How did you go with your pricing test from our last Magnify blog – Pricing Strategy – 10 ways to tell if your price is too cheap? Did you check through your quotes from last quarter, checking how many you’ve won? Was your price too high, too cheap, or just right?
In case you missed it, check out our last Magnify blog on Sales Strategy – Pricing Strategy – 10 ways to tell if your price is too cheap.
Some business owners are hesitant to raise their prices, even after several years. They mistakenly think that this will cause all their customers to leave. We’re certainly not talking about raising your prices so high that all your customers leave – that is not the intention at all. What we are talking about is charging at the appropriate level so that the price part of your brand story is reflective of your position in your market.
If your products/services are positioned at the upper end of the market, your price is an important part of your brand story and needs to be set at the appropriate level. When your value proposition aligns with your perceived value and with your pricing level, your brand will ring true for your customers.
- Where are your competitors’ prices?
- What service levels are they offering?
- How much is their market share?
If your competitors have higher prices and still maintain comfortable levels of market share – or perhaps they are increasing their market share – then surely there’s room for your prices to move up a couple of notches.
Did you realise that prices which are perceived as ‘too cheap’ can do your business a lot of damage? As the famous Warren Buffet said – Price is what you pay. Value is what you get.’
In order to have confidence charging what we’re truly worth, business owners need to have a clear understanding about what created a sale in the first place.
Sales is essentially about helping people to solve their problems, at a budget level they can justify. A sale happens because your customer believes that you can solve their problems. If, for example, your price is $2,000 less than the nearest competitor, and you are in fact the lowest price of all the quotes, you’ll win some sales because of pricing – but only if the customer believes you will deliver the value they are looking for.
If your cheap price results in a cheap job, then there is actually very little value in the transaction at all. You haven’t helped the customer to solve their problems – you may in fact have made their problems worse!
This is exactly what Benjamin Franklin was referring to when he said, ‘The bitterness of poor quality remains long after the sweetness of low price is forgotten’. So, if price is ultimately forgotten, it is value that remains.
At Magnify, it’s always our preference to encourage business owners and sales managers to sell based on value, rather than on price. Yes, we want to see you set your pricing at the appropriate level – and also reap the rewards you deserve for the good work you’re doing for your customers.
Just in case you’re still not sure about raising your prices to the appropriate level, here are 7 ways that raising your price will help grow your sales:
One – Demonstrate your Value
Yes, it’s crazy but true – many customers equate low price with low quality. Which means they also equate a high price with high quality. If you want to demonstrate that your product/service is of high quality and high value – your price is part of this story.
Two – Quality costs need to be covered by a quality price
Building on our first point – quality costs. Quality fixtures, quality products, quality services all have a cost to them. Your customer expects to pay more for quality than for cheap rubbish that will need replacing in just a few weeks. If you’ve got a quality product/service, you always want to be covering your costs. So, you’ll need to have a price that covers costs and adds the appropriate level of profit to your sales.
Three – Higher pricing means you can afford to do your best work
This one’s an ethical reason – charging properly means you can afford to give your customer your best work. If you promise a great job but can’t afford to deliver the goods this will very likely create problems downstream. Even if your lower price was an incentive to choose your business at the time of the sale, the customer will ultimately remember the level of value that you have delivered. Basically – don’t skimp on the value!
Four – Higher pricing means your business is in a safer place
Unless you plan to work 100% of the time available, your pricing needs to be high enough that your business can cope with any gaps in work. Said work gaps can happen whether you have a high price or a low price. So why not get your pricing up to a level where you’ll cope better in case of any work fluctuations.
Five – Higher pricing means customer growth is reflected in higher profit levels
For easy numbers – say your business has 100 customers at any one time. If your price is low, and you get another 10 customers, you’ll probably enjoy increased profits. However, if you price is higher, and you get another 10 customers, your profit increase will be that much higher.
Six – Your sales team will need to learn to demonstrate value to confirm sales
In the absence of value, customers will look at price. If your price is high, your sales team must become experts at demonstrating value to confirm any sales. The great news about this is that if your sales team becomes expert at demonstrating value, you’re in an excellent place to grow your sales even further through new customer acquisition. Whether your price is slightly higher than your competitors, or even priced at a premium – if your sales team can sell based on the value that your solution delivers, your business will be in a much healthier place for future growth.
Seven – Higher pricing means you can invest in customer improvements
We’re living in a highly personalised, automated age where customer expectations are rapidly going through the roof. The additional revenue and profits generated from your higher pricing can be re-invested into your business, so that you are better able to deliver a satisfying customer experience.
Whether your price is low or high or somewhere in between, you’ll need to demonstrate value and show your customers how you solve their problems. So, don’t be afraid to charge what you’re worth – demonstrate value and you will build a loyal clientele who come back again and again – and then bring their friends!