ChaChing! Using Value Pricing to Grow Sales and Profits – Part 1

People value and buy image, innovation and time saving. While value is personal, these common buying criteria enable us to price based on each.

There are only three things any of us buys - image, innovation and time savings. So while value is personal, there is enough commonality to our humanity and enough buying data to allow us to categorize markets, design offerings and price based on the value to each of those market segments.

 

It’s no secret the quickest, easiest and least expensive way to grow your top line, margins, and bottom line is to raise prices. Why, then, are you resisting value pricing?

Is it because:

  • The term ‘value’ is so vague it defies comprehension?
  • Value pricing is complex? Instinctively we know different market segments view value differently.
  • Providing demonstrable results is difficult? It often feels like you’re trying to prove a negative.
  • Value is a moving target? Given how quickly economic conditions and customer interests change as well as how short product life cycles are today, does it even make sense to calculate value and pricing to reflect that value?
  • Senior leaders feel the pricing pressures they’re getting from their competitors and their customers make it nigh on impossible to get premium prices?

Of course there are other reasons. As a senior leader you might be:

  • A price buyer and logically assume everyone else is as well.
  • Volume focused, preferring to own a large share of the market even though a smaller share would be more profitable.
  • Concerned your organization isn’t providing value necessary to warrant higher prices.

If you’re a senior leader and any these last three conditions resonate with you, I’m going to save you a lot of time and energy. STOP READING! The likelihood of you employing value pricing is so small reading the rest of this blog will be a waste of your time.

For the rest of you, we’re going to address each of the concerns highlighted in the opening.

Value is ‘vague’

Value is personal. Each of us determines the value a given product or service has for us and it’s often much different for us than for our family and friends. Naturally the question that comes to mind is “How do I establish value prices when everyone values things differently?”

The answer lies in the commonality of our humanity, which is manifest in our buying behaviors. There are only three things any of us buys - image, innovation and time-savings.

As sellers, any benefit we claim to provide fits into one of these three categories. For example, quality can enhance our customers’ image, save them time by helping them avoid repairs or a combination of the two.

Some of Apple’s customers by iPhones and iPads because they love innovations Apple builds into their products. Others buy because they love the look and feel of those products. Why? Because it enhances their self image.

The good news is that customers who value image are willing to pay as much as those buying innovation. Indeed there is readily available buyer data to show exactly what premiums people are willing to pay, depending upon where they fit on the image, innovation or time-savings spectrum.

So while value is personal, there is enough commonality to our humanity and enough buying data to allow us to categorize markets, design offerings and price based on the value to each of those market segments.

For those of you selling B2B, don’t forget you’re selling to people not organizations. Those people represent organizations, but each also possesses a self-interest motive that influences their buying decisions. So don’t dismiss the commonality of our humanity as a B2B phenomenon.

Next, we’ll explore the complexity of value pricing to see whether or not it’s a valid reason to avoid adopting value pricing.

Video: The Importance of a Content Marketing Plan

A content marketing plan is extremely important. Many business owners want to get into email marketing, then suffer negative effects working without a plan.

Having a content marketing plan is extremely important. So many business owners understand conceptually they want to get into email marketing, social media, putting out a blog and then they get into it without a plan. Before doing this, marketing expert Tom Ruwitch recommends you consider the high price of operating without a good content marketing plan. What he witnesses from his extensive work with clients is that without one, you are more likely to

  • Get to deadlines and panic because you don’t know what you want to write.
  • Spin your wheels, waste time and fail to work productively
  • Miss the mark on being aligned with your sales calls and the needs of your target audience

Your plan should project an organized schedule of content concepts for three to six months. You will move forward confidently when you then commit to that plan. You save yourself a lot of headaches, are able to provide a cohesive message and work productively. For support in defining your content marketing plan, contact marketing expert Tom Ruwitch at MarketVolt by phone 314-993-3732 ext 18 or by emailtom@marketvolt.com or visit his website www.marketvolt.com

Video: Business Websites

A brochure website is very static. There’s so much more business owners can do with their website to gain a greater return on investment.

Web development expert Cesar Keller answers the question, “what is the difference between a brochure website and a business website?” His answer is that a brochure website is a very static website, simply a dump of content. There’s so much more that business owners can do to gain a return on investment. Today’s websites include the brochure data but are capable of extending value way beyond that aspect alone. Cesar Keller reminds viewers that among other things, your website can:

  • Assist you in building a pipeline of prospects
  • Be a living, breathing mechanism that brings you business
  • Incorporate tools that automate the building of your business
  • Provide processes that automatically function to save you time and gain you connections
  • Help you to convert prospects by moving them through the process steps that ultimately lead to sales

To learn more about and see the results possible through the skills and proven track record of Cesar Keller and SimpleFlame, call Cesar at 314-266-3485 or email him at cesar@simpleflame.com

Price Addiction

Don’t become addicted to low prices! Use the questions in this blog to get back on track to serving your customers in ways they want.

It never ceases to amaze me how addicted people get to low prices.  You probably think I’m talking about buyers, don’t you?  Well I’m not.

As I’ve stated in many of my earlier blogs we, as sellers, have trained buyers to be price conscious because we place price at the heart of every marketing piece we create. What I hadn’t, until recently, realized is we’ve been drinking that Kool-Aid so long we’ve become addicted to low price strategies.

This realization came as I watched yet another JCPenney’s square deal adds that highlighted the days when their customers could get the ‘best’ prices. These ‘deals’ come from a company that recently declared itself different than other retailers by ‘eliminating’ discounting.

Why is it that we, as sellers, have become so addicted to low prices? There are several reasons that come to mind:

  1. Walmart’s success
  2. Poor customer profiles
  3. Internalizing our beliefs

Walmart’s Success
Certainly Walmart’s success with a low-price strategy has been greater than any company in the history of commerce. Companies trying to emulate Walmart’s success overlook several realities.

First, there is only one low-price leader in any industry. Unless you have a plan for leapfrogging your industry’s low-price leader, you’re setting yourself up for failure.

Second, low-price strategies eventually fail. Yes Walmart is still enjoying revenue and profit growth, but it’s in countries in which they are still adding new stores. For those countries in which they’ve saturated the market, Walmart is struggling to maintain revenues and, here in the U.S., could only do so by giving up over 2% of their profit margin. That’s roughly 10% of their original margin.

Third, your customers may not value the same things Walmart customers do. Which brings us to the second reality; most companies do a very poor job of profiling their ideal customers.

Poor Customer Profiles
I’ve spoken to JCPenney customers who say they wouldn’t be caught dead in Walmart. Others tell me they go to Walmart for cleaning supplies, but not for clothing. What do these comments tell us?

These consumers have an image of themselves that’s quite different than what they perceive to be Walmart’s ideal customer. The questions JCPenney should be asking their customers are:

  1. What items do you go to Walmart to buy?
  2. When and why do you pay more for some items than the low price you get at Walmart?
  3. What items are those you would buy elsewhere?
  4. Why don’t you purchase those items at Target? Macy’s? Nordstrom?

These are the kinds of questions that help a company create a clear, concise profile of their ideal customers. With this profile, it’s much easier to craft marketing messages to attract customers who like what you have to offer and sales scripts to close the sale.

This brings us to the third reality of our price addiction - internalizing our own beliefs.

Internalizing Our Beliefs
Years ago I had a client comprised of seven entrepreneurs who had pooled some of their resources and invested in businesses around the country. Each of the seven was responsible for running a different business.

One of the seven crafted stories to explain his company’s performance (or lack thereof) to the other members of the group. These stories always had some element of truth, but were designed to hide critical facts.

I watched this man relate the story so convincingly that even I, who knew better, felt myself being drawn into believing what he was saying. How was he able to accomplish this? He rehearsed the story so frequently he actually came to believe it himself. That’s what’s happening to retailers suffering price addiction.

These retailers have trained their customers to be price conscious and, in the process, come to believe customers are price conscious - of their own volition. Consequently they’ve stopped trying to differentiate themselves on anything other than price. In the process they’re ignoring things that are truly important to their customers’ self-image.

By the way, the situation I outlined above afforded me one of the greatest learning experiences I’ve ever had. I had to learn how to introduce facts that contradicted some of the story being told without making that partner appear to be misleading his fellow partners.

Lesson Learned
Don’t become addicted to low prices! If you are, use the questions in ‘Poor Customer Profile’ section of this blog to overcome your addiction. You’ll quickly get back on track to serving your customers in the way they’d most like to be served.

For more pricing tips visit http://www.pricingforprofitbook.com. To discover how you can get higher prices for your products and services, call Dale at 314-707-3771.

Discounting During Peak Season

When it’s peak selling season, hold your price. You’ll not only enjoy greater profits, you’ll do so with fewer headaches.

Great strategy?

Or sheer folly?

It’s early spring.  I’m listening to the radio when I hear an ad for the premier carpet cleaning company in our city.  The woman in the ad is telling her friend how dirty her carpets after having dirt, sand, salt and grime tracked in all winter long.  Her friend recommends the carpet cleaning company touting all of its benefits.

The ad is clever and well-constructed until the friend says the company is offering a discount.  What?  Offering a discount during peak selling season?  Why would they do that?  Ostensibly, to increase market share, right?

Is that a good strategy?  Let’s play this out to its conclusion.  First, the company is giving up profit margin with its ideal customers to garner a larger share of the market.  It’s peak selling season. They’re already swamped with orders yet they’re pursuing more orders with their discounts.  How is the work going to get done?  Overtime and temporary help.

Employees that work incredible amounts of overtime are fatigued.   They’re going to make more mistakes.  That’s going to hurt the company’s reputation.  Indeed, given the claims made in their ads, the company has set expectations they aren’t going to be able to fulfill.

Temporary help is an alternative, but these workers aren’t as knowledgeable about the process.  They, too, are going to make mistakes and damage the company’s reputation.  Plus it’s going to take them longer to complete the work. Not only does the company incur additional costs, it angers a lot of customers because the temps are consistently behind the schedule they were given.

Then there’s the strain on equipment.  When the company is operating its equipment at full tilt 12 to 14 hours a day, six or seven days a week, there’s no time for maintenance.  When the equipment breaks down, which it inevitably does in this environment, it throws the entire schedule off; once again, damaging the company’s reputation.

Of course you could add more equipment to handle the increased demand, but then what do you do with this excess capacity in the off-season?  Offer more discounts?

It’s counter-intuitive, but offering discounts in peak selling season to garner a larger share of the market is one of the costliest strategies this company, or yours, could possibly employ.  Don’t fall into this trap.  When it’s peak selling season, hold your price.  You’ll not only enjoy greater profits, you’ll do so with fewer headaches.

For more pricing tips visit http://www.pricingforprofitbook.com.  To discover how you can get higher prices for your products and services, call Dale at 314-707-3771.

Pricing: Are You Confusing the Market

When your price doesn’t support your marketing claims, you’re asking the buyer to choose which to believe – your message or price. Which do they believe?

Has this ever happened to you? You’ve just found a stain on your favorite dress; the one that has everyone using words like “drop-dead gorgeous” when describing how you look. Or, for men, it’s the power suit you wear whenever you’re getting ready to close a big sale. Either way, you’re at risk of losing the image that’s so vital to you.
As you’re bemoaning your loss, you hear an ad claiming it’s stain remover:

  1. Removes stains other stain removers can’t get out
  2. Is gentle on all fabrics, so much so that it doesn’t shorten the garment’s life
  3. Is green - it produces no toxic waste

You’ve heard all of this before and have always been disappointed to find the claims were unfounded. Still, if you don’t do something, you’re not going to be able to wear the outfit again.

You do a little research and find the claims made about this new stain remover, have all been substantiated by independent testing labs with stellar reputations for fair and honest appraisal of products it tests. Maybe there’s hope yet!

Off to the store you go, encouraged by the possibility of saving your favorite outfit. You find the stain remover on the shelf and, much to your surprise, find it’s actually cheaper than competing brands. Quickly, what are you thinking?

Does the Hallelujah chorus come to mind? Or are you wondering whether the product is as good as touted? Is this yet another example of advertising hype? But wait, the testing labs all supported the product’s claims! Hmm, I wonder if the testing labs aren’t as independent as I thought?

These are the kinds of doubts we experience every time there is a disconnect between the marketing message we’re hearing and the price we’re seeing. In essence, when your price doesn’t support your marketing claims, you’re asking the buyer to choose which to believe - the marketing message or the price. When faced with this choice, which do you believe?

Typically we, as buyers, believe the price. Why? Because anyone can claim anything. We learn that at an early age and our skepticism grows as we grow older. That’s why we’re skeptical of advertising claims and are more trusting of the price we’re seeing.

Let’s continue with our example. Despite doubts you’re experiencing you decide to buy the stain remover. Why? You don’t have a choice. You know the other products you’ve tried don’t work. This is your one shot at salvaging the look you treasure.

You’re earlier excitement has turned to doubt and anxiety. Yet you return home with the stain remover and, after several tests on old clothes, you apply it to your favorite outfit. It works! You breathe a sigh of relief and thank the powers above that it worked. Gee, wouldn’t it have been nice if the manufacturer had actually gotten the credit?

Seriously, is this the kind of experience you want your customers to have - one that’s plagued by doubt, fear and anxiety? Is this the kind of experience that’s going to keep them coming back again and again? Will it make them want to sing your praises? Or will their stories of you be littered with pain and anguish?

Here’s another classic example. You walk into an auto dealer’s showroom and find just the right car. As you were considering your decision, the salesperson touted the classic look, sporty feel and luxurious comfort - not to mention the incredibly great mileage the car gets. You sit down to discuss price. You tender an offer. Of course it’s unacceptable. He takes it to the sales manager and returns with a counter-offer. On and on the process goes until you finally settle on a price.

What’s the one question on your mind as you leave the showroom? “I wonder if I got a good deal?” Why are you wondering that? Because the car didn’t change, but the price did. Again, we have an example of price and sales pitch not meshing.

So what’s the message here? If you want loyal customers, make sure your price supports your marketing and sales claims. Customer loyalty hinges on a number of factors. Customers must feel good about their purchase. Feeling good means feeling confident about the choice they made. Confidence in their choices comes from knowing they made an informed decision. Where did that knowledge come from? To a great degree, it stems from the fact that the price matched the marketing claims.

This concept works regardless of the level of quality or service the buyer desires. If you’re looking for disposable plates for a child’s birthday party, a one-time-use product for people who could car less about aesthetics, you may go to one of the dollar stores. The price matches the quality. You know you’re not getting much quality, but you’re paying an extremely low price as well.

On the flip side of the coin, if you’re looking for a high quality item with image enhancement capabilities, the price better reflect both or you’re likely to pass on the item. Why? If the situation calls for high quality and that quality is going to reflect on you, you don’t want any doubts about the purchase. You’ll go to an alternative that has a more congruent marketing/price message.

Stop confusing the market! Make sure your pricing supports your marketing claims. You’ll enjoy greater revenues, higher margins and greater customer loyalty.

For additional business, pricing and sales strategy, check out Dale Furtwengler products and services at his websitewww.dale@pricingforprofitbook.com

Video: Finding Your Why – A Branding Presentation

Video run time 18:01

This presentation explores the importance of creating a brand identity by focusing on the why for your business.  The why is the reason or cause for what you’re doing, beyond making a profit, that connects with feelings shared by your target audience.   In this program, you learn:

  • The difference between what you do, how you do it and why
  • The importance of appealing to the heart by expressing your contribution and what you want to cause
  • Examples of how your why inspires employees and customers
  • How your why can turn ordinary into extraordinary

For further information, contact marketing, PR and branding expert Scott Kolbe, co-Owner of Kolbeco Marketing at scott@kolbeco.net

You must register (no charge) and login to access the rest of this content.
Register or log in.