Issue #2337

• WEALTHY: A book any investor should read (Michael Masterson)
• HEALTHY: Good news for your teenager’s face (Dr. Ray Sahelian)
• WISE: Juvenal on the price of knowledge

ALSO IN THIS ISSUE:

• 5 ways to keep customers from complaining that you charge too much (Bob Bly)
• One way to become a little bit wiser today (Judith Strauss)
• It’s Good to Know… about bug spray
• Add "coeval" to your vocabulary

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Invest Like a Dealmaker

By Michael Masterson

In the 1880s, a merchant named Patterson converted his small company’s cash box into the world’s first cash register. He did it to reduce employee pilferage. Had he left it at that, it would have been of modest value to him. Instead, the moment he realized he had a machine that would work for other retailers too, he went into the cash register business. In 1884, National Cash Register (NCR) was born.

In a now-famous speech on "worldly wisdom," Berkshire Hathaway vice chairman Charlie Munger said, "A well-educated orangutan could see that buying into partnership with Patterson in those early days… was a total, 100 percent cinch."

It’s not surprising that Patterson’s cash register business became a big success. It was the right idea at the right time – a useful tool for an industry that was exploding, like information publishing is exploding on the Internet today.

And that’s the secret of successful investing, Christopher Mayer says in his new book, Invest like a Dealmaker: finding companies that have many things working in their favor, not just the fundamentals of the company itself.

"When many forces are working in your favor," Mayer says, "amplifying and reinforcing each other, you get what Munger calls a ‘lollapalooza effect.’" It’s like critical mass in physics. Create enough concentration of mass and you’ll set off a nuclear explosion.

The average investor has the wrong idea about how the stock market works, Mayer says. "He thinks about the price of his stock in terms of its quoted stock price. But even then… he often misunderstands what that price represents."

Mayer explains that a stock’s quoted price represents only part of the stock’s underlying value: the company’s equity.

You can determine the total equity of a company by taking the quoted stock price and multiplying it by the total number of shares that are trading on the stock exchange (the shares outstanding, to use the trader’s term). But then you need to add to that the company’s total debt. The combination of debt and equity gives you the total worth of the company – its enterprise value, as stock experts like to call it.

Most investors focus on a company’s P/E ratio – the relationship between the stock’s market price and its earnings per share. That gives you an idea of how enthusiastic the market is about the company’s growth potential. (In general, faster-growing and less-risky companies have higher P/E ratios.)

But a better way to make investment decisions is to invest like a professional trader, Mayer says. And a dealmaker will always want to compare earnings to enterprise value, because this gives him the bigger picture – the kind of picture you’d have if you were investing personally in a company.

That’s just the first of several important investment concepts that Mayer teaches in his new book: Invest like a Dealmaker. I read it. I liked it. I recommend you read it too.

[Christopher Mayer isn't the only one who can help you become a better, more prosperous investor. ETR's Rick Pendergraft has created a trading service based on investing principles that are super-simple to understand. Learn the details here.]

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"All wish to possess knowledge, but few, comparatively speaking, are willing to pay the price." 

Juvenal

The Price Is Right

By Bob Bly

Ask most experienced direct marketers "What’s the best price to charge for my product," and the answer will be: whatever the market will bear.

In direct marketing, we can test prices and quickly see which is the most profitable – generating the highest return on our marketing dollars (ROMD). And, surprisingly, tests show that higher prices sometimes generate more orders than lower prices. In one classic example, a publisher was offering a service teaching presentation skills to business executives. When they tested $197 vs. $297 in their advertising, $297 was the winner.

Most direct marketers conclude that if the higher price wins, they should go with that. But while this is a sensible strategy in most instances, are there any situations in which charging a too-high price may come back to bite you… even if your price tests show the higher price to be the winner?

I can think of several.

The first is when pricing professional services.

GD, a pricing expert, once told me that the ideal price level for professional services is in the middle of the top third – NOT "the most you can get."

Let’s say the hourly rates for service providers in your industry range from $100 at the bottom to $400 at the top.

You don’t want to be in the lower third of the price range, charging $100 to $200 an hour, because prospects equate a bargain price with inferior quality.

Pricing in the middle range, at $200 to $300 an hour, isn’t bad. But it makes you one of the herd – a commodity.

The top range is an hourly rate between $300 and $400. So by following GD’s advice, you would set your hourly rate at $350, smack dab in the middle of the upper third. This is high enough that you are perceived as a top professional in your field, but not so high that you are always the most expensive provider of your service.

You see, if you are the highest-priced provider in your field, not only will new prospects hesitate before hiring you. "Every time you give your current clients an estimate, they will strongly consider bidding the job out for competitive quotes rather than just signing your agreement," said GD. "One day, they will try someone else, find they get equivalent service for a lower price, and you will never hear from them again."

Another problem with charging outrageously high prices is that it creates ill will between buyer and seller. The buyer feels ripped off, and complains loudly about things he might otherwise let pass. Also, if you charge a premium price and you fail to deliver the premium results you promised, that client will never hire you again… and will badmouth you to others.

Here’s another sign that your prices are too high: a spike in your refund rate.

So how do you put a logical limit on your pricing?

My friend, information marketing guru Fred Gleeck, has a simple rule. "I don’t sell a product unless I truly believe the content is worth at least 10 times the price I am charging," he says.

Then there is an ethical question: Given our free market society, is it okay for a drug company to charge a price for a proprietary medication that only the wealthiest patients can afford – especially when doing so effectively sentences poor people with the disease to death?

Fortunately, most of us don’t market products that people absolutely can’t live without… though some of us price our products as if that were the case. However, no matter what your pricing is – high, low, or in between – rest assured that some folks will complain about it.

Is there a way to prevent consumers from protesting against your high prices? Yes. By offering them options for getting your information cheaper. Like this:

• The premium consulting service. A high level of personal service rendered by you or another top specialist and priced accordingly… in the thousands of dollars.
• The mid-range coaching service. The customer does most of the work, but you offer advice, support, and encouragement through weekly telephone calls, online help, or some other mechanism.
• Information products. You sell a manual, DVD, or audio learning system that teaches people how to solve a problem themselves. It’s reasonably priced (in the hundreds of dollars), and involves little or no service or support on your part.
• A book. A how-to e-book or traditionally published book on your topic… selling for anywhere between $10 and $50.
• Free content. How-to information delivered via your blog, podcasts, free Webinars, e-newsletters, special reports, or content-rich websites.

By giving your customers several ways to get your information inexpensively, it will be impossible for them to complain that you are too expensive or unfairly priced. You simply point out that if they can’t afford your high-end products and services, they can avail themselves of your expertise through your e-book, e-newsletter, or free online content.

You’ll be able to sleep at night, confident that people won’t be thinking of you as a greedy opportunist and besmirching your reputation.

Or at least not doing so loudly.

[Ed. Note: Bob Bly is a freelance copywriter and the author of more than 70 books. Together with Michael Masterson, Bob has put together a comprehensive program that reveals insider secrets to direct marketing. Keep in mind that you can use direct marketing to help you grow any business - whether it's a brick-and-mortar store or an online company. Learn the details here.

Sign up for Bob's free monthly e-zine, The Direct Response Letter, and get more than $100 in free bonuses.]

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Living Rich: How to Read a Poem

By Judith Strauss, ETR’s Senior Editor

"One ought, every day at least, to hear a little song, read a good poem, see a fine picture, and… speak a few reasonable words." If you’re a longtime reader of ETR, you know that Michael Masterson has referred to this quote by Johann Wolfgang von Goethe several times.

It’s a reminder that there’s more to life than money. That, to be an interesting, well-rounded person, you have to spend time building the "personal you" as well as your bank account.

"Okay," you might be saying, "I can listen to a little good music every day. I can make it a point to look at something that’s visually appealing (though maybe not a painting). And I can at least try to have a challenging or entertaining conversation. But when it comes to reading poetry… I’d rather skip that one."

Let me try to change your mind by showing you how easy it is to read – and enjoy – a good poem. And by "good," I mean a poem that (like a good book) you get more out of every time you read it.

• Get yourself a collection of poetry – maybe something with "Best" in the title. Flip through and find a short poem to start with. Like this one by Langston Hughes:

A Dream Deferred

What happens to a dream deferred?

Does it dry up

like a raisin in the sun?

Or fester like a sore -

And then run?

Does it stink like rotten meat?

Or crust and sugar over -

like a syrupy sweet?

Maybe it just sags

like a heavy load.

Or does it explode?

• Read it out loud, without trying to figure out what it means. And don’t stop at the end of a line. Let the punctuation show you where to pause.
• Read it again… looking for patterns. Then read it again, feeling the rhythm. And read it again, focusing on how the strong images are reflected in the sound of the words used to describe them. And read it again, this time thinking about what it means.

By now, I’ll bet you’ve got this poem memorized. (It’s easy to memorize good poetry.) And I’ll bet you won’t forget it either.

That wasn’t hard, was it? And don’t you feel just a little bit wiser?

A poem a day. Try it.

[Ed. Note: Improving your personal self should be one of your primary goals every year. And it can be as simple as reading a poem a day. Learn how to accomplish all your goals - personal, social, business, and financial - with ETR's Total Success Achievement program. Get the details here.]

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Acne Improved on Low-Glycemic Diet

By Dr. Ray Sahelian, MD

Foods that produce a high glycemic load – such as sugared drinks, white bread, and white potatoes – cause a quick rise in blood sugar. More complex carbohydrates with fiber, such as unrefined cereals, grains, and beans, have a more gradual effect on blood sugar, and, thus, have a low glycemic index. Eating low-glycemic foods can help stave off obesity and diabetes. It can also help clear up unsightly acne.

Dr. Robyn N. Smith, from the RMIT University in Melbourne, Australia, evaluated acne symptoms in 43 male patients. The participants – who ranged in age from 15 to 25 – were randomly assigned to a low-glycemic-load diet or a normal diet. After three months, the low-glycemic diet was associated with a significant reduction in acne compared with the normal diet. In addition, the low-glycemic diet produced greater reductions in body weight and body mass and a greater increase in insulin sensitivity.

One reason for the success of the low-glycemic diet is that it limits the increase in insulin levels. Chronically high levels of insulin may lead to blockages in skin pores and extra oil building up under the skin.

Along with sticking to low-glycemic foods, eating lots of fish full of omega-3 EPA and DHA oils is very helpful for people with acne. Even with the best diet, many teenagers will be bothered with pimples. But their skin problem is likely to be less severe when they adopt a healthier diet.

[Ed. Note: Ray Sahelian, MD, the author of Mind Boosters, is internationally recognized as a moderate voice in the evaluation of natural supplements. Visit Dr. Sahelian's website at www.RaySahelian.com, and read his articles about the supplements you should and shouldn't be taking at ETR's free natural health e-letter.]

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It’s Good to Know: About Bug Spray

Insect repellant with the powerful chemical DEET has been a mainstay of outdoorsmen and campers for 50 years. But until now, nobody really knew how it worked.

The authors of a new study have found that DEET blocks insects from "smelling" people by overwhelming their odor receptors. The insects’ sense of smell is blocked temporarily, and they can’t find their target.

(Source: National Geographic )

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== Highly Recommended ==

You CAN learn to become wealthy!

Success is not encoded in an individual’s DNA and does not transfer from father to son or mother to daughter. It is a process – and learning the process is a major KEY to setting up for success.

Today I’d like to offer you two complimentary reports to help you get started: “How To Get What You Need To Succeed In Life" and "Simple Guidelines for Creating Abundance In Your Life."

There will be many steps you take towards your goals where it will feel like you’re taking two steps forward and one step back. You will have breakthroughs, triumphs, and opportunities to overcome adversity.

But to keep moving forward, you just might need a friendly kick-in-the-pants every once in a while. Here’s how to stay energized towards action and success every day of the year.

- Charlie Byrne

Word to the Wise: Coeval

"Coeval" (koh-EE-vul) means of the same age, originating or existing during the same period of time. It is derived from the Latin for "lifetime."

Example (as used by Mark Mathabane in Newsday): "Coeval with human speech and found among all peoples, poetry appeals to our sense of wonder, to our unending quest for answers to the timeless questions of who we are and why we are."

Copyright ETR, LLC, 2008

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This entry was posted on Wednesday, April 23rd, 2008 at 5:10 am and is filed under Daily Issues .