Pricing is a very sticky topic among just about every solo business owner I know. That’s because when we started our businesses, we had no idea what to charge, but we were told that there are market “norms” – amounts that people will, and won’t, pay for things.
So we take a peek at what our competition is charging – we charge the same, or most commonly, we charge less than the competition, to make our prices look competitive.
There are a couple of major flaws with this strategy…
First, if we let the market dictate the prices we charge and how we charge them – then we’re effectively letting other people set our income.
I once did some consulting work for a printing company that told me they couldn’t change their prices because there were industry guidelines that “set” their prices! Huh?!
You’re the entrepreneur!
You’re the captain of your own ship!
One of the GREATEST things about working for ourselves is that we don’t have to play by anyone else’s rules. There’s no boss breathing down our necks watching how long our lunch hour is, or deciding if we deserve a pay raise.
Now we get to make the rules including what we think the value of our services are. Lesson 1: don’t let anyone else tell you how you should “price” your services and determine your income.
Here’s the second problem. Most people only know one way to market their business – based on price. Being the cheapest in your marketplace is a very dangerous, a very stressful and very unstable position for your business to be in. Here’s why:
1) Because someone more desperate and more hungry than you can ALWAYS undercut your prices. Having a value proposition that you’re the cheapest has never worked long term for any business (perhaps with the exception of Wal-Mart, who has become the1000 pound gorilla of “cheapness”). Cheapness is a recipe for disaster.
If you’ve marketed your business as being the lowest cost and suddenly your competitor gets behind on their mortgage payment, gets desperate and offers even lower prices – you’re in big trouble. You’ve either got to keep undercutting your prices – working more for less – to maintain the integrity of your value proposition. Or you have to find a better, different way of marketing your business fast!
2) Secondly, people who shop at the bottom end of the market are the worst kinds of clients to have anyway. They’re typically high maintenance, high drama, folk who don’t appreciate you or your value. And they’re always trying to beat you down on price. Let other people serve those clients – not you!
I was at Tractor Supply the other day and saw a landscaping truck with this slogan on the side – “We won’t be undersold. We guarantee to beat anyone’s price.”
It was obvious to me that this guy had seen some big company (probably Wal-Mart) use this kind of marketing strategy. And he probably thought it made great sense for him to do the same, without realizing the horrible trap he was falling into. It’s not his fault – no one likely showed him how to market his business any better way.
Now here’s a really big secret.
Not everyone buys on price.
In fact not even the majority of people buy on price.
That’s why you can drive through the ghetto and see some of the biggest TVs you’ve ever laid eyes on. It’s also why we have so many stores that aren’t the $2 store.
But here’s the rub.
In order to not get caught serving the bottom end of the market, you have to provide compelling reasons why your customers should never buy on price, and why your services are so much better.
Because if you don’t do this, people will always default to deciding on price. You need to convince them to do otherwise. We’re all hard wired that way.
This is not easy to do, which is why so many business owners struggle with their marketing. And it’s why I spent almost a third of my Ultimate Marketing Toolkit on explaining how to create real value for your customers and get them to happily pay you more money, even at prices much higher than your competition.
Your success boils down to these two simple things: Having great marketing and creating real value for your customers. When you have both these things working for you seamlessly in your business, then truly, the sky is the limit!