Every industry and situation is going to deserve a slightly different answer for setting the right price.
Why?
It is different for a solo entrepreneur to set a price for services compared to an FMCG brand. A law firm versus a sports venue. But there are a few principles that apply everywhere.
Do Your Research: This is the foundation of all good marketing, a bit of research.
You’ll want to try and do a bit of qualitative and quantitative research.
Qualitative takes the form of testing your price on one or two prospects, conversations with buyers in the market, and maybe some competitor analysis.
Quantitative can take the form of conjoint studies, big A/B tests, using a tool like the Van Westendorp model.
The one word of caution here is that price research works better with more information because relying too much on one data point can skew your findings one way or the other.
Know Your Target Market: Is your offer a strategic piece of your buyer’s business? A tactical thing? Do you know the difference?
Going further: do you know the person that is impacting the sale the most?
Is it really the person signing the check or is there someone behind the scenes making the push?
Know all of these things will help you understand the value that is being created by your offer.
Remember: Price = Value: Price is all about value.
More important, price is about the perception of value. Not from your POV, but from the POV of the market you are attempting to serve.
If the market doesn’t perceive you and your offering as valuable…you’ll never get the price you deserve or want. In fact, you may not make any sales at all.
Establish the Impact of Your Outcomes: This comes up a lot when I talk with professional service providers. Folks focus in on the task they handle like legal advice, marketing, or training.
This pushes you down the value chain towards the commodity end of the spectrum.
You have to fight that because the further down the value chain you go, the tougher it becomes to get a premium.
You want to establish what the impact of the outcomes will be for your prospect.
Tangible and intangible benefits have value and can increase the perception of value for your offering.
Think in terms of outcomes like how much money will be made or saved. How much time will be gained? Stress relieved?
Whatever?
Focus on the impact. That will help you justify a higher or better price.
Don’t Discount: I’ve seen so many people flinch when it comes time to close a sale because they have a knee-jerk reaction to a moment of silence.
Or, in many cases, the reflexive response of any potential buyer is to ask, “Is this the best you can do?”
The unprepared salesperson will say, “Let me see what I can do.”
As soon as you say those words, offer a coupon code, or create an “introductory price”, you’ve begun the path to losing pricing power.
Why?
Price = Value.
Discounts destroy your perception of value.
Discounts destroy your positive brand equity.
Discounts teach your market to wait to see if there is a better deal.
Discounts eat your profit.
Discounts cannibalize sales that would have happened anyway.
Discounts are the enemy of pricing power.
These principles apply across industries…the question from me is: How are you going to use them?
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