Are your prices working for you?
Funny thing prices. If I ask one group of small business owners whether or not they’re happy with their prices, I can receive the answer yes. Check with another group however and I find they’re not. Yet, many business owners struggle with this area. They know they should put their prices up every year, but most don’t and I also know some businesses that have all the work they can handle, but are not making enough money to take on extra staff to cope with the work they’re generating.
So, let’s look at your prices. Pricing your products or services is mainly about one thing and one thing only: CONFIDENCE! If you’re confident with your product or service and feel it’s worth what you’re charging for it, great. If you’re not, it’s time to look at bit closer at this issue.
Why do people buy? Think about the last thing you bought for fun. Now think about why you bought it. You may have come up with answers like “It was on special offer” or “It goes with the colour of my cat” and so on.
But, fundamentally did you buy the item because you WANTED it? That’s the reason most people buy things – because they want it. There is also a difference between want and need to – I might have wanted my car, but I need petrol to run it. Need is for things that are absolutely essential. The problem is that a lot of people substitute the word want for the word need and so you hear “I need a website” or in the case of my husband “I need a new car”. What they are really saying though is “I want…”.
Now, have you ever seen people spend more money than they intended to on an item? I definitely have. What does that tell us? If they feel they need or want the item badly enough, they’ll spend the money on it.
So, you have two jobs in your business? Firstly to create that need or want desire badly enough so that your customers really want what you’re selling. How do you do this? Talk to them, ask them questions, find out what those needs or wants are and see whether you can fulfil them.
Your second job is to concentrate on building yourself into an expert – write articles, give quotes to the press, write a book, give talks and so on. Why? Well, do experts get paid more? Absolutely! If I were to ask you which would be priced higher: an apple pie made by my mum or one by Gordon Ramsay, what would you say? Now, obviously I know that you would buy the one from my mum, but would you agree that Gordon Ramsay’s apple pie would be selling for a higher price? Why, because he’s built his reputation.
I met a guitar teacher the other day who told me that this philosophy wouldn’t apply to his business. Then I asked him how much he would pay to have a lesson from Eric Clapton or from another guitar legend. Do you see? They’ve made themselves into experts, so they can charge more and you would expect to pay more.
There’s something else at play here when we talk about prices. And that’s VFM or Value for money. If I’m going to spend top whack with someone, I would expect that absolute best. If I got that, I would say it was worth spending that money. If not, I would feel cheated. So, if you are going to increase your prices, make sure that the product and service you provide is fantastic too.
What about those people who really do buy on price – and yes 10-12% of people out there do buy the cheapest products out there? Unless your business is catering for this group of the market, I would say steer clear if at all possible. Why? Well these are the people that typically are critical of your work, question everything and generally want the best deal they can get all of the time. In short, they are a nightmare to work with. Putting your prices up often means that you’ll get rid of this group of penny pinchers and save yourself a headache as well. Let’s face it – would you rather work with someone who appreciates what you do and thinks you do a great job or someone is constantly asking you why you charged them x, even though you’ve done a fantastic job for them?
And the other thing is, if you put your prices up, you can afford to lose some customers. Let me explain. If you normally charge £20 an hour, it would take you 5 customers to reach £100. If you put your prices up to £25 an hour, you would only need 4 customers to get the same amount – you can afford to lose one without losing out on the income. If you put your prices up to £50 an hour, you can afford to lose 3 customers and still make the same amount.
Someone once pointed out to me that it takes as much effort to get one customer paying a higher price as it does to get a customer paying a lower price – so why not go after the higher paying customers and get fewer of them to make the same money? Just a thought.
My key tips on prices are then:
1) Work on wants and needs – find out what your customers want or think they need and give them this.
2) Concentrate on making yourself into an experts – experts can charge more
3) Give value for money – if you’re going to raise your prices, make sure that your service matches
4) Put up your prices – you can afford to lose some customers and the customers you will lose will probably be the ones you don’t want to work with anyway.
5) Finally, have some fun with prices. Do some two for one offers or loyalty cards. See what works for you.