Are you pricing yourself out of business?
The other day I was looking through a Pottery Barn Catalog and thinking about how they can charge so much more for something…
For example, a glass pitcher which they named “Tavern Pitcher” goes for $ 39.50. At Walmart an almost identical pitcher costs $ 5.00.
A “party bucket” designed to hold ice and multiple wine bottles, the Pottery Barn version is $ 129. A similar version at Walmart costs $ 32.99.
Now obviously these businesses are catering to two different demographics, but if Pottery Barn charged $ 5 for a pitcher people might not buy it because they’d think something is wrong with it.
And obviously their pricing strategy has not hurt their business one bit.
Pottery Barn, founded in 1949 and acquired by Williams-Sonoma, Inc. in 1986, is the leading home furnishings retailer in the country. They have 200 retail stores and a direct-mail business that distributes 100 million catalogs a year. Not to mention their online shopping store via their website.
In fact, they’ve been so successful, they spawned new businesses including Pottery Barn Bed + Bath, Pottery Barn Outdoor Spaces, Pottery Barn Kids and Pottery Barn Teen.
What to charge for your services and products is one of the biggest obstacles business owners face…and they routinely under-price their goods and services to try and “beat” their competitor’s price.
The fear of losing customers…being judged as too expensive are things that keep businesses from charging what they should for their products and services. Charging too little can and does cause businesses to go under.
Often I hear business owners say things like, “I can’t charge more than I already am” or “I can’t get away with charging that much.”
The truth is, when you look around, chances are you will find someone charging more than you are.
And… when you charge too little or surrender to your “fear of price” by reducing prices, you are not only undervaluing your product or service, but you are jeopardizing your business in the long-term.
When it comes to setting your price, there are some simple dos and don’ts you should always follow.
Don’t lower your price to win a bid. One highly successful, more than competitive business owner I know of had the chance for one of the biggest deals of his life. He had submitted a quote to a major company within his industry.
He felt sure he would win the bid as he had the experience required and was making a name for himself in his industry.
When he didn’t get the job, he asked his contact why. Their answer, “Your rate was much lower than we thought it would be, so we thought maybe you weren’t as good as we thought you were.”
Don’t give into fear. Dan Kennedy tells a story about a thriving $ 100-million-a-year company that gave over a significant share of profits and control of their operations to a bluffing competitor who threatened to destroy the business with lower prices and massive advertising.
Dan says that it turned out that once the competitor became a partner, he destroyed the business from within in order to create a vacuum in the market so he wouldn’t have to compete head on.
The company owner didn’t go out of business because of the competitor, but instead because of his fear of price competition.
Do test out different prices and price strategies. Instead of picking a random price, test out different prices and offers. For example, try different payment terms such as a one-payment term, three-payment term and six-payment term.
At SuperConferenceTM, Ryan Deiss talked about a price test where the price was a one-pay at $ 197. There were 340 conversions at that rate. However when they changed the rate to two payments of $ 97 they had 977 conversions. But they didn’t stop testing there. The price that had the most conversions (1008 conversions) was the highest price with three payments of $ 97.
So as you can see, it’s not always the lowest price that brings in the most sales, but the most appealing offer.
Do consult qualified advice on price if you are having trouble raising your prices. Let me emphasize the word “qualified”. This isn’t your spouse or your next door neighbor. This most likely isn’t people in your niche or marketing other businesses in your area of town. It definitely isn’t your friends and family.
If your fear of raising your price is getting in your way, seek professional guidance. A marketing consultant or business advisor who specializes in price strategy such as Jason Marrs. The increase in profit often quickly makes back your investment.
No matter what you do, adding price strategy to your business plan is one of the most important tools you can use to not only increase your profit but help you stay in business for the long haul. Don’t be afraid to try pricing strategies out. Raising your prices even 10% will have a huge impact on your business and your life. And you won’t have to work any harder to make more money.
NOTE: Are you short-changing yourself by failing to extract the maximum price for your products and services? If you are, consider this your invitation to access a goldmine of information on how to raise your prices and increase your profits with little or no resistance. Discover 10 ways to raise your price, 15 price strategies to make price irrelevant and how to separate yourself from your fears about price in our Price Elasticity Online Course. Click here to learn more.