Service companies like health clubs (who provide ongoing memberships) and interior plantscapers (who sell weekly maintenance) are faced with a sales situation that can make or break their businesses. How to structure contract

Long term contracts provide predictable cash flow, insulate clients from competition and reduce client churn. However, they can be harder to sell and renew because the client faces more risk from the transaction. The secret weapon for selling long term contracts – a strong money-back guarantee to reduce client risk.

Month-to-month contracts (or no contract) provides less initial sales resistance and better conversion rates. But, attrition has a greater impact on cash flow and clients can be lured away by cost cutting competitors.

Selling Less To Sell More
More and more businesses have been migrating their contract service models to month-to-month. Why? Because consumers are demanding that service companies share the dis-satisfaction risk. It provides the customer with extra value in the transaction without a written or formal guarantee. Companies are understanding that value and turning it to their advantage. Here’s an example from the health club industry via The Houston Chronicle:

“Why are Life Time and Town Sports succeeding when Bally has stumbled? One key difference is in membership structure.

In an interview, Simkins said Bally was highly leveraged to member financing under its original structure, which required that customers commit to long-term memberships at lower rates.

Analysts prefer the Town Sports and Life Time models, which are primarily month-to-month and target a higher income clientele with more expensive fees.

A Bally spokesman said the company began offering month-to-month memberships in 2004, to provide customers with more choice.

One downside to a month-to-month structure, however, is it gives customers an easy out if the fee becomes too burdensome. Analysts said the industry has been generally resistant to recession, but acknowledge that an economic downturn could cause customers to turn in their gym memberships for jogs in the park.

CIBC World Markets analyst Vivian Ma, who gave Life Time a “Sector Outperformer” rating noted, however, that the industry has experienced steady growth since 1987 and showed no significant slowing during two recessions. Life Time outperformed the industry during the most recent downturn in 2001 and 2002, she adds.

As for Town Sports, Simkins said the company is tied to New York City’s economic health, and noted that unemployment in the city is relatively low. About 70 percent of Town Sports’ store base is located in the New York City metro region.”

How is your business selling it’s services? How could your business be selling it’s services? That may be the most important question of all.

Post from: BrightCite

Warning.  Slight rant below…

Is Your Business Web Friendly?

Is your small business prepared for the arrival of the virtual marketplace?  For years I’ve been telling all who would listen how strategic use of the web is a critical small business asset.  I’ve been met with many glazed eyes and blank stares from small business people who just don’t get it. 

Too bad – because the clock is ticking for the small business person who is web-illiterate and who still thinks about and uses a website as only an online brochure. 

It’s going to be a rough road ahead for small businesses not actively seeking to build online assets and who lack a basic understanding of how business works on the web.

On the flip side, proactive small business owners who see the Internet as an opportunity for a business building investment will be rewarded with an exceptional rate of return on time, money and resources. 

Are you actively educating, positioning and preparing yourself and business to profit from the power of the Internet?  Where do you stand?

Quick Audit
Answering yes to the questions below indicates you are positioning yourself to build online assets that will serve you and your business well in the years ahead:

1. You have a dedicated domain name for your website and e-mail (www.yourbusiness.comyourbusiness.com) skills.
2. You have a strategic plan for your website that ends with tangible results.  These results are based on visitors taking specific actions like calling, e-mailing, registering and downloading information from you.
3. You see  analytics information at least weekly, that tracks how many people visited your site, what they clicked on and how they found you.  You use this information to improve the strategic results of your website over time.
4. You understand the basics of Search Engine Optimization and have identified the keywords potential customers are likely to type into a search engine to find you.
5. You understand what a blog is and how it works for business (just as you understand the news media and PR).  You have left a comment on a blog.
6. You have a basic understanding of what RSS is and have used a feed reader before.  You know how it’s used to subscribe to and organize video, audio, blogs and other web content.
7. You have visited MySpace, YouTube, LinkedIn, Flickr and SecondLife to familiarize yourself with social networking, Web 2.0 and network effects that govern an emerging virtual marketplace.
8. You know what a Podcast is and have listened to one.
9. You know what a widget is.
10. You have given thought to how the web is changing the rules of your business and assessed how it complements your business strengths and exploits your weaknesses.  You are actively exploring the online opportunities and threats to your business.

The more questions you answered "no" to, the less prepared you are for the rapidly approaching future.  On the other hand – there has never been a better time to start increasing your online business knowledge and skills. 

Post from: BrightCite