There’s almost certainly an opportunity in your business to increase your profits, immediately, without the need to attract any more customers, just by thinking differently – and better – about your pricing.
Here are seven things that most business owners don’t know about price. At least one of them will apply to you …
1. For starters, they don’t understand how elastic price is.
The truth is that it’s actually quite a small proportion in any market that make their decisions solely on the cheapest price. If more did, we’d all be driving round in Kias; Costa and Starbucks wouldn’t exist and there’d be nowhere to buy your clothes except Tesco.
One of the biggest wins we had recently with a Premier client was simply by putting all his prices up by over 30%.
The hardest part was persuading him to do it because when he did, he lost not a single customer and overnight, his profit rose by almost 100%.
Just think about that for a moment, his profitability doubled – overnight – when he started to think accurately – and better about his prices. There’s likely progress for you here as well.
Book a 1:1 with one of our Business Growth Experts and we’ll help you shape your strategy – call us on 0121 765 5551 to book yours.
2. They don’t understand that people buy at different price levels.
You get to pick your own clientele so, if you wish, you can certainly pick those for whom price is the most important factor. The result though is usually a diminished lifestyle for you, more stress and customers that give you hassle.
I accept that in most markets there are customers for whom low price is the main attraction, but in every market there’s also a high end customer.
When you come to our National Events, you’ll meet people who have stayed at the Hilton Metropole, on site and you’ll meet others who have gone to a local B&B or stayed at the Ibis.
In every major town centre you can get dinner tonight for £10 or £110 and there’s a market almost everywhere in between.
The customers you attract at the price level you’re at now doesn’t have to stay that way. You do get to choose.
3. They don’t have a premium version of what they do.
My favourite story here is still the one about Universal Studios in Orlando. On top of your regular theme park ticket, you can, if you choose, buy an additional Express Pass for around $80 which entitles you to skip the queues and enter all the rides from a different point.
Most people don’t buy it – but 1,000 people every day do because it enhances their enjoyment of the theme park. The net result is a $26m profit uplift for Universal Studios because they give their customers the opportunity to purchase the premium version of what they do.
It’s a simple and profound lesson, much less scary than putting up prices overall, but the impact on your profitability can be huge. You should be using at least one of your 90-minute sessions this month to put that premium version in place.
4. They base their prices on cost.
Even in Mastermind, this is a regular challenge that we have to overcome. There are so many other factors to setting price than cost. In many industries and markets, your costs to source or create our product or service are irrelevant in terms of the value that your customer receives. It’s a fact that cost based pricing has a negative impact on profitability. And it always will.
I recognise that in some markets it can’t be avoided, but your market is probably not one of them and your reluctance to even think about, or get ideas as to how you could shift your pricing to some other basis is costing you a lot of cash.
5. They pay too much attention to industry norms.
Most business owners know what others are charging. They know the highest, they know the lowest and they tend to pick somewhere in between.
The problem is that everybody else in that market has arrived at their price decision by the same foolish process. It’s like ‘price incest’ – and it works like regular incest, in other words, over time, everybody gets dumber!
Don’t forget that there’s “price”, then there’s “presentation of price”, so there’ll be opportunities here for you to structure what you sell, how you package it, and how you deliver it differently compared to everyone else, which means that you can then price it differently with direct comparison impossible.
We talk about this and have some great examples on the Million Pound Masterplan Event which is available to 2016 TEAP holders.
6. They try to compete on price.
Dan Kennedy was the first to teach me that if you can’t be the cheapest, then there’s no benefit in being almost the cheapest. If you really are in a commodity market where price is the only factor, then get out.
You have to find another basis on which you can compete – and it’s probably not as difficult as you might think – especially if you’re able to surround yourself with some really smart people to help you tackle it and you’re giving yourself sufficient opportunity to think properly and accurately about the situation and the best way to fix it.
EC is full of members who charge some of the highest prices in their marketplace, but they are thriving and growing rapidly. We certainly can’t help you if you remain entrenched to competing on price and the future for you and your loved ones looks bleak …
7. They live in fear.
Something else I’ve learned over the years is that any business decision made out of fear is a bad decision.
Most business owners needlessly under-price, they are too timid in putting up their prices and, as we’ve already said, they ignore opportunities to sell premium-priced versions of what they do. All of this usually happens out of fear.
The price that people pay is a result of you having targeted the right market, built sufficient value and credibility, constructed a proposition that appeals, presented it in the right way, etc. It actually has very little to do with objectively measured intrinsic value (again, if this is news to you, then you need to get on our Million Pound Masterplan Event).
Never forget that you are not your customer, so your beliefs and filters are not those of the majority of players in your marketplace. Never forget that there are millions of affluent people in this country for whom price is a long way down their criteria when buying almost anything and in terms of speed and ease, to the lifestyle you desire and the success that you aspire to can hinge – a lot – on your price …
