Practical steps at the bottom of this article…
Price/cost isn’t a real thing, is it? Two clients within the past fortnight have talked to me about pricing. The primary concern was based around the belief that they should be charging more and had convinced themselves increasing their prices would jeopardize revenue and even lose existing customers. After explaining that pricing is just a modern measure of value, and perception of the returned value is what is important, we were able to step away from “how much does this cost?”, to “how much benefit or value is being delivered?”
Pricing was constructed to help us evaluate where we should spend our money in return for feeling as though we’ve made a wise-investment for ourselves. It also often creates uncertainty for a business owner who compares themselves to the competition. We look at our competitors to see how closely aligned we are and to justify and enhance our differences. The reality is that any other organisation in your particular field is still not exactly the same. Just as no two people are exactly the same. The primary difference? Consciousness. You and I can look the same, but we’ll never thing and perceive or experience the world in the same way. So despite competition pricing analysis being a method for evaluating your product/service cost against another, it’s also sort of meaningless.
Drawing focus to this perspective really shifted how this client and I could reproduce the pricing strategy.
The end result… a new pricing strategy and matrix was developed. Some products came down in price while others went up. Why? Because we brought awareness to the functional elements of each product, the features/benefits and how perceptually each product could be categorised to reflect a cost-value exchange that was fair.
As a team, the products are now believed to be more marketable, easier to differentiate, and with value in alignment with customer expectations.
The exercise also brought about another great outcome… we discovered new product opportunities for premium and entry-level products whilst also evaluating margins on products that may be discontinued. This allows for the distribution of stock investment into products better suited to the new season and in line with the brand’s direction.
Practical pricing strategy steps:
1. Write down why you want to review your pricing.
2. Ask yourself “What do I believe is limiting my belief around changing my prices?”
3. Write down how much you would like to charge. Just the number. Forget everything else.
4. Now, looking at what you charge today. calculate the gap between the current and proposed prices.
5. Now, ask yourself, “for me to charge this price and for my customer to get real value, I would need to…”
6. Review everything you have written and ask yourself, “what do I need to do in this moment to feel comfortable charging the proposed amount?”
7. Right now, go and do that thing you wrote down.
Still unsure? Contact us and we’ll help guide you through this process.