Do you struggle with Pricing Strategy but you don’t know why? Are you confused on how and what to charge your customers? Is this costing you time, money and a lot of energy?
Recently I was on the Creative Funding Show interview hosted by Thomas Umstattd Jr. We discuss several situations and looked at the reasons why you as a micro or small business worry about pricing. Our discussion will help you understand how to build value and charge your customers with more confidence. Full transcript at the bottom of the page. Here are a few of the things we covered.
Why Pricing Strategy is So Hard?
First, we talk about the reasons why you struggle with pricing. One big block for many small business owners is fear of rejection related to your worthiness. Another one is that you feel you don’t know how to do pricing and that results in lack of confidence in price setting.
What are the Signals that Your Prices are Too Low?
One of the first signal that your prices are too low is when your customers are telling you they are too low. Pay attentionto what your customers are saying and act accordingly. Another signal is when you don’t reach your financial target even though you have a large data base of customers. Or you’ve sold what you planned but didn’t hit your revenue targets due to excessive discounting. Another is when you have a look at the value delivered and you’re delivering more value for a lower price. It can be a sign that you’re under-priced. There are many signals, your job is to determine when something needs changing.
Anchoring: Definition and Importance
Anchoring is when you give a price or number that influences the customer’s perception of the price. This helps the customer perceive the price differently and it can work for you or against you. That’s why you want to pay attention to what you communicate and how.
It is important because a lot of what a customer is processing is happening at a subconscious level. It has a big influence on your customer and how they perceive the value and price you’re offering.
What are the Indications that Your Prices are Too High?
One of the signals is that people aren’t buying or you always here “that’s too expensive.” Just because people say that doesn’t mean that your price is wrong, it does mean that you need to investigate and understand more. Another indication is when the value you’re offering is less than the customer expects or the competition offers and you’re price is higher. Then there may be a problem as well.
Price Increase Strategy
If you’re looking to increase prices there are many ways to do this without losing all your customers. Packaging things up is a great way to shift the value perception and therefore the price as well. Of course you need to be building value along the way to get the best results. Whenever you’re changing prices the communication that goes with it as well as the mitigation strategies you use are also very important to the outcome.
Different Pricing Levels
When you are setting different pricing offers, you have to think about who is your target customer! What type of solutions are they seeking? Premium value offers? Or the cheapest one? Always set up your packages at different distances to one another. Be strategic about what’s included in the packages and the differences in the pricing of each package so that the customer can make a clear decision. Further more you direct your clients towards their desired package.
So these are some of the main topics that we have gone through and much more…So listen to the podcast interview episode 023 and read the transcript to get insightful information on how to fight the fear of Pricing.
“You need to actually charge, you know, what you’re worth” – Thomas Umstattd Jr.
“If your customers are telling you to raise your prices, you probably want to listen to that, right? Because they are going to be good judges of the value you’re delivering.” – Janene Liston
“That’s right. Because value is subjective” – Thomas Umstattd Jr.
‘The way we position prices next to each other or on a page, it communicates something to the people looking at it.” – Janene Liston
Until next time….Enjoy Pricing!