Why Doubling Your Fees Can Increase Business: How Pricing Affects Buyers Decision Making Process
Want to know the simple way to get all the business you could ever handle? Charge almost nothing. That's the approach employed by busy fools anyway. Are you a busy fool? Here's a test... If nobody has ever complained about your price then you probably are. High Prices Are A Sign of High Value...
This absolutely defies logic but we nearly all fall for it. If everyone else charges an average of £50/hour and you decide to price yourself at £100/hour what would happen? The last time you chose a piece of hardware (DVD Player, Washing Machine, TV) how did you evaluate which product was the best and which one wasn't? Does an expensive branded perfume cost so much because it smells infinitely better than the cheaper alternatives? Is a diamond really that much better than crystal at making jewellery look shiny? Which came first? Prestige Brand or High Price? When buying, we nearly all make the assumption that higher price means better quality, nearly all of the time. Humans often make lazy decisions based on assumptions. We have to make so many decisions each day that if we didn't create strategies and shortcuts then we'd die before achieving very much. There are exceptions to this but generally (and within reason) the rule applies more times than not. A Glass Ceiling If you set your prices too low, then you've created an artificial limit for your own ability to provide high quality services and make good money without working harder than is necessary. Low price typically begets low quality. High price typically begets high quality. It's very easy to lower a high price when we get it wrong, but ask anyone who's ever done the opposite and they'll tell you that going the other way is nigh on impossible. Increasing Price Can Increase Customers...
Most people think this is outrageous. But it's actually true. In his book, Selling The Invisible, Harry Beckwith tells a story about how increasing price can sometimes sell something that previously wouldn't budge. I'll retell it quickly here... The owner of a Native American Jewellery store in Arizona was getting increasingly frustrated at her failed attempts to sell some turquoise jewellery. She'd tried sales and also encouraged her staff to push the jewellery but nothing seemed to work. One day, she had to go on a trip. Before she set off she scribbled a note to one of her salespeople. Everything in this display case, price X 1/2. When she returned everything was sold. She initially thought her plan to cut the price by half had worked. That was until she discovered the real reason. The salesperson who found the note had misread it as price X 2 and so doubled the price of everything. Logical pricing that seems to you to be fair, can sometimes actually make you look mediocre or cheap. How Do You Know Their Price Is Right?
Most people set their price based upon the competition. They look at the high/low extremes and in many cases plant themselves somewhere in the middle based on their view of how they measure up. The price you set though is sending another message. It's telling your prospective customers how good you think you are. Average price means you think you're average. Not very compelling. Always, always aim to be the most expensive. You'll have an instant differentiator, higher earning potential and increased profits. Premium Price If you can steal a lead and command a high price early on in a niche or sector then you'll own the word prestige. This happened not too long ago in the NLP Training Market. An explosion of training providers began to spring up quickly in the UK and most firms set their price using their competition and other training firms as a guide. Before these firms knew it, they were all averagely priced, perceived as average and actually realised that they had to sell a lot of training to make their costs turn a reasonable profit. Another training provider, however, set their price at approximately double the average. Not only did they find it easy to gain new customers. These customers, who spent double that of their peers for the same qualification needed to justify their expenditure and so told everyone how much better their training was. Soon the seed was planted; the high priced firm gained a reputation (through word of mouth of its customers) as one of the most distinguished providers in the UK.
Whether this firm is the best or not is irrelevant, because plenty of people believe it and are happy to pay a premium to say they've trained there. Think Value Not Components
Let's say my hourly rate is £2500. If you're a consultant or trainer then you're probably thinking, "£2500 per hour? No chance! I'd have to do 5 days work for that much money." If you're a successful professional speaker then you might be thinking, "That's about right." Now let's just imagine... I know the secret formula for making a £ million in 24 hours and I'm willing to share it with you for just £2500. Would you say that's a pretty good deal? Would you grumble about paying me £2500 for 1 hour's work if my advice worked for you? You'd probably have happily paid far more than this. Depending on people's situations or problems, they will put enormous value on your ability to deliver a solution or desirable benefit. If you can truly provide something valuable that people need and want then command a fitting reward. Don't be tied to the notion that quantity is more valuable than the outcome because it's not. A Warning I'm not suggesting you should immediately, upon reading this, double your prices. Of course there are other factors to consider. * The market may not be able to stand nor afford a price that is too far above the norm. Getting it too far wrong could mean zero customers. * You may not be providing value for money if your price is escalated beyond your ability to deliver. If you believe this is important (and I hope you do) then you'll feel like a trickster. * You may be regulated in some way preventing such creative pricing strategies. Industry Watchdogs and consumer groups like to create this type of pressure for their own benefit. If you're regulated then price will rarely be your differentiator. I couldn't possibly give you firm advice on pricing based upon the format of this ezine and would urge you to test carefully and make your own well-calculated decisions on the risks and rewards. Also, if we were discussing commodities here then most of the pricing ideas I'm sharing just wouldn't work. The fact is you're usually not (or should not be) offering a commodity. You're unique, you're solving a prospect's problem in a unique way and you're communicating this in a unique way. Consider charging more - I'm sure you're worth it! 'Dangerous' Debbie Jenkins
debs@debbiejenkins.com
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