So, last week I wrote about holding firm on your pricing, and how important it is for the survival of your business.
Got some nice feedback, and for that I’m grateful. We make it our goal to come alongside our business owner clients and contacts to help them think beyond their books and “just” their bottom line. After all, that topline figure (revenue) is pretty darn important, I’d say.
As I mentioned last week, price is the laziest and riskiest thing by which you could market your business. Unless you have some kind of TRUE economic advantage and can destroy your competition with it (see the rise of Wal-Mart), then you’re playing a losing hand.
When you differentiate yourself based on price, you simply cannot provide good value. You end up competing on the wrong playing field.
Sure — while price competitors have been in operation since the beginning of time, it’s important to understand that if YOU want to build a sustainable, scalable (and one day SALE-able) business, a core foundational piece of that puzzle is that you must be charging enough for your services.
“Is that even possible with so much uncertainty on the horizon?” Absolutely.
So, back once again to pricing this week. Last week we were fighting off together the forces that would hinder your survival (price-matching). This week, let’s move from “surviving” … to thriving.
“Real World” Business Strategy Note
How To RAISE Your Prices
“Whatever is worth doing at all is worth doing well.” – Lord Chesterfield
Your competitors (and many small businesses) are stressing and fretting over how to *survive* with so much uncertainty. We all hear the stats about how many small businesses fail. And yes, I believe there may be signs of stability on the horizon for the economy … but there are also plenty of scary signals.
And most businesses are, frankly, operating in survival mode.
That means they’re committing some serious mistakes … and, as your advisor, I’d like to see you avoid their fate. Because if luxury brands like Nordstrom, NetJets, Mercedes and BMW still report record profits during downturns — how can this be?
It’s simple, really. People DO have money to spend during down times … and if you’re not bringing it in, you’re simply not doing a good enough job showing them that your place of business is the best place to spend it.
You see, it’s all about the value. And if you are having pricing difficulty, I’d suspect that you are not clear enough on the value you provide that you are effectively conveying it to your prospects.
So how can you do this? Here are some things you can do right now:
1) Eliminate Your Competition By Finding a Unique Angle
Your prospects have no way to know if you are the best option for them. To regular consumers, most options are the same — in almost every industry. So when you compete on price, you’ll get price shoppers galore, who see you as just like everyone else. But, you are *not* like all the other options … are you?
So, what makes you different? And how do you show that to the marketplace? That’s what you need to focus on and show the world. Your prospects must turn to you because they trust you, and because they see your business as worth the money to meet some kind of unique and specialized need or desire — not because you’re the cheapest option.
2) Recognize That People Purchase Based On Emotion
Why can Nordstrom’s charge higher prices for products found elsewhere (i.e. cars, purses, ties, shoes)? It’s because of the VALUE they’ve attached to their brand (i.e. social prestige, enhanced customer service, increased self-esteem). They’ve moved themselves out of the commodity market and into the heart, emotion and primal urges of their clients.
You need to do the same thing in your business. Yes, Mr. Customer can get a widget or receive a service for $XYZ … but what are they NOT getting when they work with that other option? Focus on these aspects. It’s not about the “feature” of your product or service … it’s about the intangible benefits from working with YOU.
3) Shift How You Package Your Offerings
For service professionals, there are only so many hours in a day and you’ll reach an income plateau very quickly when you are billing by the hour. Not to mention that you have to start every month over at zero –and there’s no stability in that. So, one good option? Begin billing on a flat-fee/value basis.
If you’re scared to shift, just think of the VALUE your customers will experience having a professional using flat fee billing. They won’t be nickel-and-dimed for every phone call, email and fax that comes through the office. They can communicate with you as they wish without fear and they can pick their price point of choice if you have multiple flat-fee options. And believe me, people are willing to pay more for certainty. It’s a win-win for them — and it’s very much a win-win for the health/sustainability of your business.
For retailers or product providers, you can only play “margin games” for so long. So, identify *monthly* services which might augment the experience of using your products. Consider what your customers WANT, and the problems they face in using your services. Restaurants could initiate a “VIP club”, with special perks, automatic billing and exclusive choices. Merchants can create enthusiast groups, or lessons and coaching.
The point is to go *beyond* the widget … and into the heart of your customers’ desires.
Remember this: People still have money to spend … even when the economy sputters. And they NEED your products or services. It’s up to you to convey the intrinsic value of working with you (even at a higher price point) so you can inject an even healthier dose of oxygen into the blood of your business.
I’m personally dedicated to your success. Can other accountants say that?
Feel very free to forward this article to a business associate or client you know who could benefit from our assistance — or simply send them our way? While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners. And we always make room for referrals from trusted sources like you.
Warmly (and until next week),
Valerie McLaughlin, EA