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"prices" category

The website that grew, part 9

11th February 2013

"What do you want to achieve with the online shop?" asked Hugh.

"I want to supplement the shop's income." said Kate, "so that we can be more profitable."

"And what does that mean in terms of volume of orders?  A hundred orders a month?  A thousand?  Ten thousand?"

"I really want 500 orders a month online."

"How many customers come to the real shop right now?  As in, how many different people do you see in a month?"

"I'm not sure.  It's probably around 500, but some of those would come back several times in a month."

"OK.  Whichever way look look at it, you need customers from outside Aylesbury, which means advertising online.  So if you're aiming for 500 new orders, you should build something solid, that works, and that brings people back to the site, and something that grows.  When you get to 500 you should be fairly certain that the next month is going to bring more orders, and so on, month after month."

Kate was sceptical.  "How can I be sure that this will happen?  And what's it going to cost?"

"It's not cheap, but cheap will get you the results you're getting now.  We know what works because we've done it before, but it will need your input."

Kate's problem now was that she couldn't spare the time, and John didn't want to. "What if I can't provide much input?  Can you help?"

"We can provide more day-to-day help," said Hugh, "but it is more expensive.  What about your shop assistant - er.. "

"Martin."

"Yes, can he spare any time?"

"Not really, but I think I might be able to persuade John's mum to get involved.   She's started using an iPad and she loves it!"

"OK.  That sounds good."

Hugh and Kate chatted about how the online shop would attract and retain customers, and Hugh promised to put some figures together.  They agreed to ditch the getyourdomainsnowuk.biz shop and start again with a completely bespoke shop (though built on some readily-available open source software that Hugh had used before).

After 3 days, Hugh came back with a proposal and an estimate.  The estimate contained the following figures*:

website redesign £1000.00
bespoke online catalogue £1000.00
integration with paypal and amazon payments £1000.00
email list management and sales follow up  £1000.00
set up of blog £1000.00
project management and training £1000.00
TOTAL £6000,00

*Please note that the prices in the table above are completely made up; every shop is different and it is no use extrapolating these prices for your individual circumstances.  A web developer will normally discuss your plans, and tailor the solution to your requirements, the speed at which you want to grow, the technology available at the time, and so on.

Although Hugh's pitch had sounded convincing, and he'd also included examples of websites that he'd built which were doing well in terms of sales and visitor numbers, Kate baulked at the cost.  But she sat down with a spreadsheet and worked out the return in investment, and became calmer.  "Once we hit the 500 sales mark", she thought, "it will take just 8 months for the profits to pay off the website."

She did think that John and Nancy would be difficult about the cost, and she resolved to get at least one more quote.  She searched the internet for local web shops, found a few, and fired off some enquiries. She arranged meetings with the ones who seemed most friendly, and in due course received two more estimates, one cheaper than Hugh and one more expensive.  

Then she organised a lunch with Nancy, and we'll find out more soon....

Why do estimates from technology companies vary so much?

18th June 2012
Categories: prices

It's a question I've been asked a few times over the last 15 years I've been working in the IT industry, and things haven't changed.  While you can only get a very small spread of prices if you want to buy, say, a loaf of bread, curry, or a laptop, asking for a bespoke computer solution can elicit responses from 'well within budget' to 'way off the scale'.  

I beleive that the problem is twofold, and lies both with the customer and the supplier.

The customer

While specifying "exact requirements" is pretty easy with a laptop (250GB hard drive, no optical disk, 13 inch screen, 4GB memory, Windows 7 64 bit please), it's less easy with a software system or even a website.  What you're buying isn't delivered in a small black box; it's a team of experts who understand not only your business but also how best to build future-proof and useful systems. The tendency not to regard a website or business system as a return on investment doesn't help - if it's an expense, I want the cheapest please!  It has to do X, Y, and Z, and be quick about it!  Good customers first work out how the technology will help them, and convey this carefully in their requirements specification, as well as buying the best, in order to help themselves in the future.

The supplier

In a crowded market, the customer is king.  Or at least that's how they are sometimes perceived. This perception can be felt most strongly by struggling companies, who need the sale no matter what, and are therefore prepared to offer cut-throat prices in order to get it, even making a loss in the process. Because of these, you may get wildly differing prices for what is basically the same perceived system.

What can you do?

If you're specifying a business system right now, discuss your expected return on investment with your suppliers.  There may be a fear of doing this because you think it may raise the price, but they'll be just as keen to show you that they're the best of the bunch who can deliver the right technology.

Also make sure you go to at least 3 suppliers, and when you have your estimates in, ask each supplier why their estimate is so different from the others (if indeed it is). This will enable you to get an idea of the differences in approach and the differences you might be seeing in a finished product.

Finally

What has changed over the years is that certain types of business problems have become easier to solve with off-the-shelf technology - for example, if you had asked for a shareable online spreadsheet system 15 years ago, it would have cost you dearly, but now you can simply use Google Docs for free.  But as with healthcare, this only raises the ambition of the buyer, who wants to solve increasingly complex problems. Are you over-stating your problems, and could you get a return with a simpler solution?

What you should pay for a website - part 2

27th March 2012
Categories: prices

If you haven't read part 1 of this two-part article, please read it now!

Now we've looked at what your website is for, let's jump straight in to the various types of website:

A high/increasing number of transactions (consumer or business)

If you're already making a net profit, congratulations.  If not, you will probably have a business plan that tells people you'll start making x per month within y months.  In the meantime you have to pay for overheads.  You need to double your efforts to get to this point, including working really hard on milestones, because it doesn't come easy.  At the same time I would double the "y" figure (how many months it's going to take to get into profit) so you can have a buffer against every eventuality. Having done this you should have a sum you should set aside for overheads like staff and premises. Include any stock, but try not to hold too much (but you've thought about this, haven't you?). After that, spend everything on building traffic and a high level of usability into the website.  If this means £50,000 then do it.  If it means £5,000 then do it.  If it means £500 then you probably need to have a re-think, because no matter how talented the web developer and how crazy the deal, this isn't going to rocket you into internet stardom and consistent profits.

After 6 months you will start to see a trend. If that trend is flat or trending downwards, something's not working, and if you can't figure out how to turn it around, it may be best to pull the plug. No-one said entrepreneurship wasn't risky. On the other hand if the trend is upwards, isolate what's causing it and create a budget around a more focussed set of improvements. After that of course, you just need to measure and repeat!

Membership services

Here as with any website, you need to be looking for a web developer who has experience with the kinds of features you want to build. An experienced web developer will know the "architecture" of the planned website before you even meet.  Quite often there will be a "base" piece of software with bespoke elements on top to provide exactly what you need. This "base" software, which may be called a content management system (CMS), should have a minimal or zero cost. It's the bespoke pieces you need to worry about.

The law of diminishing returns will eventually help. Say you have asked for features A, B and C, which seem to be no problem at all for your prospective web developer.  These cost, say, £7,500. Your other 'dream' features D and E cost £5000 each - but won't obviously make as big an impact as features A B and C.  Ask yourself if you need them from day 1 and what benefit they are going to give your business.

Big organisations may benefit more from these "additional" features because their membership will be prepared to - collectively - fork out for them. So while a small trade association may be content with the A B C feature set, larger organisations with thousands of members may be looking at A B C D E F and G (and spending, say, £20,000).

A corporate website for a company whose business is transacted offline (consumer or business)

Having thought carefully about the impact your website could be having on customers, you now need to think about investing in a good website to make that happen.  Not only does your website need to function, it needs to attract business, look good, and keep up with web standards. All this means that going to an instant, do-it-yourself web shop is not an option. But there are a huge range of options, so you need to be guided by someone you can trust, and who's done similar things before. Your first year budget should be in excess of £1500 (for very basic sites) and under £100,000 (because normally if £100,000 is starting to be limiting, then something is probably wrong with the planning or the talent).  Typically, if your website is information-only, you'll be looking at the lower end of that scale, but you must budget for design, which takes up more time if your business has a large "footprint", and content architecture, which becomes more complex the more content you have.

Information only, or peripheral services

This is a bit of a wildcard - for example you may be aiming to build a micro-site with a game, or a mobile site, or some wacky new idea thought up by marketing. However, if you're at this stage you probably have a good idea of how to get people to the website and a good idea of how much profit you will bring in per person.  If you're going to attract 100,000 people and convert half into buying your £10 product, They're going to spend £500,000.  Your net profit on the purchases may be more like £200,000, so a website spend of £50,000 would be OK.

On the other hand if it's going to be difficult to quantify the effect, you may want to leave out the bells and whistles and concentrate on what you can afford.


What should you pay for a website?

13th March 2012
Categories: prices

There can be confusion over website pricing at all levels of budget and experience, so we thought we'd put together a 2 part guide on what to pay for your website. In part one (this bit) we'll be looking at what you need out of your website and what it's going to give you, and in part two we'll look at options are different budgets.

So, where are you with your website - what do you need from it and what is it going to provide?

A high/increasing number of consumer transactions

At this level you've perfected an inexpensive consumer product or service which is easy to see online. You have a marketing budget which is a good fraction of your annual turnover (because it works) and you need to perfect the process of buying things on your website so that it's easy and repeatable. In theory you'd like to remove all friction from the process, so people can buy without typing or clicking. Graze.com has achieved this nicely..

Your website is going to go from strength to strength and possibly provide 100% of your annual sales. It's going to find new customers, make them repeat customers and advocates, keep in touch with them, and sell to them again and again.

A high/increasing number of business transactions

Businesses are staffed by people, so be very cautious if you think you can get away with making your website less easy to use than a consumer website! But you may have cornered the market or you may rely on a steady stream of customers fed into the website by other parts of your business. At the other end of the spectrum you will be competing for a share of a large market in just the same way as a consumer site.  Viking stationery is a good example of this. Being a business to business website, though, it will usually have a smaller market than consumer websites, and it may have to work harder to sell, for a variety of reasons including high cost price/low volume, and staff turnover within your customer base.

Your website may provide a significant proportion of your annual turnover. It should also attract new customers and keep in touch with existing customers.

Membership services

This kind of website is similar to the scenario above. It may offer various transactional functions such as membership/event purchases. But it often has a limited market, so once it's cornered the market it doesn't always need to try as hard to woo customers. However, you still need to keep up with the times and offer a great service to members, because if you don't, your members will certainly complain and quite possibly look for alternatives.

Your website will attract and retain members (i.e make money), but also save money through reduced paper administration in your office.

A corporate website for a consumer company whose business is transacted offline

This could be Coca Cola or something much smaller. It may be a information website so that people can, in effect, "self-serve", or it may be marketing focussed, running competitions and games, and creating new interest which inevitably leads back to the product.

This website and your other online activities may not keep you in business, but it probably attracts a significant number of customers to your product and saves a ton of money on customer service.

A corporate website for a b2b company whose business is transacted offline

This could be a website for a company as big as Boeing, or it could be the one you're on now.

While it may not bring in all the business or transact any of the business, it can do a lot of work. People who are in the market for your product may increasingly search for it on the web, so your website can be a powerful marketing tool. It can offer customer service, and it can even have a password-protected customer area to offer specific customer service.

Information only, or peripheral services

There are a lot of very different websites in this category, so it's difficult to generalise, but quite often these websites may mean the difference between retaining and losing customers. So they can be crucial to your business success.

Now read: what you should spend!

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