Pricing, the Key to Your Business Success

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Profits are the key to any business success. Pricing is one of the major elements to determine your bottom line
profits.

The proper pricing strategies will lead to more cash and profits in your business.

The biggest challenge I see in this economy is the knee-jerk reaction to cut pricing to bring in more sales. That only works if you have a great upsell process or lifetime value of a new customer or client after the initial sale. For example, the well-known story with one of Jay Abraham’s clients. He was consulting with a coin dealer and they wanted to increase sales. Jay asked if they bring on a first-time new client to collecting coins, on average once they make their first purchase how many times do they come back in the year to make another purchase. The coin dealer, said, “about 8-9 times on average. Once they get started they are hooked!” Jay was incredibly excited.

His strategy was to focus on getting new customers with that incredible back end. Let’s offer each new customer an incredible deal they can not refuse. Let’s offer each new customer for a limited time a 50% equity position in the first coin they purchase. Meaning, you will lose 50% on each new coin, not break even, but lose money! If the coin was worth $100, offer them only $50 to give them a win early on. The business owner thought Jay was crazy of course. But Jay explained the math of having 1,000 new customers and if each one invested 8-9 more times at full price in a given year, what the impact would be, it was staggering.

These may not be the exact numbers, but the business went from about $3 million in sales to about $150,000 million in sales in about 3 years! That is a rare exception to cutting prices, and even losing money on the front end to bring in a new client or customer.

Most small business owner may not have a product like this where the consumer is so passionate and addicted to the product or service.

Let me point out one of the most important components of price:

If you or your staff only can sell by price, and your solution by you or your staff is to offer a discount to convert a new client or customer that means you do not have to develop sales or marketing skills. If your business cannot sell by anything else but the price, it is doomed to fail eventually (you might be thinking, WalMart® sales by low price only, that is not true, they have great systems advantages and others that you do not see).

Again, if price is your ONLY way to sell, that is a huge problem. One big reason for this is that it takes a lot of work to develop real sales skills, marketing skills and work on your language product and customer service to constantly improve and get better. Harvey Mackay just came out with a great new book, The Mackay MBA for Selling in the Real World, which would be a great place to start to improve your sales skills.

Here are great tips from an event I attended in the past on pricing strategies with Dan Kennedy, a great marketer. I always take great notes at events and I know there are great nuggets in here to help you with your pricing
strategy.

Five Ways to Raise Prices and Sales Results

  1. Power. What advantages does your product or service offer? Do you offer a systems advantage or advertising advantage over your competition? Is your ability to implement better? What is the true economic advantage of your price? What results will your product or service produce? Sometimes you have to do a better job of explaining the process that you go through and don’t assume everyone knows the steps you take your client or customer through. If you can become the celebrity expert in your field that is an ideal approach. The celebrity expert is almost always the highest in fees charged.
  2. Change who you are selling to. If you are attracting cheap customers, what bait are you using to get
    them? Either your website, copy, language, positioning is giving the impression that price should be the only criteria to determine if your product is better than someone else’s. Are you attempting to market to everyone? There is a high-end dog kennel in Cleveland Ohio where there are suites for your dog; you can have a steak dinner at $48 per night for your dog, and many, many other upsells. They cater to a luxury market and the copy, experience, and everything matches. A copywriting change can be powerful. If you change your copy from those looking to increase their income vs. increase their net worth, net worth communicates to a very different audience. That may seem small, but that is really a huge difference in copy and WHO you are selling to.
  3. Strongly consider selling to the affluent. They are the least affected by price. This group is least affected by the recession. Those who spend 90% of their income on necessities…they are most affected by the current economy. The middle class is getting smaller if that is your market, 2/3s of that group has moved up, and 1/3 has moved down.. They are the least affected by price. This group is least affected by the recession. Those who spend 90% of their income on necessities…they are most affected by the current economy. The middle class is getting smaller if that is your market, 2/3s of that group has moved up, and 1/3 has moved down.
  4. Always offer a premium version of your product or service. At least 20% of any buying group will take the premium version of your product or service. Some of you may have one but you or your sales staff may use their own judgment as to whether they would shell out that kind of money for the premium version. Not good. You are using your own economic situation to judge others. You should at least offer it and you may find 1 out of 5 take you up on the offer. Of course, if you improve your presentation and the value of the premium option and study how to sell to the affluent that would make a big impact on your results.
  5. Influence with Writing. Sales skills are vital to your results. Copywriting is sales skills in writing. Most do not work on either set of skills. Find tools, books in both areas to improve upon your communication. This alone will dramatically increase your sales results. Having better skills will help you obtain higher prices also. I love to ask salespeople what was the last book they read or CD they listened to that make an impact on their sales skills. Most people will answer, “10 years ago I went to a training by my company, or I am a natural at selling I do not study anyone else.” Basically, those are excuses, and there are no sales skills present.

Don’t fall for the trap that since the economy is bad, you must lower your prices. It actually may perpetuate you
going out of business sooner than later. Working on these five areas to improve your result will have the biggest impact on your pricing strategy and overall sales success!