Pricing ‒ It’s More Flexible Than You Think

By: Dan Kennedy on: February 13th, 2016 6 Comments

Most small business owners operate in the dark when it comes to price.

They guess at and ballpark what they should be charging. When it comes to research, that usually means taking a look at what the competition is asking and try to slightly undercut them. Cost analysis? That’s usually a panic move that results in reduced prices, which leads to smaller profit margins and jeopardizing the future.

It’s time to shed some light on the mysterious and elusive topic of pricing. Here are a few things you should know:

Competing on price can be hazardous to the future of your business. If you aren’t the cheapest, it makes no sense to be “one of the cheapest”. Because those who shop price only are all going to go to the cheapest. Which leaves you out in the cold.

If you are in a commodity business, you must reinvent yourself. Find something besides price to be competitive. Maybe your service is second to none. Or your delivery or follow-up time can’t be matched by the competition. Find something besides price that you can use to leverage your business.

Not long ago a client asked me to create an ad. The client is a consultant in the restaurant industry. And the ad was for one of his students. The student owns a gourmet pizza take-out and delivery shop. It’s located in a small city where they compete with over 100 other pizzerias. And they are the highest priced of them all. They offer no special deals or two-for-ones. They doubled their sales and their profits last year. Here’s the key word that differentiates them from all the other pizzerias in town: gourmet.

Don’t worry about so called “industry norms”. Most business owners take a look at what their competitors are charging. They make note of the high price, the low price, and end up setting their prices somewhere in the middle. As unscientific as it may sound, this is the way most businesses establish their prices.

Most selling occurs in a vacuum. If your selling process doesn’t, you need to change your marketing approach so that it does occur in a vacuum before an actual sale happens.

There is “price”, and then there’s “presentation of price”. This means structuring what you sell, how you package it, how you market it and to what audience, how you deliver it differently than the competition. These small, subtle differences allow you to set a higher price, because a direct comparison to lower prices can’t be made. Why? You’ve built in value-added benefits and features to your product and service – something the competition doesn’t offer.

Avoid running your business on fear. Most business owners needlessly underprice their products or services. They then try to overcompensate by raising prices – often too little, too late. They also make the mistake of ignoring opportunities to sell premium priced versions mostly out of fear.

The price your customers, clients or patients pay is a result of the target market selected, perceived value, the value proposition presented, salesmanship, credibility, celebrity status, brand and buying experience. These are just a few of the factors that play into the buying decision.

The buying decision has very little to do with objectively measured intrinsic value. If that were the case, diamonds would not cost any more than glass or coal. You can control and manipulate all the non-intrinsic factors. So you should approach price courageously and creatively.

A great way to build up your pricing courage is to do a little research and find out what else your clientele spends money on – and how much they spend. Also take a look at what the really affluent spend on a variety of goods and services. Items like an $800 putter for golfers or a home entertainment system that costs many thousands of dollars are common among those who can afford it.

NOTE:  Powerful Price Positioning is this weekend’s web deal. It reveals seven tested and proven strategies you can use to charge more than ever without experiencing any kind of price resistance. It’s loaded with plenty of tips and valuable nuggets you can use to bump up your prices and start earning the kind of money you deserve. Order yours by midnight Monday and you’ll also receive a special bonus

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    ABOUT THE AUTHOR:

    Dan Kennedy is internationally recognized as the 'Millionaire Maker,' helping people in just about every category of business turn their ideas into fortunes. Dan's "No B.S." approach is refreshing amidst a world of small business marketing hype and enriches those who act on his advice. For more money-making marketing tips, tactics and strategies, go to www.GKIC.com

    6 Responses

    1. Ake Hedman says:

      You are so right. I just want to add,- listen to what a customer really buy!

      When I operated a business in Europe my price was 3 times of my competitors and my competitors managed to get about 1 or 2 jobs out of 100, because we sold safety and competition sold price!

    2. Todd Morrow says:

      Really enjoy your post!!! Such great info.

    3. Tsufit says:

      Guys, if you only listen to ONE person about pricing your stuff, it should be Dan Kennedy. In the many books Ive inhaled books on the topic of Behavioral Economics, I’ve been fascinated to learn how our potential customers make decisions. But Dan is the one guy who understands and teaches the concept of Price Elasticity better than anyone. And he’s the guy who will dare you to add a zero to the end of your price without blinking while guiding you take the actions necessary to be able to attract clients eager and happy to pay you your new price with a smile. Buy Dan’s stuff, at any price!
      Tsufit, Author, Step Into The Spotlight!
      http://www.SpotlightBook.com

    4. David Hunter says:

      I also love seeing businesses flourish when their prices are higher than everyone else’s prices!

      But, when they’re charging higher prices they also usually have much better customer service. I’d rather go to a local mom and pop shop and pay a little more for my goods than go to Walmart where I have to wait in the only lane open (while they have 25 other lanes closed) and wait and wait and wait because the cashier doesn’t know what’s going on.

    5. Always challenge pricing assumptions.

      I apprenticed for over two years learning house painting and pressure washing. My understanding was that people would only pay about $350 for pressure washing. I never pursued it as a viable line of business. A couple of years ago I tried a different pricing structure for pressure washing. I started an à la carte approach. I offer to pressure wash a house for $500, add on exterior window cleaning for $150 to $195, clean a walk way for $25, patio for $45, etc. I let the customer build the price. I’ve gotten as much as $900 for pressure washing.

    6. Darren Teale says:

      When never a truer word is said.
      Yes, I already own the product and have been using principles taught in the product for years. I take pride in taking the order and being told that I am the dearest in the industry.
      It takes a 100% belief in your product and the value it and you provide.
      Carefully crafted scripts that justify the price long before it gets raised and having already answered the “your twice the price of the last guy!” before you give the price and to be able to stand there straight face and say they must be going out of business with those prices because that’s cheaper than the cost of components to make it properly and deliver it,
      “are they going to be there to back any guarantees they offer?”
      Powerful price positioning doesn’t give you fill in the blanks sales scripts but, it does give you the components to build your own.
      Forget about trying to please the masses focus on those who have the ability to pay and price to exclude the people that won’t pay that are wasting your time.
      Other GKIC products that I have found that complement this one beautifully are
      Price Elasticity
      How to create Personality in copy
      The Power of Copy Unleashed
      Make Them Buy Now
      And the “Ultimate Marketing Machine”
      The one thing the last one does is shows you how bring together all the knowledge you have learnt then shows you how to give yourself industry authority status which gives you an even better pricing advantage over your competitors.
      Lets face it your in business to thrive not battle for a paycheque every day and not to fight for scraps with your competitor. Go on standout no….
      Stand above rest…

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