1. Price is Elastic.
Believe it or not: Only a small percentage of buyers (of any product) base their buying decisions solely on getting the lowest price. If most did, we’d all be driving around in the cheapest cars on the market. Needless to say, we don’t!
How about the business owner (consultant) who raised the fee for his service from £ 220 to £ 2, 295 in one leap – and the same percentage of prospects continued to buy. They “stretched” with the price. If you had an identical product in three different price perceived retail locations (such as say Harrods, BHS and a Car Boot Sale), then you would see a marked difference in what people were prepared to pay for this identical product. Sometimes it’s just a variation in the target market -i.e. as our price changes, our target market may change, which brings me onto…
2. Different People Buy at Different Price Levels.
Yes, there is an Asda customer – probably in every category of retail sales. But there is also a Harrods customer. You can get a meal at Asda and you can get a meal at Harrods. You can sleep at a Travel Lodge or at a Hilton. In other words, there are many customers for whom price is low on their agenda for different services. It’s up to you to pick your target market entry level.
3. Business Owners that Compete on Price.
If you can’t be THE cheapest, there’s no benefit in being almost the cheapest. Find another way to compete. Sell on Value not on Price.
Consider a gourmet pizza take-away and delivery shop in America competing with 127 other pizza outlets – yes that’s right 127! (we all have competition don’t we?). They have the highest prices of all of them, they don’t do deals (such as 2 for 1) – and yet they doubled their sales and more than doubled their profits last year. Key word: Gourmet. What key words can you use in your business?
4. Business Owners that Pay too much Attention to ‘Their’ Industry.
A lot of businesspeople look at what others are charging in ‘their’ industry sector, and pick something between the high and the low. The problem here is that everybody else has arrived at their prices by going through the same process – and it gets worse over time. Understand that most selling occurs in a vacuum. If yours doesn’t, consider altering your entire approach. How you set your pricing is critical to your business success. There’s “price,” and then there’s “presentation of price” How can you package and deliver what you sell differently from the way everybody else does it? How can you price it differently and make direct comparison impossible?
5. The Business owner living in fear. Any business decision made out of fear is a bad decision.
Out of fear, most business owners needlessly under price their service and raise prices too little too late. It’s one of the most common problems I find when working with a business initially. They miss the opportunities to sell premium-priced versions of their products and services. As mentioned earlier: Price paid is a result of your target market selected. It’s also based around the perceived value, the presented value, your salesmanship, your credibility and many other factors. It actually has very little to do with the product intrinsic value. If it did, why would diamonds command any more value than glass or coal? Hence why not try approaching your price courageously and creatively? Increase your awareness of the goods and services your prospects spend money on, and also how much they spend.
Consider a top cosmetic dentist who routinely gives prospective patients estimates of £20,000 to £40,000 for work they want to have done. He enjoys an 80%+ conversion rate. Ok, so he’s renowned as a very good dentist, but is he 400% better than his competitor down the street … even though his fees are 400% higher?
This difference between intrinsic value and perceived value exists in every business sector. There’s always somebody successfully selling a product or service at a price that’s dramatically higher than everyone else’s… even though the quality being delivered may actually be only slightly (if at all) better. You can do it too. No matter what your product or service is intrinsically worth, your prospect will pay a premium for it if he perceives it to be worth more than all the others he can choose from. The question is…how will you create perceived value in your business…?
To Your Success,