Determine your price structure per product or service
This should be determined by your salesmanship and marketing criteria instead of “market value”.
Here’s how prices are set. Generally, people get a “market value” by finding the lowest price competitor and the highest price competitor and plop themselves down right in the middle. This is flawed thinking at best. Letting your competitors impact your pricing at all will have you leaving money on the table. They might be dumber than you and can’t price their own stuff.
Another mistake is pricing by cost. Figuring out what something costs you to sell then raising that number a bit. This leaves you vulnerable to a lower price competitor with more capital that can go negative on the front end of a sale until you are out of business. Part of the reason Walmart is vilified. Your pricing should be set by one factor or variable and that is....your salesmanship.
Everything from your direct mail to your customer service and store cleanliness should add value to your business. Remember, we are educating them with our marketing strategies and only 10% of people buy by price. Let your competitors have them. You want the people who buy based on value, value becomes amplified by your salesmanship. If 20% of your customers think your price is too high then its probably just right. Don’t sell your business short because you have a low self esteem. You are not your customer and your opinion doesn’t matter. The only opinion that has value is the one that hands you a credit card or cash.
Resistance to obtaining the highest price possible is more internal than external. Ask yourself “What is it my customer needs to believe about my business that will justify them paying a premium price?”
The following strategies are simply a breakdown of what elevates businesses to the next level financially. Get over the "my business is different" or “that won’t work in my business” mentality. Not all of these strategies will be applied to every business but for sure all businesses can use some of it.
Power to command the premium price in your industry
Power comes from perceived supply and demand. If pizza is your favorite food and there were 12 pizzas sitting on a table right in front of you, on a scale of 1 to 10 (10 being: you don’t want it, 1 being: you would fight for it) how bad would you want a slice? 7, 8? Now, imagine there is a room full of hungry people and the pizzas are being gobbled up very quickly. How bad would you want a slice now? 3,4? Ok, now there is one last piece and you are the only one that hasn’t had a slice. Its a pretty safe assumption that You NEED that last slice!
Being the only source of an essential need is the quickest way to grab power in your marketplace. Even if your selling what a dozen other people are selling you have to find your Unique Selling Proposition (USP).
Your USP should not only make you the preferred source, its should make you the ONLY source!
To find your USP you must define your category, mix products and services, add strategies from other industries and anticipate what your customers will need not what else you can sell them. By defining a category you eliminate any possibility of price comparison.
Low price is not an advantage. If you are planning to become the “low price leader” there will be some moron who will come into your market that will sell stuff cheaper than you until he is out of business but, he will stay around long enough to have a terribly negative impact on your business.
True economic advantage is by far the easiest way to leverage power. By economic advantage I mean making more money than everyone else in your market.
People can not separate price from value. More expensive is always going to be viewed as better. For my daughter’s birthday, if I buy a cake at the grocery store for $14, there’s probably not going to be any conversation about it at the party. Now, if I order a cake for $200 its going to be one of the main features to my guests. We’ll take pictures of it and my guest will invariably ask where I got it.
Ask yourself this: “What creates a happier customer, low price or high price?” Don't put yourself in a position where you can't create a great experience.
When you sell cheap you have to do everything cheap which means a crappy experience for the customer and puts you in a position where you have zero margin for error when dealing with negative circumstances. Everything has to work perfectly for you to stay in business. (hint: things rarely work perfectly)
Spend more money on your products and services to create an economic advantage. You can't run from the cost of sale that gives you the most power in the market place. You want to run to the higher cost of sale that your competition is afraid to go.
You can shrink and limit the activity your mindset and pricing allows or you can adjust your pricing to afford all of the best products and services available. When you’ve done this then your customer changes and you are now selling to people who are effected least and last by the economy!