In Japan, under new normal, people may be allowed to have multiple jobs and some use Blog, Youtubes, and SNS to sell their products and services. Today, I would like to demonstrate tips for such people: The ultimate pricing tips released by the legendary entrepreneur
I summarized it from the story of Mr. Inamori*, the honorary chairman of Kyocera. I respect him a lot. The points are the following 6 items.
1 Understanding the fundamental principle: pricing is the core of the management
2 Discarding the market standard, or so-called common sense.
3 Bearing in mind that the customer is always true.
4 Conducting the PDCA cycle on daily basis
5 Breaking down each expense item as precise as possible
6 Conversing with figures appearing on the financial statements
Let me explain one by one.
1 Understanding the rule: pricing is the management itself
First and foremost, this is very important.
“Anyone can sell your product if the price is cheap. But this doen’t make any sense from the management view point. We should deliver the maximum price that customers are willing to pay. If the actual pricing is lower than that, you can take as many orders as you want, but the price is more than that, no order is expected. You must always pick up that threshold as the price for your product. So, as a management, you must be sensitive enough to “feel ” and perceive where that threshold is.
Mr. Inamori says like that. However, this is not easy to detect that point.
What I would like to recommend learning Aikido for you to get prepared for pricing.
I have been doing Aikido for the past 10 years, and now I am in the second Dan-Level-. Especially, I think Yamaguchi-sensei’s Aikido of Okinawa Aikikai is the best in the world. You will learn how to figure out this point through Aikido, when you get well focused on your counterpart and figure out that point.
There is a technique called Nikyo. This cannot be conducted without knowing your counterpart’s weaknesses. Master Yamaguchi is currently 76 years old. However, he is better than anyone, including younger students. As soon as Yamaguchi-sensei took my hand, this point was obviously found. So I could understand the essence of “detecting the weaknesses”.
Recently, we sent a quotation to a client who is very important to us.
As for the fee, I intended to aim for the highest point in the range where the client is willing to appoint us. This worked and without any discount negotiation, we may be able to have the contract. What we should learn in Aikido practice is “Reading your counterpart”
2 Discarding the market standard, or so-called common sense.
Most top managements feel comfortable with the net profit figure which has been considered as the standard in that industry. For instance, manufacturing, below 5 percent has been considered as “normal”. If we define our profit ratio, the actual result would never exceed that standardized figure.
Thus Mr. Inamori said we should forget about the market standard figures when it comes to the performance analysis.
3 Bearing in mind that the customer is always true
Some top management try to determine the sales price by accumulating the cost for them to produce that product or service. But this is not the right approach. The price will be determined under the market lead by customers. Once you’ve got the sales price, you should make this business profitable by reducing the expense.
4 Conducting the PDCA cycle daily basis
This, in other words, means capturing your daily balance by checking your accounting result. In Kyocera, yesterday’s result is always available at the noon in the next day. Which means, less than one day, Kyocera accounting department delivered the result to the management. This system is crucial for the top management to make the proper decision in a daily management. Examining the result, making the improvement, checking the results in the next day, and analyzing the improvements’ effect. Then you can conduct different improvements or some other trials. For top management to deliver the best PDCA cycle, quick reporting system is significantly important.
5 Breaking down each expense item as precise as possible
Under the determined price, for the company to be profitable, all the employees have to work very hard to reduce the expense. For them to do, each single item’s actual expense seems to be visible.
6 Conversing with figures appearing on the Financial statements
Mr. Inamori says, “We must become a manager who can analyze the financial statements prepared by the accountant and hear the moans of stagnant earnings and the crying of own capitals, for example.”
I personally believe that a company is a “living creature.”
What do you mean?
You might ask this question and you got puzzled, and regard me as a crazy.
But this is quite normal.
Employees and managers all deliver their own energy to manage and operate the company.
Because that energy brought by those people is converted into companies energies, growth, and shrunk.
Mr. Inamori considers the company as a living creature under the natural world, because he has been converting the business administration to the high level of “philosophy”.
In fact, he mentioned determining the price of the goods or services you are trying to sell, you should make a balance sheet and income statement, and listen to the voice of the figures and numbers. If you put all of your efforts to listen to them, they will eventually start talking to you at least demonstrate something to you.
