The Ultimate Guide To Price Strategy
Tactics and Strategies to Immediately Increase Prices and Pitfalls to Avoid at All Costs
Could the advice you’ve been told about structuring your prices or priced your products hurt your overall sales?
In this post, I’m going to show you the price-structuring tactics and strategies anyone can copy, allowing you to double your sales without spending an extra dime or having to get extra leads.
I’ll start off with covering the most common ways to set prices, and why. Then I’ll jump into specific tactics. Finally, I’ll wrap up with the do’s and don’t of price strategy.
Let’s start with the most common ways to establish your prices. Some of them are good, others ok, but many just suck! And if you’ve fallen victim to this thinking, that’s ok. It’s not too late. That’s what this post here for.
Most common ways to set your price:
- Industry Norm
- Client Controlled
- Cost Plus
- Return on Investment (ROI) Goal
This is the most basic and unsophisticated way to set your price, but understandably common. This is common for entrepreneurs selling a service- something that is intangible. Services don’t lend well to objective value translation because it didn’t cost you anything. It’s entirely subjective.
For example, we all know that a new book costs between $15 and $25. It’s standard. It’s a tangible, physical good that translates easily into a pre-determined monetary value. However, the service that you deliver is not tangible and does not translate in monetary-value terms that everyone has agreed upon.
So what do most people do? Use their intuition, or worse, just guess.
Terrible idea. Any business decision based on no formal testing, solid intelligence and data or history to inform you is a bad one.
Here’s the good news. Because you’re selling an intangible service, you have more elasticity in what you can charge. That means the price will stretch because of the fact that it doesn’t directly translate into a monetary value, allowing you to easily charge more!
We’ll get into some tactics and strategies later in this report.
This is probably the most common form of price structuring. Essentially, you look at what everyone else is charging and charge the same. Maybe slightly cheaper to undercut the competition, but essentially the same.
There are even published price standards across different industries. Or your educational institution many given you price guidelines, then suggested to charge the same.
Here’s why it’s a bad idea. This method ignores the cost and profit margins of those companies or individuals being copied. You are blindly copying one piece of a business without knowing essential elements of the overall business plan that hold it together.
Here’s the real kicker- only 15% of private business owners are prospering while the other 85% are struggling. And studies have proven that the top 15% charge more!
When you know what your customers really value, you can take charge of your market and break free from this trap. It all starts with Market Research.
Now, just to be clear, I’m not telling you that you should never look at your industry or competitor’s prices. In fact, it’s an essential part of market research. I’m saying you should never let that determine your price.
NOTE: Want some amazing advice from a pioneer in this line of work? Go look up Earl Nightingale’s Lead the Field. TL;DR: If you want to be successful, find out what everyone else is doing… then do the opposite.
When it comes to value, there’s always a gap between what you perceive as the value you give and what your customers perceive as the value they receive. We see this often on sites like eBay or craigslist.
One of the fundamental flaws with this is the simple fact that you (as a business) and your customer usually have competing objectives. You are trying to get the highest price for the least work. Return on Investment (ROI) will make or break a business- it’s Business 101. But your customer has something else in mind. In fact, it’s the exact opposite. Your customer is trying to get the most service for the lowest prices- Consumerism 101.
In order to control this, you will have to master the art of Managing Customers Expectations. But that too is another conversation for another time.
Another form of Customer-Controlled Prices is surveying them, asking what they’d be willing to pay for. Then making that your base price.
Sounds good. Except not!
There is a Grand Canyon sized gap between what they say they will pay and what they will actually pay. Usually they’re not even aware of this discrepancy until they’re in a real buying situation. In psychology, there’s a big disctinction between what’s called declared preferences versus revealed preferences.
Professional marketing firms have put hundreds of thousands of dollars into this, analyzing countless focus group, buying conversations and industry surveys, only to find that it rarely works.
Again, this type of market research is good to have as a starting point, but don’t base your prices solely on this data.
This is a more advanced way of thinking about prices, and probably the best that we’ve discussed so far.
Cost Plus pricing means that you first determine all of your operating and business costs, such as equipment, utilities, rent, etc., then add a pre-determined amount of money on top of it to reach your price.
This guarantees you are going to be bringing home a profit. It’s always nice to know that the cost of doing business is paid for at the beginning of the month, rather than waiting for your paycheck to see if it covers your expenses.
But there are some flaws in this approach that ignore essential key business success principals. First and foremost, it ignores Supply and Demand- Economics 101. Markets fluctuate, which means your prices will also. Therefore your prices should inevitably change. And if this happens without properly reestablishing client expectations, people will revolt!
The second problem is that the amount of money added to the business cost is pre-determined by… you guess it- the industry.
But the biggest problem for you if you use this approach is the fact that it ignores value. Namely, value of your time and energy.
Return on Investment (ROI) Goal
I like this approach because it takes the perspective of business as an investment and forces you to have a strategy. If you haven’t learned by now, I’m all about STRATEGY!
ROI Goal as a price structure is very similar to Cost Plus, but instead of using the industry-dictated profit amount, you get to decide how much money you want to make!
For example, if you want bring in twice as much as you spend, take your business costs and triple them. So if you are paying $500 for rent, utilities, etc., then you need a return of $1,000, plus you need to recoup the initial $500, which will bring your price to $1500.
The reason I like this is that you’re starting to take responsibility by moving the price decision to your side of the business equation.
Those who take responsibility hold in their hands the keys to taking control of their businesses and their lives.
How have you been setting your prices? Is there a better way?
What You Can Do Right Now To Raise Prices Without Raising Churn
Now, let’s dive into some actionable takeaways so you can leave confident about setting your prices.
Here are some of the best-kept tips, tricks, tactics and secrets in the price game as well as start you off with the basis for some of the best strategies for entrepreneurs to get paid high prices.
We’ll start with the tactics. These are the tricks that will give you an immediate boost in response and up-front cash, but if you pair this with a full-fledge strategy, you will exponentially grow your take-home cash.
So, here is a quick preview:
- Red Herring Pricing
- Charm Prices
- Perception in Content
- The Starbucks Effect
- Sizzle Selling
- The Popeil Dropdown
Red Herring Pricing
A red herring is something intended to divert attention from the real matter at hand. It’s something that is meant to distract someone.
Here is how this applies to setting our prices. In his book Predictably Irrational, Dan Ariely explains that, “the basic idea is that when we are presented with two options that are rather different, we have a hard time making a choice between them. In such cases, if a third alternative that is similar to one option but clearly inferior to it is added to the mix it can change the choices we make. It sounds odd that adding an inferior option that no one would select would influence our choices, but it does.”
For example, if you had to choose between a weekend in Rome with all expenses paid and a weekend in Paris with all expenses paid, the decision is difficult because the variable differ too widely too fairly compare (i.e., food, culture, attractions). But what would happen if we added a decoy option? What if we added a weekend in Rome with almost all expenses paid? This would be the same as the other trip to Rome but without the espresso in the morning. The idea is that Rome without the espresso would make Rome with the espresso look better in comparison to Rome without the espresso and also overall and relative to Paris. This is why adding Rome without the espresso can get a larger market share for Rome.
How can you apply this?
Could you add a red herring package or plan to your offers?
I’m sure at one point in your life, you’ve been at the store and you’ve seen prices ending in X9.99 and said to yourself, “why do they do that? People just round up in their head to the nearest 10 anyway. It doesn’t fool anyone.”
This is known as “charm pricing.”
But here is the empirical evidence that this does in fact work. In his book Priceless, William Poundstone breaks down the studies and proves that these charm prices boost sales by an average of 24 percent relative to nearby prices.
The crazy part is that these charm prices out sold even the lower price items.
It makes no sense, but you don’t have to understand it in order to use it.
How can you win the hearts of your clients with charm pricing?
Perception in Content
The basis for this tactic is to set the context of the price using options to change the perception the buyer has on the overall price. When it comes to prices and costs of intangible items, like services and information, it’s hard for us to determine if it’s going to yield a high pragmatic utility.
This is good news because it will allow us to set a context for the buyers to compare and determine which is the right choice for them. When humans are uncertain about something, the natural thing to do is to look around for a reference point, which then gives them an anchor to compare things against. We can change their reference points and thereby change their perceptions.
Here’s what I mean. Let’s take a look at another example from Priceless. Poundstone analyzes an experiment selling beer. You may not drink, and I don’t either, but there’s still a valuable lesson to be learned.
People were offered a premium beer for $2.50 and standard beer for $1.80. Roughly 80% chose the premium option. But when a third option was introduced, a bargain beer for $1.60, 80% of the people bought the standard beer for $1.80 and no one bought the cheap bargain beer.
The third experiment is where it gets interesting. They took away the bargain beer and replaced it with an ultra-premium beer at $3.40. This time, the majority of the people bought the $2.50 premium beer, with nearly 10% buying the ultra-premium, and less than 10% buying the standard.
The lesson: offer a few options and make the middle one the one you want to sell the most. Pair this with the Red Herring Pricing and you’re guaranteed to have a winner.
Add another layer to this by making your third option substantially more than the Red Herring and the desired middle option. This will in effect change their price reference point, anchoring a higher price.
How can you change a buyer’s perception by setting a price anchor?
You’ve heard the phrase, “Sell the sizzle, not the steak.” This goes for your pricing too. This essentially means sell the benefits, not the features.
What sounds more appealing to you? Steak with vegetables or Signature, Center-Cut Prime Filet served with Sweet and Savory Tempura Onion Rings and Spinach au Gratin.
They could be the exact same dish, but I bet you that latter would sell for double what the former would.
In fact, studies at the UC Berkley School of Psychology will back that up. The fancier the name, the higher the price people are willing to pay.
But how can you use this? I’ve coached too many health and wellness professionals that have program called “option 1” or “standard package” and so forth.
I want some sizzle! Give me the choice between the Gold VIP All-Access Coaching Program and the Platinum Mastermind All-Star Coaching Program. I can’t go wrong with either. But when I have the choice between Option 1 and Option 2, it sounds like both could be losers.
And don’t just tell me that I have access to all the material 24/7 for life. Tell my WHY that benefits me. There’s another whole discussions around the differences between listing features, advantages and benefits.
How will you add sizzle to what you’re selling right now so that you can demand higher prices?
The Popeil Dropdown
Here it is, the Popeil Dropdown: “Originally, this items is retails $1000. But today, you’re not going to pay $1000. You’re not going to pay $900. You’re not even going to pay $800. No, not even $500. When you buy this item today, you’ll pay the low price of $299!”
Sounds like one of those late-night infomercials, right? That’s because Ron Popeil, one of the greatest pitchmen of all time, first made it famous in an infomercial. And he was good. That guy could sell ice to Eskimos.
Although this tactic has been ubiquitously used to the point that it is now seen as cheesy, people still use it. Why?
Because it still works!
I was recently at a business colleague’s house and a package had just arrived. He excitedly opened the box and unwrapped his new kitchen gizmo and proceeded to tell me that it’s the Swiss Army Knife of the kitchen. I asked him if he bought it on TV since I had seen the infomercials. He said, “The infomercials are terrible and so corny. But this is such a great gadget!”
Do you see the irony? This product infomercial used the Popeil dropdown, which my colleague recognized and criticized… then proceeded to purchase the item anyway! I don’t think he actually realized what was going on.
I laugh because I see this all the time.
Hesitant to use it in your marketing? I don’t blame you. That’s why I’m going to share a little secret that my marketing mentor and guru taught me. It’s quick, it’s simple and it reduces the cheese factor.
All you have to do is add a reason why. That’s it!
If you give legit rationale and logic for lowering your price, it gives you more credibility and believability. Otherwise, they see you as just another salesperson doing everything you can to get their money, which will have the complete opposite effect. They’ll run in the other direction so fast, your head will spin.
For example, if you have a 6-month health coaching program that costs $2000.00 and you want to drive some immediate sales using the Popeil Dropdown, it could look something like this.
You could offer a $200 off (which is 10% off but stating in dollar amount sounds better) to celebrate Independence Day. Then you could offer another $200 off for fellow University of Colorado Alumni (go Buffs!). Don’t forget the $200 off for being a working mom. And if you pay in full up front, you’ll knock off another $200.
Of course, you have to be careful of sounding like you’re making something up on the spot- that will diminish your trust. The only way that will work is if you frame it correctly.
Those are some of the strategies that you could use. You’ll have to find which one(s) you feel comfortable with and that will work for the way you do business. So pick a few and go try them out!
Which tactics can you use in your business right now?
Setting Your Business Up For Long Term Success
Now, let’s talk about Price Strategies. The tactics we discussed are going to be useful to a degree, giving you slight advantages and claiming money that you were leaving behind. It’s short-term inward thinking that is focused on you and your business.
However, when you become strategic, it will give you an advantage over your competition. This is long-term outward thinking that is focused on your position in the market place. Together, strong Price Strategies and tactics will bring your more impact, income, and clients!
I want to start with some of the biggest mistakes that are secretly costing businesses bags of money. These mistakes are made not only by beginning entrepreneurs, but even by some of the most seasoned veterans.
The Most Common Costly Mistakes That Kills Businesses
- Not having a Price Strategy
- Selling from your heels
- Trying to be the lowest price provider (thinking people buy only by price)
- Imposing your belief system onto your buyers
In some cases, it’s what we’ve all been taught. In other cases, it seems like the intuitive thing to do. So if you’ve fallen into one of these traps, don’t worry. It’s not too late.
Not having a Price Strategy
You may be thinking, “How much strategy goes into setting your prices anyway?”
Actually, more strategy goes into it than you would think. It’s not as easy deciding your prices and posting them on your services/price page on your website. Having a price strategy can change the entire dynamics of your business.
Having a solid price strategy does not replace having a solid marketing strategy integrated with a solid business plan and well constructed sales funnel. In fact, your price strategy is part of your business plan and takes into account your sales funnel. It’s a piece of the puzzle that fits into the bigger picture, giving you a competitive edge to run your business and live life on your terms.
What does having a Price Strategy look like?
This is my no means comprehensive, but I’ll give you a few points to start thinking about.
When you’re deciding your prices, you have to think about what your price says about you and your services/business. It’s common knowledge and a common idiom: “You get what you pay for.”
Cheap prices translate to cheap service/product, which will attract cheap buyers. Cheap buyers are the worst: they have the lowest LTV, they refer the least, lifetime, having longer buying cycles, have a higher CAC, so on and do forth. If you think you have to lower your prices to stay competitive, I’ll talk you out of that later.
What do prices structured on the high end say about your business?
Now, this is where price strategy as part of your market and business plan comes into play. They key is that your message (explicit and implicit) has to stay congruent across all channels. If you are setting the image that you’re a premium provider serving the affluent market charging premium prices, then when someone visits your website, you can’t have cheap clip art, bright colors and everything written in Comic Sans font (that’s one of my biggest pet peeves- marketing to the affluent in Comic Sans font… really?). Your website has to say the same thing as your prices.
Same with your email copy. Same with your personal appearance. Same with the stories that you tell. Get the picture?
What role does price play in your overall business plan and sales funnel? What does your price say about your business?
Selling from your heels
Selling from your heels includes everything from constantly discounting your services or product, to balking or pulling your punches when stating your prices, to negotiating your prices.
Since I’ve mostly worked with health and wellness professional, this has more to do people selling service rather than products. But people selling product can learn a lot here too.
If you’re a consultant, has this ever happened to you? You’re speaking with a potential client during an initial consultation/strategy session. It’s coming to the end of the session when you have to talk about the service you provide. The potential client throws an objection at you. Your only thought to counter the objection is to lower your price. And even worse, you regret it later because now you’re not getting paid what you’re worth.
This does two things that set you up for failure. First, it sets precedence. If someone is willing to offer a discount to one person, they will inevitably discount their prices to many more. It will never stop. This moves your prices in the wrong direction. We want your prices to go up!
Second, on a more subtle level, it communicates to the potential client that you are willing to negotiate. Some people won’t take advantage of you, but the ones that do are merciless! This isn’t the state fair auction. Think of premium providers. How often does Under Armour go on sale versus Nike?
Here’s one more scenario that you may be familiar with. Again, you’re speaking with a potential client during an initial consultation. At the end when you pitch your service and ask them to work with you, they ask “What do you charge?” You respond with a meek, “Um… $100 an hour? [long, awkward pause] Is that ok?”
That is selling from your heels. This is displaying the confidence of a pimply-faced, hormone raging teenager asking a girl out on a date for the first time.
I’ve even heard someone once say; “You wouldn’t do $100/hour, would you?” Who has the control here?
Sell from you toes. When someone asks you the price, you lean forward and firmly declare, “$250/ hour.” Then shut up. Don’t be the next one to talk.
That is how you sell from you toes.
How can you sell more from your toes?
Trying to be the lowest price provider
When your strategy is to be the lowest price leader and think this will attract more clients, you are actually killing your practice. I have to be blunt about it. This not only devalues yourself and your business, but renders your business more fragile. If you are targeting price shoppers (aka cheap buyers), guess what you will get? Cheap clients!
I told you a few reasons why you don’t want cheap clients, but here’s another. When cheap clients are faced with any sort of financial distress, the first thing they do is determine where they can cut expenses. How confident are you that they’ll cut their cable package before they cut your services?
These clients are also most susceptible to uncontrollable economic situations, like a slow economy. A family making $25,000 net income is spending 80–120% of their income on necessities and will take a heavy hit with any change in the economy. If they have an emergency visit to the dentist, this will leave them little or no discretionary or disposable income.
However, if you’re at the high end of the price spectrum, your clients are under minimal stress and least affected by economic change. They hardly feel it. A family making $1,000,000 a year is still living very comfortably if they have to send the entire family to the dentist. Twice. A slow economy barely phases them, as they don’t have to give up a single thing.
One more point I need to make about being the lowest price provider is this: there is always someone out there willing to sell his/her services for a lower price. Do not play that game. EVER!
“But Brandon, what about Wal-Mart? They built their empire on being the lowest price provider.”
If you want to price like Wal-Mart, then you need to be prepared to do EVERYTHING like Wal-Mart. You need to have massive volume — millions of product moving off your shelf each year at razor-thin margins. You need massive distribution channels — dozens of inside buyers shopping thousands of products from every country around the world. You need a massive workforce- nearly one and a half million people to manage in America alone.
Are you up for that task?
Here’s a little history lesson to prove a different point. Wal-Mart’s initial business plan wasn’t to be the lowest price provider. Sam Walton grew this empire starting with one local store.
Also, if you look at history, the lowest price providers have never maintained market dominance. It started out with FW Woolworth, paving the way for five-and-dime stores. Then there was the rise and fall of Sears. Then the rise and fall of K-Mart. Sure, they’re both still around, but with no market dominance and a precipitously declining stock.
Who knows how long Wal-Mart is going to be around? They may actually have a chance, but that’s because they changed their strategy and moved their position away from the lowest price provider because of their declining stock.
Imposing your belief system onto your buyers
Just because you won’t spend $XX amount on a product or services doesn’t mean your customers won’t. Remember, it’s about bringing value to them. If you know more about something than they do and you can teach it to them, that’s value. If you’re product allows them to do something better, faster more effectively, it’s value.
Don’t underestimate your skills and abilities or your product’s worth. Beauty is in the eye of the beholder, and so is value.
I don’t want to spend too much time here because it’s something that you’re going to need to get over on your own. Some people get over this quickly and overcome the obstacles that hold them back, while others will spend the rest of their working lives stuck.
If you need some help, pick up the Robb Report and see what people are buying. You’ll be amazed. Look at Forbes list of 100 wealthiest Americans and see how much money they have to spend. Just go out there and see the amount of money people are spending. It’s wild! You won’t feel bad charging high prices after that.
FYI, despite the proliferation of economic hardship in the media, there are over 13 million people in America who are millionaires. Take that in for a second.
The Most Powerful Pricing Strategies
Are you with me so far? I know it’s a lot to take in. See what I told you? There’s more that goes into strategy than most people think.
I want to end this report with giving you the foundation for becoming more strategic with your prices. I’ll do my best job explaining this without you having to hire me as a consultant to come into your business and build it for you.
In usual fashion, here’s a quick preview of what’s to come.
- The Divergent Edge
- The Starbucks Effect
- Diagnose and Prescribe
The Divergent Edge
At its core, this is about making your business stand out from the competition. If you can effectively accomplish this, it can be the single most powerful position in the market that allows you to set your prices above everyone else. But on the other hand, if you don’t stand out, you become a commodity. This could be the single worst position in the market, giving people no other choice than to make their buying decisions on price.
For our sake, we will define the term “commodity” in economic speak as “a generic product or service widely available sold in mass.” The operative words that I’d like to emphasize are generic and widely available. By this definition, if you’re selling a commodity, you do not have divergent edge. They are mutually exclusive.
Think about it. When you’re making a purchase, if the item is the same generic thing, what else do you have to make your decision on besides price? In the absence of persuasive information about differentiating value, your buyers will do the same and purchase the lowest price item.
How do you fix this?
If you offer something that everyone else does, there are ways to transcend commoditization to differentiate what you offer, allowing you to become a premium provider. The two most powerful ways to do this are specialization and not allowing comparison.
When you specialize, you are making something specifically for a particular person. A great example of this is Curves, you know, the gym just for women. This concept was so powerful that it became the fastest growing and largest fitness franchise in history, brining in over 2.6 Billion dollars. The patrons have created their own culture revolving around their life at the gym. It’s even created a movement with other women-only gyms popping up. That’s powerful!
How can you use specialization? What can you create that is designed for a specific demographic?
Now let’s talk about the second tool, not allowing comparison. The concept is pretty simple: create a product or service that is so different than what is being offered in the market that people will not be able to go out and shop around to compare items. However, the application takes work, which is probably why I see very few businesses put this to use.
We can go back to Curves for another fantastic example. When they created a gym specifically for women, there was no other gym in this category. They created the category, prohibiting people from shopping to compare women’s gym #1 to women’s gym #2, 3 and 4. On the other hand, if we want to buy a new car, there are so many choices, it will make your head spin, especially if you’re not a car person and don’t know car lingo.
Many entrepreneurs that I’ve consulted get hung up on this and make it harder than it is. If I had a dime for every time I’ve heard, “But my business is different,” I’d be able to buy that $2K coffee machine I’ve always wanted. I tell you this because I don’t want this type thinking to limit you.
I’ll make it even easier to not allow comparison. A simple way to do this is package what you’re selling, by adding supplemental services that other people are not. Chances are you can think of something valuable to add. But the caveat here is to make sure it’s relevant and valuable to your customers. It’s not about what you think is valuable or what you think they need, it’s about what they think is valuable and what they think they need.
Is there something unique that you can add to help them get the desired result quicker? Is there something you can add to help automate the results? Is there something you can add that is complementary to your service that they want?
When you combine not-allowing-comparison with specialization, it multiplies the effect.
How can you differentiate your business and service from your competition?
The Starbucks Effect
This is one of my favorite strategies. It takes more effort, but the effect is astonishing.
How astonishing? Look at Starbucks in Manhattan. There’s one on every corner. I use to work in downtown Manhattan, and as I walked up Broadway to get to work, I would pass literally 2-dozen (probably more) places to get coffee for $1 or less. But which coffee shop consistently had the line out the door? Yea, Starbucks.
If you think it’s because they sell the highest quality coffee, then you obviously haven’t had Starbucks coffee. If you think it’s because they have the friendliest baristas in Manhattan, then you haven’t been to Birch Coffee, or Stumptown, or Grumpy Café, or Culture Café, or Ninth Street Espresso or any other local coffee shop.
It’s because they’re not selling coffee!
I know, now you’re probably thinking, “Wait. Brandon, have YOU ever been to a Starbucks?”
Here’s what I mean when I say they are NOT selling coffee. They are selling more than coffee. They’re selling familiarity. People won’t risk getting sub-par coffee at a place they don’t know; they know exactly what they will get from Starbucks .
They’re selling social acceptance. Everyone goes there; it must be the cool thing to do.
They’re selling a “third place” atmosphere. People are tried of working, but don’t want to go home yet, so they go to a “third place” where they can lounge with their friends or cuddle up with a book. This is the vision Starbuck’s COE had when he good the throne, and has stood on his head to bring that vision to fruition.
But more than anything, they are selling an experience. When you go to a Starbucks, you are getting the experience of being in a European coffee bistro, not just an ordinary café. That’s how it was conceptualized by the founders from its inception.
That’s how you make price irrelevant.
Here are some other examples of companies changing what they’re selling. FedEx changed from selling the shipping of packages to selling the comfort of knowing that your package was actually going to get there, and get there quick. Subway went from selling fast food to selling weight loss with the Jarred story. Dominos Pizza built their empire by changing from selling pizza to selling speed with their unique selling proposition “fresh, hot pizza delivered in 30 min or less guaranteed.”
Here are some other ideas along with examples of what you can sell other than you core service:
Affluence/Status: People want other people to know that they have money and are part of high society. Look how many people buy Louis Voitton or Gucci bags and have closets full. These are your classy brand names known to be expensive.
Personal Satisfaction: People will buy premium items just to make themselves feel good. Why do you think people shop at Nordstom and buy $500 face creams when they can get the same thing for a fraction of the cost? Maybe you shop at Whole Foods. It’s the same thing- you want to feel good about yourself.
Reassurance: Peace of mind is priceless. You can’t put a price on feeling safe and protected. This is the business that all insurance salespeople and financial planners are in.
Convenience: If your customer is a working professional, busy parent, or anyone else with extremely limited time or energy, then selling convenience is a piece of cake. Examples range from housekeeping services to drive-throughs to dog walkers.
Pleasure: We all have a weak spot that we will pay almost any amount to enjoy a little more pleasure in our lives. For me, my guilty pleasure is chocolate. High-quality, organic, fair-trade dark chocolate. You with me? I’ve paid $10+ for a 1.5 oz bar of chocolate. My friends thought I was absolutely crazy! But everyone has something, sports cars, luxury vacations, spa treatments, massages, etc.
Personal Empowerment: The whole self-improvement industry is one of the most lucrative industries of all time. Americans are spending over $11 Billion per year, and it continues to rise. Every human has dreams and aspirations. If you can help them become a better person and reach their dreams, you’ve hit the jackpot. This includes everything from fitness to finance to emotional health, and so much more.
They may not all apply to your business. In fact, most likely you’ll find just one or two apply. If you can find out which one(s) then you can leverage it and become a premium provider of something more meaningful and significant to your customers/clients.
How can you change what you’re selling to set your business and service apart from everyone else?
Diagnose and Prescribe
This strategy takes skill and tends to be much more complex, but as I said earlier, I want to give you a foundation that you can start to build on right away.
Here’s a quick scenario to illustrate the point. Let’s say you have a weird rash on your arm that hasn’t gone away in weeks, and now it’s really starting to bother you. At this point, you’re thinking, “I really need to see a doctor,” so you make an appointment with your naturopath ASAP.
During your appointment, he sits you down, asks you a myriad of questions, writes your responses down, takes a little skin sample and goes to the back room to analyze the data. The results come back and he tells you that you’ve got Rash XYZ. He assures you, “Nothing to worry about. We can get rid of that quickly with no problem. I have just the thing.” He writes you a prescription for some herbs and tinctures, then directs you to go to the front office to have the office manager get you what he wrote on the paper. Without question, you do as instructed and buy the remedies without even questioning the price.
Sounds pretty straightforward and like a common experience, right? If you break it down, he essentially sold you with absolutely no resistance. You didn’t price shop. You didn’t seek a second opinion. You didn’t even question the cost.
With this diagnostic and prescriptive model, doctors see virtually no resistance while charging outrageous prices. In fact, over 87% of all prescriptions are filled on the way home from the doctor’s office. Again, with no resistance.
Here’s a quick note: doctor’s who specialize charge higher prices than generalist doctors. I cut the tip of my finger off cooking once, and had to see a hand surgeon specialist. He charged $400 for a 10 minute initial consultation and was booked completely solid for 17 days out. A general family physician can’t do that.
Now, before you say, “But he’s a doctor and I’m a coach,” remember what I said earlier about that type of thinking. The question that the successful people ask is, “How can I use that?”
Let’s take a look at a great example.
If you look at Mizzen and Main’s FAQ page, scroll down to the “Sizing/Fit” section and click on the link under “Still not sure of my size” to take their “what size am I questionnaire.”
Finding the right size for clothes online is always tricky, but do you have any doubt now which size is the right size for you?
What kind of diagnostic and prescriptive procedure can you establish to reduce resistance?
So there you have it- a complete guide to price tactics and strategies. It requires dedicated work and patience to pull it off, but I guarantee it will pay off in the long run. If you’ve made it this far in the guide, then you’ve already shown me that you’re serious about your business and your success.
The truth is that only 10–12% of people will actually read guides and report of this length after they have downloaded them. But those who do are the ones who actually go out and implement the material and ultimately succeed. Congratulations!
If you found this helpful, I would greatly appreciate it if you shared it with your friends, family members, colleagues and anyone you think would benefit from it.