What are you doing when setting prices? You should be asking yourself a series of questions.
Questions are so powerful. In fact you can completely change people’s behavior simply by asking different questions. In this case we are looking at changing your behavior as you go about setting, getting and managing your prices. The previous episode we looked at 12 questions to ask yourself when price setting. Those were some of the more basic questions. If you haven’t listened to that episode yet do so now.
Why are these questions so important? Pricing is strategy and looking at it from different perspectives helps you to determine what is most suitable for your business. Just because two businesses are selling the same thing doesn’t mean they will sell it at the same price. These questions I’m bringing to you in this and the previous episode will help you think through the strategy. Some of these questions are fairly obvious and others you’ll wonder why bother. But they all play a role in your strategy.
Do remember that Pricing in any business will be a different levels of maturity. So right now you may only consider the basics. Later on as you become more mature in your pricing you’ll expand to include more things in you pricing strategy.
In This Episode
In this episode, we are looking at 12 more questions to ask when setting prices. When I sat down to record that first episode I came up with way more than just 12, hence bringing you part two. And yes, there are even more than the 24 I’ve chosen for these episodes. But you have to start somewhere. This second series of questions goes deeper into the strategy around your business and pricing. Not all questions will apply to all businesses but most of them you will find useful in yours.
I can even suggest as you listen to the two episodes you make a list of which questions you need to include in your thinking as you go about building your pricing strategy and price setting process.
Podcast Episode Highlights
- 0:00 Intro
- 1:48 Questions One to Three
- 3:31 Questions Three to Six
- 5:56 Questions Seven to Nine
- 9:03 Questions Ten to Twelve
- 10:54 Wrapping It Up
“If your offer is your signature offer versus a teaser or little offer, you may choose to position it differently.” Janene
“Time-rich versus cash-rich can tell you a lot about how to position your offer.” Janene
“If you choose to bundle your offer, your prices are “adjusted” in the process and it’s important to account for that in your profit calculations.” Janene
“You want to think about are you going to be making those special offers? Are you going to be offering discounts or negotiating the contracts with your customers? If so, that may affect how you position yourself from the beginning.” Janene
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Questions One to Three
The first question that I want you to think about or ask yourself is, how are you using this offer? Why is this important? Well, if the offer that you’re looking at is a main or a signature offer versus it being a teaser offer or an upsell or a downsell, you might position it differently.
Maybe you have it as your signature offer, but somebody else has it as an upsell, and that means you may put different prices on it. That should be part of your consideration, how you’re using the offer.
Price setting question number two. How price sensitive is my target customer group? Now this is a really great question because if you are going after a group that is highly price sensitive, then you’re going to need to bring offers to the table that meet that price point, and therefore probably deliver less value than if you are going after customers who have less price sensitivity. Think about how price sensitive is the target group you’re thinking of.
Question number three, are my prices aligned with my brand values and other aspects of the business? This is really important. If you’ve had a look at my value pricing model, if you haven’t you’ll find a link to it in the show notes, then you will know that business alignment is one of the foundational elements of a good pricing strategy. Making sure that your pricing is aligned with things like your brand and the values of your company is very important. Because if it’s not, then you may need to make some adjustments to your prices and how you implement them.
Pricing Questions Four to Six
Question number four, how are my customers behaving? Do they behave more time rich or cash rich? This is a great example. I love talking about this. My dad loves it even more. What do I mean by time rich? Cash rich? Well, most people, when they’re buying things, they behave either more time rich or cash rich. Time Rich are people who will spend a lot of time doing research.
My dad for example, when they first came to visit me over here in Switzerland, he spent a lot of time researching flights and prices, and he saved a couple hundred franks or come a hundred dollars, I guess it was for him. After doing all these hours of research their tickets. But there are other people who would not take all that time and would rather pay to fly direct, and they’re willing to pay a little bit more so they behave more cash rich, like their money is there to help them save time and spend their time in other areas.
Time-rich versus cash-rich can tell you a lot about how to position your offer when setting prices.
Putting Offers Side by Side
Question number five. Can or should I be creating different offers at different value and price points? One of the things that I always say a little bit, in jest, but it is true. The best way to sell a $5,000 offer is to put it next to a $15,000 offer, right?
It makes it look cheaper. And that’s one of the things that can help you if you have an offer, is to put it with other offers side by side, because then it gives people different price and value points to look at. So the question is, in your business, does that make sense? Because maybe your offer is 5,000, but if you put it next to a $15,000 offer, you might be able to charge a little bit more, or you might choose to charge a little bit less for that $5,000 offer.
Depends on the situation, but you need to first ask yourself, should I have different price points and value points? And from there you can decide which way to go with your price positioning.
Number six, will I be selling the same offer to different customer segment? If you have one offer that’s for all segments, then that is going to influence your pricing, of course.
Now, in some cases, like we’re going to get into in the next question, you may be able to differentiate.
Questions Seven to Nine for Setting Prices
That brings me to question number seven, which is, will I need prices for channels that I sell to? Let me differentiate between a customer target group and a channel. Customer target groups are people that you sell directly to, whereas channels are usually you’re selling to someone who’s then is reselling your offer.
When you sell to different channels, you’ll need prices for those channels as well. You may need one price for your end users and then other prices for the same thing for your different channel partners. And that is certainly something you wanna consider in your pricing.
Question number eight, can or should I bundle my offer? This is kind of the opposite of what we are talking about, somewhat the opposite of question five, but here we’re talking about if you have a lot of little offer. Should you be putting them together into bundled offers, and what would that mean in terms of your pricing?
Now, some of the questions that we’re talking about in today’s episode are going to be important when it comes doing your profit analysis because if you’re selling to different channels and you’re selling the same product or the same surface, service at a lower price to these different channels, then you’re gonna have to account for that when you do your profit calculations. And the same here if you bundle your offer. Quite often when people bundle offers, they sell things at a slightly lower price.
Looking Back at Your Analysis
Part of setting prices is taking those prices and performing a profit simulation. If you don’t use the actual net prices in those calculations then you won’t see the real picture. You’ll want to adjust your profit calculations for those adjusted prices as well. This is one more reason why it is so important for you to be asking yourself these questions, and then going back and looking at that analysis that you did or the simulations that you ran to make sure that you reflect the true prices you will get.
What will often happens is you’ll plan with a price of a hundred, but through discounting the average price is much lower. They get to the end of the year, their average price was much lower than a hundred because of those discounts and special deals. If you don’t account for that, then you’re gonna be up for a really negative surprise at the end of the year when you see your profit. Because it’s not gonna be anywhere near where you expect it to be, even though you sold as much or as more as you had expected. So be careful of that.
Question number nine, will I be discounting my offers and under what circumstances? So again, this is going to, okay, how tactically are you going to be doing things within your business? And do you need to account for that in some way when it comes to your price positioning, your main price that you have?
You want to think about are you gonna be making those special offers? Are you going to be offering discounts or negotiating the contracts with your customers? If so, that may affect how you position yourself from the beginning.
Questions Ten to Twelve
Question number 10. We’ve got three more. Are there any intangible value points that I need to take into consideration?
When we talked about value last time, we said we want to look at the economic value where you quantify it, but there’s also intangible value. These are the things that we can’t see or touch in the same way. If you think of luxury goods, they have a lot of intangible value. Or if you think of when people buy branded products and pay more for them, Sort of a 10 intangible value there and it you may want to take that in consideration in terms of what you’re charging for people for in your prices.
Question number 11, will my customers be buying the same thing repeatedly or are they basically buying one off from me? Yeah. Or are they buying, you know, this time they buy one thing and another time they might buy something else. Now, why is this important when it comes to your price setting?
Well, people will behave differently when they’re buying the same thing repeatedly from you than when they buy, say a one-off, make a one-off investment in something. And that could very well impact your price positioning and how you set those prices. And here’s the last question. How often will I be adjusting my prices?
Now, you might find it funny that I’m talking about adjusting your prices at the same time as setting them, but you wanna think about that in advance. Because it (adjusting your prices) may give you different opportunities to do different things with your price setting upfront if you understand how often or when you might be looking at adjusting prices.
Wrapping It Up
Think about that as well before you set those prices. That is what I wanted to share with you today in this part two episode of Questions to Ask Yourself When Pricing Your Offer. If you have any questions or if you’d like to find out more about how to get help with pricing in your business, head on over to thepricinglady.com and book a call with me.
If you’d like to ask me questions about these questions, then connect with me on LinkedIn. I’d love to hear your feedback and your thoughts on the episode. I wish you all the best. Have a great day, and as always my friend, enjoy pricing.