What, are you wacked?
February 4th, 2009 Chris
We did something crazy the other day. Something particularly foolish given all the doom and gloom of the current economic situation. We raised our prices.
Why did we do it? Well, to make a long story short we confirmed three things about new, higher pricing:
- We are competitively priced
- We provide substantial value
- We are aligned with the way we were selling
The first one is sometimes hard for us in our micro-business. There are many, many competitors out there with different slices/niches of the sales training business. But we can get a sense of the pricing of those that offer similar services and products, ensuring that for what we are offering, we are in the right ball park. Oddly enough, there is a fair bit of consistency (at least in our market).
This is a bit tough for me. I’m used to getting out powerpoint slides with granular analysis of competitors pricing at different volume, studying discretionary discounting, etc… And maybe I’m making excuses for not getting that gory. It’s just that we’ve found our market for our services there is a lot of price elasticity so along as you’ve got good value, you can charge appropriately.
A good example of this is the speaking business. There are speakers that are $1,500 a day and there are speakers that are $30K an hour. In that spectrum of prices you get different value – speakers who are more engaging, more entertaining, more famous, more impactful, etc… And there is good business volume through out that entire range. So the key is maximing speaking fees based on your return-on-investment to the customer.
That’s a long winded way of getting to my second point. That is, value is king.
So when I said we raised prices, how did we do it? We took each of our services and added additional value. For example, in Colleen’s base level coaching program, we went from one web class a year to four. That has tremendous value and more than compensates for the price increase. And, showing again the importance of managing costs, we can do so with no incremental costs to the business. So that price increase is pure profit (good for us) and the customers get even more return on their hard-earned dollar (good for them).
Finally – one of the most profitable things we did was align what we sell with how & where. For example, when Colleen speaks at an event, she used to offer our base coaching program. That it, our cheapest offering and the same one we sell on-line.
Then we realized that this was nuts. Here is our greatest asset – our sales queen – up in front of a live audience and she’s only selling the base offering. We changed that at the beginning of January and now Colleen sells her mid-tier package (at it’s new even-more-value price). Low and behold, our sales quantities dropped by about a third but the package is over four times the price. So, we’re far ahead.
So, to make a long (too) story short, by taking a look at how you can add more value without increasing your costs and ensuring that you align the offering with how you are selling it (or vice versa), you can raise your prices and make more money. Even in today’s economy.
C.
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