50% chance

For example, when I asked my wife to marry me in 2007, I said “Darling, will you marry me?”. I had a 50/50 chance and fortunately for me she said yes. Some weeks later we started telling our friends that we were going to get married in June, 2008. This was now more certain and probably 80-100% going to occur.

Technically speaking though, my wife made a decision at the time of speaking, which is another use of will. So, we also use will for spontaneous decisions that are made at the time of speaking. However, I am sure my wife had thought about an answer to marry me well before 🙂

If somebody was knocking at the door or if the telephone rang, we usually say “I’ll get it or I’ll answer it” (I’ll = I will). We don’t have time to think about it before. It’s a spontaneous decision that we make at the time of speaking. So, we just do it! (the certainty of 80-90% or the possibility of 50% is irrelevant as do means 100%)

It’s a bit like a fact, which we also use will for. E.g. He’ll be 28 in July. This is a future event and a 100% fact.

Sometimes we speculate about future events with greater certainty. E.g. My friend lost his job and will have to sell the house. This is more like 90-100% because of will+have to. Have+to (90%) is almost like must (100%)!

Generally, speculations and assumptions are similar to predictions. What will happen in next week’s episode? (you have no idea but you can speculate). I think it will rain tomorrow = a prediction (50/50 – maybe less). However, I think it’s going to rain has 80-90% certainty. Maybe you are outside, see some dark clouds and feel raindrops on your hand. We can usually see or have more evidence to support the future action or event with ‘going to‘. E.g. I am going to travel to Australia next year. I have already bought the tickets!

One final example, I think Germany will win the next world cup in 2014. This is a prediction – 50/50 (maybe less). Let’s say we are at the world cup final and Germany is winning 3-0 against Spain and there are five minutes remaining in the game. Then, I could comfortably say “Germany is going to win the world cup”. It’s 95% certain unless Spain scores four goals in five minutes.

Practise going to and will exercises at http://www.englisch-hilfen.de

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Jan 14

Customer Acquisition vs Retention (Medium)

ID-10097427Customer acquisition is the act of acquiring, getting or obtaining new customers. The other side to winning new customers is customer retention, keeping or retaining existing customers. So, which is more important in Germany? Many people I have spoken to in the past few years believe customer service in Germany is a black hole or nonexistent. German companies are committed to winning new customers, not keeping them. So, why do they have it the wrong way around and why is customer retention more important?

As part of my studies at university, I undertook a research study into customer retention rates. Not only did I discover that it costs up to five times more to win new customers than to keep existing ones, I also learnt that there are several other key benefits to keeping your customers happy.

First of all, happy customers tend to talk to other potential customers (you might not normally reach) about your business and increase the chance of getting new business without having to do much extra work at all. Something like the concept of buzz marketing.

Secondly, there is far less risk and more stability established within your business model, if you maintain a high customer retention rate – that is you don’t lose many customers! Of course, the downside to a high customer retention rate, could be a tendency to become more complacent and less competitive. Issues that can be dealt with by having a good pricing philosophy, good relations with your customers and regular product or service innovation.

There are also some German consumer characteristics that make customer retention and customer satisfaction even more important or critical to business success. In Germany, there is a strong culture of people giving recommendations to each other to help them acquire new business. These recommendations don’t come lightly. They are serious validations or testaments that a business is good or not. Consumers also take research organisations that produce test results (such a test.de or Stiftung Warentest) very seriously or religiously, depending on your point of view. From my experience, Germans can be very loyal, supportive and helpful. Once you’ve got them, you really have a customer for life and they would need some very good reasons to change to a competitor, so why would you want to lose any customers at all? A little more effort on keeping existing customers happy rather than on acquiring new ones may be the key to success in Germany.

For more advanced English learners, further information can be be found at…The Local.de – Germany’s News in English – Is Germany returning to service dark ages?

In the next issue, I will write more about some of the themes I mentioned here today, that are also important when it comes to customer loyalty and satisfaction e.g. pricing philosophy and complacency.

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