You may be able to raise your prices, or introduce a premium price level–if you really understand what your customers value most.
You can pay $1 for a cup of coffee, or you can pay $5. You can fly economy class and simply deal with the tight seating and extra baggage fees, or you can fly first class to get the face towels, sorbet, and leg room–but you won’t arrive any faster. And admit it: You have probably scratched your head on occasion at the $5 bottles of Evian water in your hotel room, sitting not far from the tap.
Whatever the product: Some customers are clearly willing to pay much more for what are arguably incremental differences in product, service and experience.
I don’t know if there are absolute rules on pricing variation when it comes to these types of preferences. I know people who will drive miles to save a nickel a gallon on gas and yet think nothing of spending big money to get better seats at a ballgame.
But as you sell to your customers, you should be thinking about this: Are there nuances in what you deliver that could increase the price you charge?
Changing the Value Proposition
Here are a few questions to get you started:
Do you know what your customers truly value? My trainer charges me the same rate for a half-hour workout session as most other trainers charge for an hourlong workout. I asked him about this once and he said, “Look around at the other trainers: Does it seem like their customers get more of a workout than you do?” We looked around the gym; it seemed like there was a lot of chatting and wandering. He then said, “Your time is worth a lot more than my fee. You are paying me for the workout–and if we can get it done in half them time, you are money ahead.” That’s a great value point.
What you will pay extra for? Think about your own choices. We all have things for which we will pay a premium and others for which we seek the lowest price. Often we use this reference for what we consider to be a reasonable expectation for our customers. If you’re considering premium pricing, think about these categories:
- Speed
- Convenience
- Exclusivity
- Service
- Packaging
- Quality
At my business, I have discovered that premium pricing is possible even with price-sensitive customers, if you find the right value component.
Who determines your prices? In your mind there are at least two voices: the loudest customer who complains about price, and the happiest customer who values what you provide. These often subconsciously set what you believe are your pricing limitations. The question is, do these voices represent the true spectrum of your customers–or are they just the loudest?
How to Raise Your Price
If you’re considering a premium-priced offer, make sure you take these steps.
Ask. When considering premium-priced offers, talk to your customers who are on the higher end of your value spectrum. Those are the people who have already demonstrated a willingness to consider components of value beyond price.
Test. When I was first starting my speaking career, my assistant received a price inquiry for a keynote address. She misunderstood our pricing schedule and asked for double our normal rate–and got it. When I explained to her that she had misread the rate, she asked, “Should I call them back and tell them the real price?” Of course, the answer was no: We had just established a new “real” price. Market testing is a science for very big companies, but for your company it may be just as simple as trying something and seeing what the reaction is.
Measure. Always compare past performance to new performance to see if there has been an impact on volume, margin, satisfaction, and acceptance.
It can seem that there is a constant drumbeat in the world for lower prices, and it is easy to hear only that loud drum. But you can use your own choices to learn a lot about premiums and preferences to develop new offerings for your customers.