Edvin

MVP
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Rising from the ashes...
Start: The Rising (Part 1) - Introduction
Previous: The Rising (Part 10) - Franchise or Not to Franchise
Current: The Rising (Part 11) - Working On/In The Business
Next: The Rising (Part 12) - Name/design, Financial, Technology

The saga of my entrepreneurship continues; make no mistake, it is a journey...

My Son's and I visited USS Hornet battleship museum in bay area California, and it was a great experience. The Hornet not only has an impressive history; but, it provides great educational opportunity.
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Differentiation:
During our visit I couldn't help thinking about how I can bring this monumental entity int to my learning center through STEM (Science, Technology, Engineering, Mathematics) education. During our visit we saw the catapult, which is responsible for launching the fighter jets.

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This got me thinking that I can create a Lego model of the catapult to educate about pressure, pneumatic system, mechanical advantage of pulley systems, etc.
My model (not working yet) can demonstrate the concepts as well as evoke excitement.

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I can't help get excited about this because I personally would find it valuable to put my kids through such boot-camps; but, there are non-available in my area.
In case you are wondering, I did look into Bricks4Kidz and Young Engineers franchise; but ultimately decided that the business models are restrictive with my goals & ambitions.

So, now I appear to be reinventing the wheel...

I can't help think that showcasing real-life system with a lego model will excite both parent and child when they walk-into-the store. I have this vision of wowing the customers with other amazing science artifacts in the store, like a floating light...
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Recall, that I intend to use STEM as marketing strategy, my real business model is to provide supplemental education for K-12.


But, wait, what am I doing? Am I working "On" or "In" the business? Am I wasting my time building Lego models when I can download lego models and respective education curriculum?


I find myself answering that I am indeed wasting time when I can download ready made solutions, which can serve as a product. I've lost enough time in researching franchise option and delay writing business plan.

I still don't have a product for my core business; though, I have narrowed it down to two vendors to help with delivering personalized lessons. I'm awaiting for respective sales to demo the products.


So, I guess I can start working on my business plan...​

Pricing:

My mind begins to wonder about pricing strategy ...
Do I really need to have my price end with #9?

I googled psychology of 99 pricing and found an excellent article titled the 5 Psychological Studies on Pricing That You Absolutely Must Read. The article has the following highlights:
  1. Providing comparative pricing chart can be negative
  2. Time is a better seller than money
  3. Provide useless-price, which transforms bargain hunter to value-seeker
  4. Prices ending with 9 yield 24% increase in sales
  5. Context of pricing matters (i.e. beer from hotel is worth more than beer from grocery store)
Interestingly when I read the comments I find that apple app store requires the pricing of products to end with 9. Similarly, there is another trend with numbers ending with 7.
There is research that states numbers end with 9 evokes consumers to shop by feeling where as when the number ends with odd number 7, consumers must use reason to determine if the price is a good value.
When using nine, it is important that left most digit changes. That is, changing $3.00 by one cent yields to $2.99.
Additional insights to increase sales include: putting sale price next to standard item, change font size/color of sale next to standard price, increase price of an item to change perceived value.


But the real reason for researching the prices is to determine my pricing strategy...

I learned that cash-flow is a big issue for many business failures.
So, does reducing my price accelerate my in-cash or should I consider raising the price above my competitor and focus on differentiation and the value? I can test this; but, should I be testing when I have zero in-cash flow and risk losing the customer?
It seems to me that I should stay in the same price range as my competitor and focus on the value to avoid losing bargain hunters during my initial startup.

I have two main competitors; one charges a premium and the other is more economical. My plan is to play at the premium market. Perhaps, I can show the premium price and show sale price, which is comparable to my economical competitor.
But, am I cannibalizing by providing discounted price so early? Again, I have to remind myself that I need the initial cash flow; but, I ask again how does reducing the price guarantee higher enrollment. That is, does 50% price reduction equate to more than double enrollment? If not, than it makes no sense to reduce the price.

Perhaps, I should consider Penetration Pricing to undercut the competitors; but, risk losing and undercutting my perceived value.

Perhaps I can do both...
My plan is to sell certain number of tutoring hours as a package (i.e. 30h, 60h, 100h). In case you are wondering, I came up with this strategy during my franchise selection research.
I can offer the first half of hours at penetration price and second half at premium.
Or is it better to say Buy X hours and get Y hours free.
It seems that I have several options that I can experiment without reducing the perceived value of my service, and I might be able to A/B test to find the best pricing strategy.​

I still have more work ahead of me. The contents of these posting will undoubtedly be the foundation of my business plan document, which requires more research in price shopping (signage, leasing, etc), and penetrating community (local PTA, City camp and follow community facebook/twiteer, etc).
 
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