The Right Way to Adjust Your Prices
"What the hell is going on with your pricing?" my colleague asked during a once-over of a proposal I was about to send out. I began to stutter an apology. I knew my pricing had been too high. But then … the shocker: "Honey, your pricing is way too low."
Too low? Bollocks. This is what I'd been charging for the past year. After further phone debate, I revised my rate upward, then cringed as I sent the proposal. Less than a day later, my client sent it back, signed and with a deposit. I raised my prices and earned the business? Yup.
A few of you might also need a good smack on the pricing front. So I reached out to Greenville, S.C.-based business strategist Dan Waldschmidt (who has worked with everyone from tiny startups to the NFL) to get his take.
The Who of Pricing
"Asking yourself, 'Is this too high?' isn't the best question," Waldschmidt offers. "Instead, try asking, 'Is this my market?'"
Businesses evolve. Economies change. But the key to surviving any economic shift is in knowing your audience. "If you're trying to sell Kobe beef to folks [who are] all about the backyard barbecue, you don't understand your audience," Waldschmidt says.
Review your customer base every year. What's important to them? Which products are your top sellers, and why? Is an item you thought would be a whiz-bang hit just collecting dust? Head straight to your audience for their input. "If people aren't buying something for the price you've established, you're either not describing it clearly enough or there's not enough value,"
Waldschmidt says. Talk to your customers about the value they feel they receive when doing business with you, and ask for feedback about areas in which you could improve value. Straight from the horse's mouth is always best.
Tip: Ditch the market surveys, Waldschmidt advises. Unless you're looking to serve the entire market (which he hopes you're not), price your products for the audience you want and use your existing and prospective clients as a barometer for future price adjustments.
The Why of Pricing
Bargain-basement your prices and you'll look like … a Toyota Camry: reliable, but nothing special. Raise prices high, and customers will think you're quite a bit shinier--sexier, even. But you have to back those prices with some extras. "Charge outrageous amounts of money and then strive like hell to hit those standards," Waldschmidt challenges.
Your audience wants something special. So give it to them. When you're reassessing your pricing strategy, it's not just about what you offer, it's about how your customers feel when they get it. Want to charge more? Up your service. Pare back your client list so you serve fewer, but more thoroughly. Add a clerk during peak hours so no one is left frustrated. Set the bar, then set yourself up to clear it like an Olympic hurdler. Service plus product is the only equation that gives your audience the ever-important why to do business with you at whatever price.
Tip: Want to boost sales? Skip the discounts. Instead, offer an extra something for your customers when they participate at full price. A bonus one-hour consulting session. A 10-minute add-on to your massage. That way, you can keep your product value and pricing intact while still enticing customers to make time-sensitive purchase decisions.