Stop Losing Sales, Raise Your Prices
If you’re like me you believe that living rooms were made for music and that the best music of all is performed live. Following that school of thought leads one to believe that nothing could be better than having a talented artist performing for you and your friends in the comfort of your home. Recently, that’s exactly what my wife and I had the pleasure of experiencing .
You see, our neighbors regularly bring music into their home by hosting house concerts that feature great musicians who appreciate playing for small groups of music lovers during their off-days between gigs. Last night the featured troubadour was Jesse Terry, an award-winning singer/song writer who put on a captivating performance.
Jesse had entertained us once before, about the same time last year, and acknowledged us as he took his place at the head of the room. Like most musicians, Jesse isn’t the highest paid individual and makes his living from a variety of sources like selling his own CDs at the concerts he performs. Before beginning to play he pointed to a stack of discs and explained that his three CDs were available for sale after the concert. Then he made a surprising remark. Jesse pointed out that his CDs are selling quite well at in-home events, “Thanks to Mike, my business advisor,” he commented looking toward my direction.
That’s because at last year’s event I noticed Jesse was selling his CDs for $10.00 each and promoting two for $15.00. This struck me as being odd noting that everyone in the room could afford much more and might not perceive the CDs as being worth much due to the low price. So at the intermission I approached Jesse and suggested that he test a new pricing strategy. Explaining that he may be undervaluing his music in the eyes of potential customers I suggested that he increase his single CD price by 50% and move the two CD promo up 66% to $25.00. Well guess what? With the new/higher prices Jesse’s CD sales have nearly doubled at each event since.
The principle behind keeping prices high involves perceived value. Since there are psychological barriers at the upper range of pricing, it stands to reason that similar barriers exist at the bottom range of pricing as well. Low pricing, in some cases, puts customers off and makes them question the product or service being offered. Taking a page from Jesse’s experience, perhaps you should take a look at your pricing structure to see if raising your prices will actually generate higher sales. Here are a few tips to consider when doing so:
1.) Value Is In The Eye Of The Beholder
Technology Integrators often undervalue their services because their mindset ties the price they charge to the labor involved in performing the service. On the contrary, integrators who use a more individual notion of value believe that the services they offer are only valuable to the extent that a potential client desires them and they adjust their pricing to the buyers perception of value. The latter keeps the value-minded integrator at peak perception in the eye of the buyer and more likely to secure the job.
2.) Price With A Purpose in Mind
For Technology Integrators who price on value, costs only define if a job should be offered and to what extent. Their costs don’t play a role in determining the perceived value by potential customers. When determining your price, have a conversation with the prospective client to recognize their needs and wants. The conversation is your chance to better understand and communicate the value you can provide. Ask questions like, “If price were not an issue, what role would you want us to play in the design, installation and service processes?” This helps you to define your scope of value before you outline your scope of work. Doing so refocuses your potential client from buying a commodity to elevating their home or business while making them more open to you as the provider.
3.) Nobody Ever Says “Your Price Is Too High.” And Means It
Remember that when a potential client says that your price is too high, it really means that they don’t fully understand the value you can provide. If this happens, ask them to explain and review your bid against the competitors. Chances are, you’ll be comparing apples to oranges and the exercise will enable you to better explain the value you’ve built into the bid that your competitor did not. At that point you have the opportunity to change the bid, meet the competition or just pass on the opportunity. Either way the potential client will respect you above the others for taking the higher road.
Just like the performer Jesse Terry found when he adjusted his prices to meet the perceptions of his customers, you too can use value pricing to create a better overall customer experience and position your firm above the rest. So the next bid you prepare ask yourself, “What is the value created for this client,” and price it accordingly. You’ll be amazed at the results.