FIVE STEPS TO SETTING YOUR PRICE CORRECTLY
On Monday we were sitting in a wonderful food market in Mexico City, on our last day of a great 11-day trip.
Knowing it would be a while before returning, our friend, guide and hostess asked me how she and her colleague, who joined us for breakfast, could improve how they price their services. They have not increased their pricing for years and are worried they will lose customers in their holistic health businesses.
She complained that while she is an expert in what she does, she never knows how to ask for what she knows she deserves and wants for her services.
Her colleague nodded enthusiastically that she, too, struggles with the same issues.
So, over a delicious plate of my favorite Mexican breakfast of Chilaquiles Verde con Huevos, we went through the five steps on how to set the right price for a product or service.
Five Steps to Pricing Correctly
- Identify Your Target— who are you selling to? Know the difference of your primary and secondary target customers. What are their demographics and psychographics? How well do you know them? To learn more, read my blog post: Customers Not Getting It?
- List Your Competitors— most entrepreneurs I know rarely, if ever, research their competition. It’ll bite them in the butt every time! Think you don’t have competitors? Most likely, your target market is too specific. Many competitors? Too general. For more details, read How’s Your Competition?
- Competitive Advantage— the value of what you do compared to others. The perceived value, from the customers’ perspective, is what matters. You build this up, authentically, by building up your features and benefits of what you sell. Read more on this: Features VS Benefits—The Key To Jolting Your Sales NOW
- Brand It— “brand” is the “personality” of your company. This includes: logo, slogan, tag line, website, marketing copy and materials, fonts, colors, uniforms, phone services, etc. This personality should also encompass your pricing. For example, Apple’s brand “beautifully designed, simple to use and user friendly”. You see that in everything Apple does. More on this: 8 Steps To Achieving Critical Mass
- Price Accordingly— now that you know a) who you are selling to, b) what you are selling, c) what your competition is already doing, d) how you are better and/or different, and e) the “personality” of your company, you can determine your pricing.
I strongly suggest, regardless your industry, not to compete on price.
You will lose that game!
Instead, focus on “bundling” your product and services together, authentically, to have customers focus on what you are delivering, not price-shopping or comparing with your competitors.
Especially if you are in a highly competitive industry.
Think credit card or mobile companies and how they have price comparison charts showing features/benefits, compared to their customers.
Additionally, look to offer different price points, giving customers options on purchasing from you. You can position these prices to “point” to the service (or product) you want them to buy.
NOTE: This is relatively tricky stuff. If you want to see how it all fits together, review this blog post I wrote a while back: Your Customers Not Getting It?
At the end of the day, the real secret our friends from Mexico got from our breakfast meeting on Monday was something that actually came before this list: do they get their value?
If not, then how can they expect their customers to get it?
Big “ah-ha” moment for the both of them!
As we said our goodbyes, they both were excited to review the value they bring to their customers, rebrand and price themselves for their better-defined target customers.
I cannot wait to learn their results!
Action Steps for the Week
Do you know who you are selling to? What the competition is doing to get their attention as well? How are you different or memorable from them?
Also, revisit your company’s brand. Make sure all the pieces are consistent, and avoid confusing your customers.
Lastly, and most importantly, what do you feel your product / service is worth?
Price accordingly via leveraging authentic bundling, pricing scales, or benefits.