What business owners don’t know about price would fill a shelf-full of books.
Me too, at first.
It’s a steep learning curve, this running a business, isn’t it?
This is a long blog post, so get yourself a cuppa and read it carefully. I reckon the ideas in here are among the most valuable in this series.
Price is elastic.
Let me ask you a question. What do you think people consider most important when deciding to buy something? Actually, I can’t tell you the answer, because it depends on the person, the product and their reason for buying.
I can tell you, though, that only a tiny proportion of people buying anything make their decision solely or mostly based on cheapest price.
If everyone bought on price alone, the only clothes shop would be Primark and we’d all be driving Dacias (Britain’s cheapest car).
Are you Primark, John Lewis or Harrods? Dacia, Mondeo or Rolls-Royce?
As long as you’re comfortable with your positioning and it will get you closer to your goals, that’s great. I’m not judging – not everybody can be Harrods!
People buy at different price levels.
Go deluxe! One of my mentors, Peter Thomson, is always telling us to go deluxe.
There are Primark and Harrods customers in every category, no matter what you sell. Think of ways to ‘deluxe’ your product or service. Can you do it faster? Most people – rich people particularly – will pay a premium to get what they want straight away.
Can you add something extra – some more of ‘you’ to your product or service?
For example, I offer the 49 Ideas, my Inner Circle subscriptions, and my paid-for courses. But if you want a really tailored approach, where I go in-depth with you into your business and give you the individual benefit of my skills and experience, you pay a premium for that.
Competing on price is a dangerous game.
The really successful business owners know this. In fact, they don’t just know it, they grok* it.
If you can’t be the cheapest and make that your USP, there is no benefit at all in being at the bottom of the barrel with the rest of the ‘almost cheapest’. That is truly crap positioning.
Do not be a commodity.
I repeat: do not be a commodity. Life is way too short and you are worth much more than that.
If you keep lowering your prices in line with your competitors, you will lose. Eventually you will start losing money on your product or service, and your business will crash and burn. Plus, it’s not doing your customers or suppliers any favours. It’s a bad way to do business.
And it’s how the big supermarkets are screwing over our farmers.
Industry norms are meaningless to your business.
We’re back at positioning again. It’s really common, when starting a business, to look at what everybody else is charging. I did it. I’m sure you did it – and perhaps still do.
We look at what others are charging and pick somewhere in the middle.
Stop it now!
It’s a crazy way to sell for a couple of reasons, which will become obvious when you think about it. I mean, if you came to your prices like that… most other people must have done the same thing. Right? Which makes pricing completely arbitrary.
Dan Kennedy, marketing genius, puts it like this: “Understand that everybody else has arrived at their price decisions through the same foolish process as you might now. It’s price incest, which works like regular incest: over time, everybody gets dumber.”
Most selling occurs in a vacuum (meaning people are focused on the thing in front of them, not all the other options) and if yours doesn’t, you should alter your approach to marketing. Of course, that’s why you’re here – to do just that.
Remember yesterday when I said you want relational customers, not transactional ones? This is what I was talking about.
Here’s a concept you might find difficult to get your head around, but get your head around it you must.
You don’t have any competitors.
Your business is different from everyone else’s: it has you. How you structure your business, how you package your product, how you sell it, how you deliver it… all that means you can price it differently. It makes direct comparison impossible.
You can wave goodbye to the price buyers.
Most business owners live in fear of pricing.
Don’t be one of them. A bit of healthy awareness is great, but don’t live in fear. Any business decision made out of fear is a bad one.
Fear drives people to needlessly under-price, to avoid raising prices in time (if at all) and to ignore opportunities to sell the deluxe version.
The price customers pay comes from the customers you select, the value you create and offer, salesmanship, credibility, brand, buying experience – and a hundred other factors. It has very little to do with objectively measured intrinsic value. If it did, rubies and sapphires would cost no more than coloured glass.
Be brave. Choose your target clients carefully. Find out what they spend their money on now, and how highly they will value what you can offer.
Contrast that with what they could gain. For example, my services ain’t cheap. But they are excellent value, because I know that if my clients implement my services and take my advice, they’ll make £thousands (if not more).
So do something for me today. Go away and look at your pricing. Really look at it. Look at what you offer, how much it costs, how much you make, and what you offer. What’s your real value?
Now put your prices up by 10%. That’s the fastest way to increase your profits I know. Most of your clients won’t notice. The majority of the ones who do notice won’t mind.
*Grok means to understand something so deeply, it becomes part of you – you live it.
Vicky Fraser is a copywriter, author, and entrepreneur. She really did run away with the circus… but when she’s not swinging from a trapeze, she’s showing other copywriters and small business owners how to work with better clients, make more money, and stop missing bathtimes, first words, and dinners with angry partners. In fact, she wrote the book on it. Get your copy here.