Do you want to increase prices for your products without getting a hit on your sales? How about customers thanking you for charging them higher price? You probably think we have lost our minds, but trust us; it is possible do just that! We will show you how in this post.
It seems counter-intuitive to say that you will be able to improve customer satisfaction and increase sales while at the same charging more. Conventional wisdom says that if you are not doing well lower the price and customers will flock to your business. As natural as it seems, this is simply not true. Competing on price is not a sound business strategy for small business owners as explained in the previous post.
Pricing is a complicated topic. It is both art and science, which is why many small business owners have difficulty coming up with the right price. They end up pricing too low leaving money on the table. Before we show you different ways you can charge premium price you need to understand how customers make decision about buying your product. The price customers are willing to pay is the result of perceived value they expect to receive from your products. This is the most important fact you need to keep in mind when pricing your products. It is not about how much it costs or what your competitors are charging for it. And there are several ways in which you can increase the perceived value of your products.
- Differentiate – You need to do everything you can to discourage customers from doing apple-to-apple comparison. Whenever customers are comparing your product to that from competitors they will go with the lower priced one everything else being equal. But if you make them compare apples to oranges it will stop them from doing so. If you want to get out of low price hell this is one action you must take. There are several ways you can do this as explained in subsequent bullets.
- Improve quality – Customer will not pay premium for shoddy products. If they are paying premium they expect to get premium product. Higher quality equals higher price and vice versa, period!
- Sell “must have” products – Who remembers the Beanie Baby or Tickle Me Elmo craze from yesteryears? Customers were willing to pay anything for them and were literally fighting with others to get their hands on these products. Can you imagine being the company that sells those types of products? You have achieved premium price nirvana when customers start drawing punches for your products.
- Provide guarantee – This plays into customer fears and needs for safety and security and their willingness to pay premium as explained earlier. One way to do this is by providing guarantee that will offer them peace of mind.
- Show and tell – Customers always love to hear behind-the-scene stories about your products. Luxury retailers do a good job of explaining how their products are hand-crafted painstakingly and with great care. When you make them feel good about the products they are buying they will be willing to pay higher price.
- Hold your ground – Finally, you can do all of the above and still lose by giving in to the temptation of lowering the price because you are temporarily losing sales as a result of aggressive discounting by your competition. This is a wrong strategy. You have to stand your ground in the face of short-term battle or risk losing the reputation for high-value, high-price vendor that you have worked so hard to cultivate. This is not easy to do, but you have to stick to your story to be able to succeed in the long-term.
Have you had any experience with building premium price business? We would love to hear about how you did it? Let us know in the comments.
This reminds me of a study I read once, where consumers frequently disregard the lowest price option because they feel it equates to low quality. This study, combined with this article, makes me think you are indeed right — if you believe in the quality and value of a product, price it appropriately! (But still do it on your own terms rather than getting into a rat-race with your big-box competitors, of course, where you’re probably not going to be able to compete.)