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Last Update: Thursday July 29, 2021

Key Idea: Be Willing to Buck the System

Co-founder Bud Konheim says that a customer's happiness correlates with the price they must pay for your goods or services. 

Key Question:

A: 

Price things to please people.  Customers need to be smiling when they buy from you not frowning.  Typically we price something based on our cost of goods (including direct costs such as materials and labor) and indirect costs (marketing and administrative), so we have some margin. Margin is good, but Bud wants us to be also sensitive to "the feel good factor." Oh boy, if it isn't hard enough just to break even, we now have a "fun" factor. Is this good business?

A: The proof is in their presence. Look at Bud and Nicole, they not only exist; they thrive. Creating a "fun" moment --"I'm going to buy this!" -- that feel-good factor is not just good business, it is good for our souls. Bud isn't talking about what "the market will bear" or some multiplier of his total costs; he is talking about a unwritten contract between the buyer and seller. "You treat me fair, you make a good profit, stay in business and keep making things that I enjoy, and I will give you my business."

Q:
Bud says, "The buyer half the time has no idea who her customer is because department stores deal in traffic. Where a small store deals in trade. She knows her customer, she knows Alice, she knows Mary, she knows Sally, she knows Joan and she buys for them. And that's a business."

The distinction is between traffic and trade.

Later in the show you meet Stephanie Lyons of the La Jolla store. She says that it's the customers: "...La Jolla, Del Mar, Rancho Santa Fe – they are fabulous customers." She knows them. What is primarily real in business is the relations we have with the people around us, employees, supplier, resellers, and customers.

In this time, when we can know so much about anybody, how well should we know our customers?

A: Very well. But not as an invasion of their privacy; we should know people in real relations that are built upon social interactions and real events. Increasingly, small business has a important role to play to be a place where people really know your name. It is a part of that unwritten contract that is based on a trust muscle that needs to be exercised. There is so much distrust that is inculcated in our society through commercial television and global events, we all need small places to go.

Think about it

Would you price your products and services differently if you knew your customer more intimately? Can you add the cost of "fun" to your cost of doing business, thereby increase prices and increase sales activity at the same time? Can you more skillfully craft your niche?

Clip from: Nicole Miller - Fashion & Quality

Nicole Miller on her visit to her boutique in La Jolla.

New York, NY: In this episode we go to the heart of the fashion industry and behind the scenes of Nicole Miller, a fashion house on Seventh Avenue to meet the founders, Nicole Miller and Bud Konheim.  In an industry where even top designers have taken production overseas, Nicole Miller pieces all proudly wear the label, "Made in New York."

It's a stroke of genius for these times, but the reasons go far beyond patriotism. For Nicole Miller, it's all rooted in the fabric of the American entrepreneurial dream: pride of idea, of process, and of execution.  They earnestly try to make women happy and  they are key advocates for causes important to women.

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Nicole Miller Fashions (BK)

Bud Konheim, Co-founder

525 Seventh Avenue
New York, NY 10018
2127199200

Visit our web site: http://www.nicolemiller.com

Office: 2127199200

Business Classification:
Fashion

Year Founded: 1982

Be Willing to Buck the System

HATTIE: The company has grown by creating fashions they love, by developing their own sales channel and by licensing Nicole's designs to 15 different firms who make handbags, travel accessories, socks and more. Nearly half of today's 130 million in annual revenue comes from the licensing of designs by Nicole.

 
BUD: The price strategy has to be part of the fun. If a customer is going to pick up a tag and say “This is uncomfortable for me, it's not fun.” So it doesn't have to be cheap – it has to be something that she expects it to be. I mean, I think that's probably the key. They come through a Nicole Miller awning knowing there is no designer price punishment. It's going to fun clothes – they are going to wear it and they are going to have a great time. It's as well made as anything – it's certainly original design.

We have runway shows just like everybody who charges 50 times the price. But, it's got to work for her the way she expects it. She expects to pay a certain price in there, and if we break that barrier, it is uncomfortable and she's likely not to buy it.

If you start out selling department stores, there's no feeling of anything. If there is a buyer there or a merchandiser or a controller, because you don't even have people selecting the merchandise anymore, you are selling into an office; you present and you don't know who the customer is.

The buyer half the time has no idea who her customer is because department stores deal in traffic. Where a small store deals in trade. She knows her customer, she knows Alice, she knows Mary, she knows Sally, she knows Joan and she buys for them. And that's a business.

This ambiguous stuff, where you just buy stuff for somebody or the trade or the people. There is no focus to that and there is no meaning to it. And it is much more difficult when you are buying by some sort of computer profile.

What Nicole Miller is today absolutely flies in the face of everything.

It is a young looking line at better than young cheap prices. It is not really very expensive and it's also a little bit longer waisted. That's what we do. And when department store come in here, their big question is, “Who do you hang with?” Because all our missy stuff is still conservative, and all our trendy stuff, they call it contemporary (they change the names all the time) is all on this other thing – it's cheaper, and it's flashier and it's not well-made but nobody cares.

I say, “But, this is what we do. This is what we do.” We are in the middle of the whole thing and we are not like anybody else, and we have been very successful doing it.
 

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