The media is currently bombarding us with stories of ‘how bad the world economy is’ – the fact is, businesses with solid foundations that offer products & services that deliver real value to their customers will always have the potential to grow. As Seth Godin pointed out, “Inc. magazine reports that a huge percentage of companies in this year’s Inc. 500 were founded within months of 9/11.” ['Looking for a reason to hide' 26 Sept 2008]
As a business owner, you may be anxious about how you’re going to get more customers &be tempted to drop or discount your prices. This kind of ‘domino effect’ is really unnecessary & I predict that businesses that fall into this temptation in order to get more business will not see it through to their next financial year-end. However, serious business owners who understand that ultimately you can never compete on price alone who will be able to resist the urge with the knowledge that a policy of pricing to value is far more sustainable in the long term.
Here’s true story example provided by Julian Franklin of ‘Julian Franklin Productions’ ['Selling on Price' 7 May 2008] of precisely what happens when business owners make the basic marketing mistake of thinking that their cheap prices will help them:
Everybody loves a good deal. Sometimes this means a great product at a good price. Other times it means a good product at a great price. I have learned over the years to prefer the former rather than the latter, but that’s a topic for another article.
This is about selling yourself on price. I hear so many performers lamenting the new guy who “undercuts” them. No one can undercut you unless you are the low-price leader. And if you are the low price leader, then you INVITE undercutting.
Take for example, how excited I was when the “$1.00 Bazaar” opened near my house. Any magician will tell you it is a great place to go to find inspiration. The dollar store inventory constantly changes because they purchase their stuff from people who couldn’t sell it in a normal store. This is usually because it is of poor quality, flawed design, or of very dubious value, but again, I’m getting side tracked.
So I shop there and am pleased with the fact that the junk I’m buying never costs more than $1.00. This is a very good thing, because generally it is not worth any more than a dollar and sometimes I think I get ripped off.
So you can imagine how elated I was when a new store opened up across the street with a big sign advertising “Nothing over 99¢”.
YEE-HAWW!
And they claim the best selection of low quality merchandise in all of Texas. Yes, that’s a mighty big claim because there is a LOT of low-quality merchandise here in the largest state in the continental United States.
“Giant 99¢” didn’t fail to deliver on their promise of a great selection of unsellable refuse. On my first visit I was awed by the incredible selection of wall-to-wall junk and not a single thing was priced (or worth) a single penny over 99¢.
Now, I’m sure you’re wondering, “How in the world could things in Texas possibly get any better for the bargain hunters?” But some of you already know the answer….
Yes, that’s right, we got our very own “Mr. 98¢” store! The grand opening was spectacular! They had day-old donuts, tofu hot-dogs on stale buns, and one of the least expensive entertainers in the city. He wasn’t there when I arrived 20 minutes after his show was supposed to start. And he still hadn’t arrived when I left 45 minutes later, but the store manager held pretty high hopes that he would eventually show up. You know, provided he wasn’t involved in another DUI or something.
So I drove home with a smile on my face that nothing could shake. I found a new resource for invaluable merchandise (actually it’s really more “unvaluable” merchandise, but my spell checker won’t let me use that word).
Then it hit me as I was driving in the warm glow of satisfaction (or was it the warm glow of the faulty chemical glow sticks I got twelve for 98 cents that had leaked all over the backseat?). Regardless, I realized this was much more than an amazing retail phenomenon; this was much more than a resource for discontinued and recalled items at below cost; this was a business model like none other.
Finally I realized how an entertainer who had nothing of real value could finally compete. By simply lowering your price you can create the unique position of being the absolute cheapest entertainer in your area! What kind of a FOOL would possibly compete against you when you held such a low-value, low-profit position?!
And even if they DID compete against you (as “Giant 99¢” did against “$1.00 Bazaar”), you can simply turn the tables on them and lower your price even further (like “Mr. 98¢” did to “Giant 99¢”). The possibilities are limited only by the number of divisions in your government’s currency!
As I contemplated the vastness of this marketing strategy I passed a store that clearly understood the concept. They were beating everyone to the punch. They were selling everything for just 79¢!
Unfortunately they wound up going out of business. I wonder why?
['Selling on Price' 7 May 2008 http://julianspeaks.com Julian Franklin]
How do you charge what you are worth?
For many new business owners, this can be a frightening question – it requires self-assessment & judgement of how professional & valuable your services truly are. I’m not saying that you should instantly become the most expensive company in your industry; rather, I’m suggesting you really try to understand your customers more so that you can price your product or service to match the value of your product or service.
Customers are not unhappy to make large purchases, as long as they have a perceived value – you haven’t heard of any of the the famous clothing & shoe designers going bankrupt recently, have you?
As I discuss in , one of the main purposes of your business is to ethically exploit your customers: many people are shocked by this, initially. But it is vital for the sustainable success of your business & your personal wealth development that you begin to make serious decisions about the true value of what your business offers. Once you know the value, make that your price & then stick to it. Don’t let the temptation get to you, I promise it’s worthwhile in the long run!
Deliver so much more than what your customers expect – make a “magical moment” – so that they are more than happy to pay your asking price. At the point when your customer as bought into you & your offer, you price is now longer ‘too high’ or ‘too low’ but it’s ‘just right’.
Today, take a brief moment to sit, think & do a self-assessment: am I worth more today than I was 6 months ago? Shouldn’t I be raising my prices since I have gained more insight, knowledge & experience?
The people who have become truly wealthy instinctively know what they are worth.
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