Your customers do not want your products and services; they want what your products and services will do for them. They are looking to extract value from your offerings and creating value is what you get paid to do. In a competitive market, those who understand and create value best will prosper.
The first step to persuading your customers to pay more, is to deliver more value than your competitors do. To create more value you must first understand what your customers are buying so you can sell them what they are buying.
Value is benefits minus costs. Use this equation to drive your business because it is what drives your customers’ decisions to buy. Benefits are features of your products and services that solve your customers’ problems. The more you understand your customers’ problems, the more opportunities you will have to create value. You must understand your business and your customer’s businesses.
Customers go shopping because they have problems. Therefore they want solutions, and that takes can-do thinking. They do not want to hear ‘no’. Costs such as time, effort and emotional or mental costs are ‘expensive’ to your customers. They destroy value. It is worth money to your customers to have these costs reduced.
You can create value for your customers by giving them something extra. Delight your customers by providing solutions to problems they would just love you to solve but cannot really expect that you would. When you do, you will knock their socks off.
To persuade your customers to pay more, you must understand what your customers value. Value is what you have, that your customers want and are prepared to pay for. Most companies understand what their customers want, but not what they are prepared to pay for, or how much they are prepared to pay.
You do have a choice. You can compete on price or value. If you do not compete on value, you will have to compete on price.
Pricing Myths Debunked:
- Price is NOT the issue. People buy for emotional reasons more than logical ones. Research shows that even for business customers price is not the main issue.
- The market does not set price. You do not have to be a passive price-taker. There are things you can do to persuade your customers to pay more.
- You do not have to undercut or even match your competitor’s price. The market leader is usually not the lowest priced. What you do have to do is differentiate your offering.
- You do not have to lower your prices to attract business. In fact, there is evidence that raising prices can increase sales.
- Do not even think about price wars. You cannot win them — not long term. Price wars are destructive and unprofitable. They can ruin your business and damage your industry.
- Truth 1 – Price is a factor, but it is not the main factor. It is your job to neutralize the price issue.
- Truth 2 – Sales, discounts and lower prices do have a place in business. They can all increase turnover. That increased turnover comes at a cost, however. Know what that cost is likely to be before you reduce your prices.
- Truth 3 – Performance affects price. If your customers encounter poor product or service quality they will complain about the price.
- Truth 4 – Simple is best. Customers do not like complex pricing models and they hate hidden fees and charges. Be transparent in your pricing.
- Truth 5 – If you want to maintain your margins after you have reduced your price, you will have to sell more unless you can reduce your costs. Find out how much more before you lower your prices.
- Truth 6 – Your customers will pay more. In fact, it is easier to say no to discounts, or even increase your prices than you think. Value is priceless if you help your customer to get rid of the pain.
- Truth 7 – Price is not a fixed point. Rather it is a band. Set your price just under a price barrier not just over one.
Questions to Consider:
- What evidence do you have about the price sensitivity of your customers?
- What are the issues that affect your customers’ buying decisions?
- What could you do to persuade your customers to pay more than the ‘market’ price for your products and services?
- How could you further differentiate your offerings from those of your competitors?
- Why are you offering discounts, low prices and reductions?
- What benefits are you getting from these?
- What is it costing you to get these benefits?
- Are they worth it?
- How could your pricing strategy be improved?
- What performance problems do you have that might be causing customers to complain about price?