Let’s talk about something dear to my heart: that most vile of pricing strategies, the “competitive pricing strategy”.
If there’s something that leaves me wanting to batter ignorant Brylcreemed marketing execs to death with the shiny tailpipe of their company BMWs, it’s their dumb, dumber and dumbest pontificating about “competitive pricing”.
The moment someone opens his or her mouth and spouts such inane drivel, I’m off.
And one of the worst things a potential client can do for his or her chances of joining my Private Client List is to ask me “how much do you charge?” before asking anything else. I’ll come to this in a moment.
But first, since you can probably guess I’ve got some pretty strong feelings about this, I think I’d be as well to explain.
Some Simple Truths About Pricing Strategies
- People rarely buy on price alone. Almost never, in fact. Thus pricing strategies based on the assumption they do is like cutting your own throat to drink the blood.
- If they do buy on price, it’s your own fault. Because it means YOU haven’t given them enough perceived value to make the price worth paying. Would you really care how much that corneal-transplant costs to save your precious daughter’s eyesight? Probably not. Why? Because, presumably, you value her.
- Customers and clients who do buy on price are the kind of customers and clients you’ll wish had gone to your competitors. Seriously. If they start out by pissing and moaning, it’ll only get worse. They’ll pay slow and complain fast. I guarantee it.
Now, there are some exceptions here, in that you will find the odd person here and there who really is a price buyer. Great. The best and most effective pricing strategies automatically exclude these losers.
In short, you ignore them completely and deliberately position yourself at the high ends of your market (another favourite topic of mine). Position yourself and all your marketing to drive the miserable sons of bitches away.
Make Your Pricing Strategies Part of Your Positioning
It’ll drive the dregs away and attract the quality clients – the kind who’ll actually thank you for having such expensive prices.
Let me repeat: pricing strategies based on “competitive pricing” are dumb, dangerous and unnecessary, because people will pay what you ask if you five them reason to.
So… why don’t most people buy on price?
Because the reason they buy things is… they have problems they want solved.
And if the desire to have the problem solved is strong enough, the “price”, that is the monetary price is far outweighed by the emotional price of not having it solved.
And it’s true for probably every commodity in every market you can think of – because the price people are prepared to pay isn’t determined by the intrinsic value of something; rather, it’s determined by the perceived value of it. And that is purely subjective, as I hope is abundantly clear.
Would you pay £2 for a packet of paracetamol (Tylenol), just like you can get from Tesco for 16p? I wouldn’t. Except for the time I was driving and had a splitting headache, and that was the only way I was going to get anything for it.
Pricing strategies based on what “everyone else” thinks you “ought” to charge are insane. Price is incredibly flexible and elastic (to the point where I accidentally over-quoted a job by almost double by quoting Sterling instead of dollars – and he didn’t even blink).
Finally, let me just explain why and how I personally use high-end pricing strategies as differentiators in my own copywriting services.
But in a good way (and yes, it is good for my clients, too, as I’ll explain).
I’m not sure what the “market value” is of your average copywriter is, but I expect it works out at something around, what, $50 to $100 an hour?
Well, I charge at least 5 times that just for consulting on the phone, and a hell of a lot more for sitting down actually writing direct response copy for clients. And yet, I’m always busy and booked up for a couple of months ahead most of the time.
But how can this be, since Everyone Knows you have to think about “competitive pricing” and have the “market price” as the core of your pricing strategies. Pricing strategies based on fear and peer-pressure, in other words.
Hmph. Bugger that for a game of soldiers.
You see, the moment the only differentiating factor between me and those other copywriters becomes the price, I’m immediately interchangeable. I can be swapped out for cheaper model just like a light-bulb or a ball-point pen (and pens are a good example – if “price” was really that important, Mont Blanc wouldn’t be selling pens – sorry, “writing instruments” – for umpty-hundreds or thousands of pounds, would they? No, Jon, they wouldn’t).
So, I do three things.
- First, I set my prices high – see for yourself.
- Secondly, I deliver value which justifies my clients paying those prices (and since my business is direct response marketing, something with the raison d’etre of making them more money than they put into it, my “value proposition”, to steal a line from the Creem-Heads is obvious).
- And thirdly, I get my future clients to convince themselves of my value by developing relationships with them – and I do this by emailing every day to my newsletter list, writing on this blog and generally by demonstrating I actually do know what I’m talking about.
Obviously this is good for me and my cash-flow.
High Level Pricing Straegies Are Good for My Clients, Too
Because it means they get my full attention. Think about it: if I’m charging someone £10,000 for a big marketing makeover and whatnot, that’s enough to keep me in jelly-babies for some time. It means I’m not jumping around from client to client trying to keep all the plates spinning because my fees are so low I’m doing the equivalent of working at the supermarket, pumping gas and digging gardens just to stay afloat.
It also means they’re committed to the project. They don’t stump up £10,000 and then decide to do it themselves because they think they know better than I do. Someone putting down that kind of fee along with the pained expression and sharp intake of breath is both committed to succeeding at the project and convinced I’m the right man to make it happen.
This is a very different scenario from having a $40 an hour copywriter and rewriting his or her copy because it’s “cheap” and so has no real value.
Now, all this sounds like I’m blowing my own horn (would that I were so flexible).
But no: it’s a principle you can apply to any business you’re in with very rare exception.
Your job is to build so much value into your products and services price becomes irrelevant to the highly qualified prospective buyers with the wherewithal to see you’re worth every penny.
And that, my friend, is a king among pricing strategies, and you can take to the bank!