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How Pricing Can Power A Turnaround
How Pricing Can Power a Turnaroundhttp://www.entrepreneur.com/..._medium=feed&utm_campaign=Feed:+entrepreneur%2Flatest+%28Entrepreneur+Update%29&utm_content=Google+Reader[5/23/2011 12:52:07 PM]
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GovernmentAuctions.org Co-founders Ian
Aronovich and Michael Pesochinsky.
Photo courtesy of RS Photo Lab
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Home >Starting a Business >Success Stories >How Pricing Can Power a Turnaround
How Pricing Can Power a Turnaround
A smal l busi ness over haul s i t s f ee model t o w oo
c ust omer s and mak e a c omebac k .
By J ane Porter | May 23, 2011
Offering your product for free may
not appear to be the smartest move
when is cash-
strapped and struggling. But for Ian
Aronovich, 38, co-founder and chief
executive officer of
GovernmentAuctions.org, an
aggregator of government-auction
listings, making his service free to
the public for a trial period is
precisely what helped turn around
the in the recession.
In 2008, GovernmentAuctions.org,
which provides information on
surplus and seized items being sold
at government auctions around the country, was operating on the same pricing
model that Aronovich and his partner Michael Pesochinsky developed when
they launched the business in 2003. The Great Neck, N.Y.-based company
charged customers a $40 annual subscription fee to access to auction listings
of items ranging from dump trucks and unclaimed land to electronics and
jewelry. The service should have been particularly appealing to cash-strapped
consumers, Aronovich says, but when the recession hit, sales began to drop.
"People liked our membership, but didn't want to shell out one lump sum for
the entire year," he says.
Today on Entrepreneur
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When You're Hungry for Sales, Consider These Lead-
Gen Tools
How Pricing Can Power a Turnaround
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the Start
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More Stories »
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How Pricing Can Power a Turnaroundhttp://www.entrepreneur.com/..._medium=feed&utm_campaign=Feed:+entrepreneur%2Flatest+%28Entrepreneur+Update%29&utm_content=Google+Reader[5/23/2011 12:52:07 PM]
Smal l Busi ness
Comebac k s
How to Stage a Small-Business
Comeback
How a Microbusiness Rebounded
from the Recession
Famous 'Trep Failures -- and
Comebacks
Mor e i n t hi s ser i es »
Real i t y Chec k
Aronovich and his partner had
to ask a lot of tough questions
to help get their company back
on track. Consider how these
might help you revamp
:
• Is your pricing model in need
of an overhaul?
• How can you lessen the risk
for your customers when it
comes to buying your product
or service?
• Are you making enough of an
effort to understand your
sponsored by
sponsored by
Operations
Running a Business
Real Estate
Technology
Popular Forms
A Low Poi nt
By the start of 2009, the decline was too drastic to ignore. For the month of
March, revenues were down to $54,000 from a monthly average of $70,000
before the downturn, while monthly overhead costs topped $30,000.
Aranovich, who has a law degree and Pesochinsky, who has a background in
development, knew their service needed to be priced differently, if
they had any hope of turning the business around.
That's when the partners began taking a
closer look at membership rates. They
realized the company was doing little to
make sure members renewed
subscriptions once their year was up. "The
best customer from our perspective is
someone who has been with you,"
Aranovich says. "To acquire a new
customer is much more expensive than to
keep an old one."
While was shrinking, Aranovich's
family was growing. At the time, he had a
three-year-old at home and another baby
on the way. Nonetheless, it became clear
that the company, which employs three
full-time and two part-time contract
workers, needed to make a drastic
change. Aronovich and his partner decided
to give up their paychecks for three months to avoid going into debt, while
putting in 100-hour weeks to come up with a new pricing strategy for the
company.
Tur ni ng t he Tabl es
The partners decided to try incentives to attract more customers. First, they
established a free three-day trial that let people test out the service and decide
if they wanted to cancel before paying. Market research had suggested that
giving customers a chance to try a service would make them far more likely to
choose it. "If we made it less risky for our customers, they would be more
likely to activate an account," Aronovich says.
On top of the new incentive, the company restructured its pricing model.
Instead of requiring an upfront fee of $40, they offered the free three-day trial
with the option of cancelling before charges were applied. The monthly
recurring charge would allow members to opt out when they wanted, but also
let the company charge more over time given the shorter-term commitment.
Over the next few months, the company
experimented with various price points,
giving their sales figures to a statistician
whose number-crunching determined that
the best rate to charge was $18.95 a month.
But when the new pricing went into effect at
the end of May, revenue fell to its lowest
ever -- less than $20,000 in J une as the
company began building its new membership
base. Over time, monthly sales began to
rebound, climbing from $20,000 to $30,000
and eventually reaching $82,000 a month in
less than a year's time.
Today, nearly 60% of the people who opt for
the company's free trial stay on to sign up for
a monthly subscription. The new pricing
model generates nearly six times more
Shi ppi ng & Logi st i c s
What you need to know
about sending and receiving
packages to keep costs in
line and your business running smoothly.
Smal l Busi ness
Resour c e Cent er
From how-to guides to
business forms and essential tools, you'll find
all the resources you need to start a business.
Fi ndi ng t he Ri ght Busi ness
Thinking about starting something of your
own? This guide can help you learn how to go
from dreaming to doing.
Commer c i al Vehi c l e Cent er
Business owners who are going places
depend on their vehicles to help get there.
I nsur anc e Cent er
Learn about insurance coverage options and
cost savings for business owners with a range
of needs.
Smal l Busi ness Comebac k s
How inspired companies are emerging from
the recession and their resourceful strategies
for staging a turnaround.
I nnovat or s
Meet the innovators who are changing the
face of business and society with creative
solutions to today's problems.
Top Sear c hes
St ar t i ng Your Ow n Busi ness
St ar t Smal l Busi ness
St ar t Onl i ne Busi ness
I nt er net Busi ness Oppor t uni t i es
At Home Busi ness I deas
Home Base Busi ness
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business
your
business
How Pricing Can Power a Turnaroundhttp://www.entrepreneur.com/..._medium=feed&utm_campaign=Feed:+entrepreneur%2Flatest+%28Entrepreneur+Update%29&utm_content=Google+Reader[5/23/2011 12:52:07 PM]
customers and their changing
needs?
Print
102
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Franchise News
revenue for every customer who stays for a
full year compared with the original $40 flat
rate. "It offers a lot more stability in terms of
knowing how much revenue comes in," Aronovich says. "Even if we get less
new people in a particular month, we know we will get renewals from the
previous month."
In 2010 the company earned more than $930,000 in revenue, a 58% increase
from the $588,000 in annual revenue from the year before.
Lessons Lear ned
Reaching out to customers for feedback and testing various prices before
settling on one allowed the company to come up with the most profitable
business strategy. "You can always pivot your strategy to make your business
more successful in troubling times," Aronovich says.
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1 St ar t i ng Your Ow n Busi ness
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Shar e Your Thought s
Show i ng 2 c omment s
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Real-time updating is enabl ed . (Pause)
Really I do not agree with the particular pricing strategy implemented as from $40/year to
$18/month and that's $216/year (this is like taking for guranteed that customers have a
peanut size brain!!) but I agree that good pricing matrix and restructuring is needed
sometimes that not only benefits the business but at the end customers too.
Sign Up for the Latest in:
Starting a Business
Sales & Marketing
Growing a Business
E-mail* Zip Code*
Share
Confirm
Send Like You like How Pricing
Can Power a
Turnaround. · Admin
Type your comment here.
Post as …
Ashvi n Her e 36 minutes ago
submit
Newest first
doc_144681528.pdf
How Pricing Can Power A Turnaround
How Pricing Can Power a Turnaroundhttp://www.entrepreneur.com/..._medium=feed&utm_campaign=Feed:+entrepreneur%2Flatest+%28Entrepreneur+Update%29&utm_content=Google+Reader[5/23/2011 12:52:07 PM]
Home Ask Ent r epr eneur Gr ow Your Bi z Busi ness I deas Fr anc hi ses & Oppor t uni t i es Vi deo Tool s & Ser vi c es
Print Comments (2) 102
GovernmentAuctions.org Co-founders Ian
Aronovich and Michael Pesochinsky.
Photo courtesy of RS Photo Lab
FEED
sponsored by
Communi t y Bl og
Franchises for Sale | SecondAct.com | Mobile | Subscribe | Newsletters | Follow:
Ent r epr eneur of 2011 Cont est - Enter to Win by J une 15
St ar t i ng a
Busi ness
How-To Guides
Business Ideas
Startup Basics
Business Plans
Getting Financing
Finding Customers
Inventing
Suc c ess St or i es
Going Green
View All
Money
Sal es & Mar k et i ng
Fr anc hi ses
Bi z Oppor t uni t i es
Home Based Bi z
Onl i ne Busi ness
Management
Human Resour c es
Tec hnol ogy
Wor k Li f e
Magazi ne
Mobi l e
Mor e Resour c es
Events
Business Calculators
College Search
Franchise Your Biz
Columnists
Business Forms
Startup Books
Classifieds
Trade J ournals
Encyclopedia
Slideshows
Get the Magazine
Home >Starting a Business >Success Stories >How Pricing Can Power a Turnaround
How Pricing Can Power a Turnaround
A smal l busi ness over haul s i t s f ee model t o w oo
c ust omer s and mak e a c omebac k .
By J ane Porter | May 23, 2011
Offering your product for free may
not appear to be the smartest move
when is cash-
strapped and struggling. But for Ian
Aronovich, 38, co-founder and chief
executive officer of
GovernmentAuctions.org, an
aggregator of government-auction
listings, making his service free to
the public for a trial period is
precisely what helped turn around
the in the recession.
In 2008, GovernmentAuctions.org,
which provides information on
surplus and seized items being sold
at government auctions around the country, was operating on the same pricing
model that Aronovich and his partner Michael Pesochinsky developed when
they launched the business in 2003. The Great Neck, N.Y.-based company
charged customers a $40 annual subscription fee to access to auction listings
of items ranging from dump trucks and unclaimed land to electronics and
jewelry. The service should have been particularly appealing to cash-strapped
consumers, Aronovich says, but when the recession hit, sales began to drop.
"People liked our membership, but didn't want to shell out one lump sum for
the entire year," he says.
Today on Entrepreneur
Six Quick-Hit Marketing Ideas for Social Media
When You're Hungry for Sales, Consider These Lead-
Gen Tools
How Pricing Can Power a Turnaround
For This Entrepreneur, Velvet Elvis Paintings Were J ust
the Start
The Top 10 Commercial Cleaning Franchises
More Stories »
Bestsellers
St ar t Your Ow n Busi ness,
Fi f t h Edi t i on
From startup to year three--save time and
money, minimize mistakes and maximize
profits.
Learn more »
Ent r epr eneur Magazi ne' s
Busi ness Pl an Pr o
Create a business plan today with the #1
selling business plan software. Save time,
avoid mistakes and create winning plans
that get results.
Learn more »
Resource Centers
Rest aur ant Cent er
From sandwich shops to full-
service restaurants, learn how to turn your
culinary passion into a business.
Email Share
Confirm
Like
your company
company
How Pricing Can Power a Turnaroundhttp://www.entrepreneur.com/..._medium=feed&utm_campaign=Feed:+entrepreneur%2Flatest+%28Entrepreneur+Update%29&utm_content=Google+Reader[5/23/2011 12:52:07 PM]
Smal l Busi ness
Comebac k s
How to Stage a Small-Business
Comeback
How a Microbusiness Rebounded
from the Recession
Famous 'Trep Failures -- and
Comebacks
Mor e i n t hi s ser i es »
Real i t y Chec k
Aronovich and his partner had
to ask a lot of tough questions
to help get their company back
on track. Consider how these
might help you revamp
:
• Is your pricing model in need
of an overhaul?
• How can you lessen the risk
for your customers when it
comes to buying your product
or service?
• Are you making enough of an
effort to understand your
sponsored by
sponsored by
Operations
Running a Business
Real Estate
Technology
Popular Forms
A Low Poi nt
By the start of 2009, the decline was too drastic to ignore. For the month of
March, revenues were down to $54,000 from a monthly average of $70,000
before the downturn, while monthly overhead costs topped $30,000.
Aranovich, who has a law degree and Pesochinsky, who has a background in
development, knew their service needed to be priced differently, if
they had any hope of turning the business around.
That's when the partners began taking a
closer look at membership rates. They
realized the company was doing little to
make sure members renewed
subscriptions once their year was up. "The
best customer from our perspective is
someone who has been with you,"
Aranovich says. "To acquire a new
customer is much more expensive than to
keep an old one."
While was shrinking, Aranovich's
family was growing. At the time, he had a
three-year-old at home and another baby
on the way. Nonetheless, it became clear
that the company, which employs three
full-time and two part-time contract
workers, needed to make a drastic
change. Aronovich and his partner decided
to give up their paychecks for three months to avoid going into debt, while
putting in 100-hour weeks to come up with a new pricing strategy for the
company.
Tur ni ng t he Tabl es
The partners decided to try incentives to attract more customers. First, they
established a free three-day trial that let people test out the service and decide
if they wanted to cancel before paying. Market research had suggested that
giving customers a chance to try a service would make them far more likely to
choose it. "If we made it less risky for our customers, they would be more
likely to activate an account," Aronovich says.
On top of the new incentive, the company restructured its pricing model.
Instead of requiring an upfront fee of $40, they offered the free three-day trial
with the option of cancelling before charges were applied. The monthly
recurring charge would allow members to opt out when they wanted, but also
let the company charge more over time given the shorter-term commitment.
Over the next few months, the company
experimented with various price points,
giving their sales figures to a statistician
whose number-crunching determined that
the best rate to charge was $18.95 a month.
But when the new pricing went into effect at
the end of May, revenue fell to its lowest
ever -- less than $20,000 in J une as the
company began building its new membership
base. Over time, monthly sales began to
rebound, climbing from $20,000 to $30,000
and eventually reaching $82,000 a month in
less than a year's time.
Today, nearly 60% of the people who opt for
the company's free trial stay on to sign up for
a monthly subscription. The new pricing
model generates nearly six times more
Shi ppi ng & Logi st i c s
What you need to know
about sending and receiving
packages to keep costs in
line and your business running smoothly.
Smal l Busi ness
Resour c e Cent er
From how-to guides to
business forms and essential tools, you'll find
all the resources you need to start a business.
Fi ndi ng t he Ri ght Busi ness
Thinking about starting something of your
own? This guide can help you learn how to go
from dreaming to doing.
Commer c i al Vehi c l e Cent er
Business owners who are going places
depend on their vehicles to help get there.
I nsur anc e Cent er
Learn about insurance coverage options and
cost savings for business owners with a range
of needs.
Smal l Busi ness Comebac k s
How inspired companies are emerging from
the recession and their resourceful strategies
for staging a turnaround.
I nnovat or s
Meet the innovators who are changing the
face of business and society with creative
solutions to today's problems.
Top Sear c hes
St ar t i ng Your Ow n Busi ness
St ar t Smal l Busi ness
St ar t Onl i ne Busi ness
I nt er net Busi ness Oppor t uni t i es
At Home Busi ness I deas
Home Base Busi ness
ads by medi a.net
Business Forms
Sear c h over 1,000 busi ness f or ms and
doc ument s.
Legal
Finance
Entrepreneurship
HR / Careers
Marketing
Search all forms »
software
business
your
business
How Pricing Can Power a Turnaroundhttp://www.entrepreneur.com/..._medium=feed&utm_campaign=Feed:+entrepreneur%2Flatest+%28Entrepreneur+Update%29&utm_content=Google+Reader[5/23/2011 12:52:07 PM]
customers and their changing
needs?
102
Follow us on Twitter
Get the Magazine
Online Business
Franchise News
revenue for every customer who stays for a
full year compared with the original $40 flat
rate. "It offers a lot more stability in terms of
knowing how much revenue comes in," Aronovich says. "Even if we get less
new people in a particular month, we know we will get renewals from the
previous month."
In 2010 the company earned more than $930,000 in revenue, a 58% increase
from the $588,000 in annual revenue from the year before.
Lessons Lear ned
Reaching out to customers for feedback and testing various prices before
settling on one allowed the company to come up with the most profitable
business strategy. "You can always pivot your strategy to make your business
more successful in troubling times," Aronovich says.
Connec t w i t h Ent r epr eneur
Become a fan on Facebook
Free apps for iPhone and iPad
1 St ar t i ng Your Ow n Busi ness
2 How To St ar t A Smal l Busi ness
3 St ar t Onl i ne Busi ness
Top Sear c hes
ads by medi a.net
Shar e Your Thought s
Show i ng 2 c omment s
Sort by Newest first Subscribe by email Subscribe by RSS
Real-time updating is enabl ed . (Pause)
Really I do not agree with the particular pricing strategy implemented as from $40/year to
$18/month and that's $216/year (this is like taking for guranteed that customers have a
peanut size brain!!) but I agree that good pricing matrix and restructuring is needed
sometimes that not only benefits the business but at the end customers too.
Sign Up for the Latest in:
Starting a Business
Sales & Marketing
Growing a Business
E-mail* Zip Code*
Share
Confirm
Send Like You like How Pricing
Can Power a
Turnaround. · Admin
Type your comment here.
Post as …
Ashvi n Her e 36 minutes ago
submit
Newest first
doc_144681528.pdf