Last week, I shared with you a couple examples of some smart moves made by smart companies. And even in the midst of a (very) busy tax season, I still have time to go through my email, and it seems that this one struck a chord.
So I thought I’d return to the theme this week, with some different sorts of ideas.
Because the fact is that we should all be putting ourselves into the place of a student when we see wise business decisions being made around us, and we should open our eyes to them.
One important component of any service or product is pricing — and specifically a strategy around it.
It’s an under-appreciated component of a great business. In fact, though I haven’t yet read it, this book was recently recommended on the topic and looks very good: Pricing Confessions
So many small businesses go out of business or get into a cashflow crunch simply because they get trapped into thinking about their pricing in the wrong way.
When you differentiate yourself based on price, you simply cannot provide value. You end up competing on the wrong playing field.
Sure — while price competitors have been in operation since 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 in this economy?” Absolutely.
It better be. But let’s talk more about this…
“Real World” Business Strategy Note
How Your Small Business Should Think About Price
“We are not permitted to choose the frame of our destiny. But what we put into it is ours.” – Dag Hammarskjold
Your competitors (and many small businesses) are stressing and fretting over how to *survive* in this brutal environment. Yes, there may be signs of improvement on the horizon for the economy … but 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 are reporting profits, what are they doing that is smart?
It’s simple, really. People DO have money to spend … 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 I’d suspect that you are not clear enough on the value you provide to convey it to your prospects.
So how can you do this? Here are some things you can do right now:
1. Treat Yourself Like You Are Unique
Your prospects have no way to know if you are the best option for them. To regular folks, 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–not because you’re the cheapest option.
2. Clearly Understand The EMOTIONAL Outcomes For Your Product Or Service
Why can Nordstrom 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. Change The Packaging For Your Pricing
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, my advice? 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 every time. 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 in this economy. 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) to command the income level you want (and rightfully deserve) this year.
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.
Valerie McLaughlin, CEO