Just to add to my post yesterday on pricing strategies, since there seems to be some confusion.
The trick, for want of a better word, to charging premium prices and getting them consistently is to find a market where the perceived value of what you’re offering is worth the price you’re asking.
It all really comes down to pain.
People buy stuff to solve problems.
Now, the word “problem” here has a very loose and wide definition, because you’d not really call the lack of having, say, a first-edition copy of Herman Melville’s Moby Dick a “problem” in the same way you’d call having terminal liver cancer a problem.
But even then, it’s all a matter of perspective – because no matter how daft these things seem to you, if you’re the one with the burning desire, then even the simplest, most ridiculous of “wants” become “needs” and even “obsessions”.
You doubt this?
Well, if you have teenaged kids and have witnessed their insane and wholly irrational belief, conviction and, yes, obsession with the idea the latest trendy-model mobile phone is going to improve their social lives beyond anything you mere boring old fart of a parent could possibly imagine, then you’ll know exactly what I mean (as an aside, this is a very important and powerful psychological trait we humans have evolved, and as marketers it behooves us to understand it).
Back to Pricing Strategies…
There’s nothing stopping you charging what you like for anything you sell.
No law against it, as far as I’m aware (although there are, as always, one or two exceptions, even though with a bit of imagination you can get around them). Thus pricing strategies are constrained only by the free market.
The trouble is, unless you give prospective buyers a reason to pay more for your products and services than for others, they won’t.
And that’s where the secret lies.
Pricing strategies are games of two halves, as they say: to sell successfully at a high price, you have to offer a high perceived value. And to sell over and over again to the same people, the perceived value really has to translate to actual value (or, more accurately, their perception of the high value has to remain high – if they think it’s a waste of money after they’ve got it home, you won’t be selling much more to them. Although there are exceptions which are worthy of a post all of their own).
So how do we do all this?
There are two quick and easy ways.
Killer Pricing Strategies #1
First, increase your prices. Just do it, as the old Nike slogan used to say.
Now, the inevitable worry is you’ll lose business. But that has never happened in my experience.
True story: I was chatting with a local butcher about a year or so ago. The first thing I told him to do was raise his prices by 10%.
He umm’d and ahh’d and eventually did it.
No one complained, and only one person even noticed, an old widower who comes into the shop once a week for his solitary pork chop, who asked:
“Has the pork gone up?”
“Right ye are then”.
So what, a measly 10% increase, huh?
Not so fast. On a 35% margin, which is about average for most businesses in most industries, that represents a 34% increase in your profits or thereabouts. The smaller your margin, the bigger the increase, too.
Conversely, this means if you do lose some business, it means you can afford to lose about a third of your sales volume and make the same amount of money.
Working a 6-day week now?
How about working a 4-day week for the same wages instead?
In reality, though, this just won’t happen because you’ll lose little if any business. Effective pricing strategies make for mega-profits.
Killer Pricing Strategies #2
Create a super-deluxe high-end offer that doesn’t cost you a penny until someone takes you up on it.
An example might be, say, something mundane like dog-walking. You might charge £100 to walk someone’s dog every day while they’re on their holidays.
So imagine you then say, “but for £500, I’ll get Fido shampooed, groomed and manicured, replace his bed and all his toys; what’s more, I’ll get your house cleaned, garden looked after, car washed and milk, bread and other essentials in the fridge for when you return. And I’ll pick you up from the airport”
Some people will go for this. Most won’t but some will. And it won’t cost you a penny to find out.
Why These Pricing Strategies Will Work… if You Use Them
We humans are odd creatures.
For reasons we again don’t need to go into, we’ve evolved to take our lead from our peers. It’s very hard to go against the conventional wisdom because we fear their judgement, criticism, laughter and ridicule so much.
That’s why most business owners just scrape through.
Newsflash: that’s not going to change. But what can change is you can choose to be one of the other kind.
And that means doing things your friends, family, neighbours, colleagues and practically everyone else will have an “opinion” about, and an “opinion” not terribly complimentary to your wisdom, intelligence and chances of your future business success.
Without being too blunt about it, perhaps one of the best pricing strategies you can adopt is simply growing the spine to demand what you’re worth.