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On pricing power

Guest post by: Seth Godin

Article Overview: If you’re not getting paid what you’re worth, there are only two possible reasons: 1. People don’t know what you’re worth, or 2. You’re not (currently) worth as much as you believe

On pricing power

If you're not getting paid what you're worth, there are only two possible reasons:

1. People don't know what you're worth, or

2. You're not (currently) worth as much as you believe The first situation can't happen unless you permit it to. If you're undervalued, then you have a communication problem, one that you can solve by telling accurate stories that resonate.

Far more likely, though, is the second problem. If there are reasonable substitutes for your work, and those substitutes are seen as cheaper, then you're not going to get the work. 'Worth' in this case means, "what does it cost to get something like that if something like that is what I want?"

A cheaper substitute might mean buying nothing. Personal coaches, for example, usually sell against this alternative. It's not a matter of finding a cheaper coach, it's more about having no coach at all. Same with live music. People don't go to cheaper concerts, they just don't value the concert enough to go at all.

And so we often find ourselve stuck, matching the other guy's price, or worse, racing to the bottom to be cheaper. Cheaper is the last refuge of the marketer unable to invent a better product and tell a better story.

The goal, no matter what you sell, is to be seen as irreplaceable, essential and priceless. If you are all three, then you have pricing power. When the price charged is up to you, when you have the power to set the price, there is a line out the door and you can use pricing as a signaling mechanism, not merely a way to make a living.

Of course, the realization of what it takes to create value might break your heart, because it means you have to specialize, take risks, create art, leave a positive impact and adopt generosity in all you do. It means you have to develop extraordinary expertise and that you are almost always hanging way out of the boat, about to fall out.

The pricing power position in the market is coveted and valuable... The ability to have the power to set a price is at the heart of what it means to do business profitably, so of course there is a never-ending competition for pricing power.

The curse of the internet is that it provides competitive information, which makes pricing power ever more difficult to exercise. On the other hand, the benefit of the internet is that once you have it, the list of people who want to pay for your irreplaceable, essential and priceless contribution will get even longer.

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Article Tags: pricing power



Related Forum Posts
Re: Is the rising cost of wheat affecting you or your busine - Well I guess this problem would primarily affect a small bakery that has little or no pricing power with buyers and limited suppliers.
Re: International Shipping Costs Money! - [quote="Kevin Lee":2nynbu3v][quote="Alan Mater":2nynbu3v]Exactly! I wish eBay would incorporate a way for users to report such sellers. They already implemented the 'no negative feedback for buyers' policy, which I'm a huge fan of. Some more changes still need made.[/quote:2nynbu3v] Hey Alan, It'd be great if there was a "pricing officer" to cap unfair shipping costs and put an end to ticket scalpers. It's crazy to have to pay double or more just to see a good show these days.[/quote:2nynbu3v] Hi Kevin, I agree. Tickets for anything these days are scalped on eBay. But, do you think a "pricing officer" would be enough? I think they need to implement a system that allows users to report offending listings. Then, those reports could be sent to the pricing officer, rather than the officer having to search every single listing on his/her own. Having the power and numbers of the users would be to eBay's advantage in this case.
Re: How do you back up your computer? - Hi ideasuniversity, The $5 per computer pricing (or $50 per year) for unlimited storage is pricing we intend to have ongoing. Thanks, Gleb
Re: Is it worth buying a Dell computer with financing? - I used to purchase my no-name brand machines so that I could always upgrade them. Some went through several reincarnations with new motherboards and memory, preserving old peripherals, power supply and tower. But now with cabling changes, power requirements and form factors, it seems just as easy to purchase a new machine (but I always drag along at least my old 80Gb, 10,0000 RPM system drive). In addition, I carry an iPaq for telephone and occasional portable email and surfing. For 'real' portability though it's an ASUS notebook which really seems to live up to the reputation of superb graphics, and commercial quality at retail pricing. Both computers use Vista, whose performance was greatly enhanced with its first service release. And yes, I recently learned my lesson about backups so have an internal terabyte data drive as well as a 1/2 terabyte external one ....
Women Entrepreneur Tips - Thank you LeoOliveros, I found #4 particularly true in my case: 4. The Enterprise Must Include the Power of Power Networks. As a conductor of your own enterprise, you can not see yourself as a one-woman-show. You must choose to utilize the power people in your life, by asking for help when you need it, and effectively delegating in order to capitalize on your strengths and that of your power network. When certain experts are not represented in your power network, you must actively seek advisors or mentors and develop a team of specialists, so the benefits are received by everyone involved in the power network - the true Power of Power Networks.


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