Hey Rainmaker, I never charge as much as I should.
Even though my copywriting fees have risen more than fivefold in the last half-decade, even though I charge premium prices for nearly everything…
I should charge more.
I always try to give my clients and customers an extremely high level of value for what they’re getting.
And yet, at the same time, I’m always trying to charge higher and higher, premium prices.
This is a strategic decision.
I’d rather have the type of customers and clients who are willing to pay more, knowing they’re getting more… Rather than the ones that always insist on less.
This chapter is the thinking behind that…
“Pricing Strategies For Greater Sales And Profits”
It’s commonly thought that consumers make purchasing decisions based on price. In fact, when asked directly, consumers will tell you that price is the most important deciding factor in making a purchase. And in some cases, they’re right. But in most cases, they’re wrong.
Take, for example, the grocery store. Walk down the cereal aisle at the grocery store, and you’ll notice an interesting phenomenon. There is a wall of cereal. At many different prices. Most of the name-brand cereals have a lookalike version, created by a different company, meant to mimic the taste and appearance of the original but to be sold at a lower price.
Now take some time standing in that cereal aisle, watching shopper behavior. You’ll find something very interesting, considering how frequently consumers self-report that price is what motivates their buying behavior.
Most shoppers will not buy the cheaper generic versions of the cereal. Most shoppers will buy the more expensive, name-brand versions. In some cases, there is a significant taste difference. In many cases, there is not. Take Cheerios, for example. There is no difference between regular or Honey Nut Cheerios and their generic alternatives. And yet, Cheerios still outsells the generic.
Why? Because consumers make their buying decisions based on a lot more than price.
If consumers bought only on price, there wouldn’t be Whole Foods, or any higher-end grocery store chain. Organic foods wouldn’t ever leave the farm, because they cost too much to grow, and can almost never be sold at competitive prices.
This phenomenon is certainly not unique to the food industry, either. If we only bought on price, Lexus, Mercedes, Tesla Motors, and Ferrari would not exist. Everybody would be driving a Kia or Hyundai. Apple computers and iDevices would not exist. Nobody would live in a house any bigger than a shack.
In fact, modern society would basically not exist, in any form resembling what we know today.
People buy on many, many factors, beyond price.
Utility is one factor that explains a lot of innovation and reasons for people buying at higher prices. But it’s not all.
We recently bought a minivan. Why? Because it would carry our family around better than a smaller vehicle. But we didn’t buy the cheapest model that would satisfy the core utility a minivan could offer. If price were the only factor, we would’ve found the cheapest thing with the seats and space — the utility — we wanted.
Value is another factor worth considering. What are you getting, for what in return?
An interesting case study here is investing. Value investors are actually quite rare. These are investors who calculate the value of a business, and only buy stock in a company when the price to value ratio is extremely attractive relative to other opportunities for their investment capital.
But, alas, most people don’t invest on value — even with rich investors like Warren Buffett as an example of why they should — and this mirrors their spending patterns elsewhere.
The list could go on. Listing every reason people might buy is not the purpose of this chapter, so I’ll refrain.
What you need to understand is that with price being one of many reasons people may choose for making their purchasing decisions, you should not feel compelled to sell at the lowest possible price. (You can even encourage customers who pressure you to sell based on price to take a hike!)
Is selling at a low price a good strategy for growing a big business and making yourself rich?
Well, it’s hard to argue with the success of businesses like Walmart and Amazon, which have made their founders and owners rich beyond most folks’ wildest dreams of avarice.
However, low price is an almost impossible competitive advantage to sustain over the long run. Take the car industry for example. What enduring brand can you name that’s sold cars at low prices for the last 50 years? It seems to be a moving parade. Most mass-market car makers have a low price model, but they are only sustained in offering that by also offer higher-end models and brands. The car brands that have been built on low price exclusively have failed to sustain the business model. Alternately, take a look at the mid-market and higher, especially the luxury and high-end brands. They’ve endured decade after decade.
To be expensive, and worth it, allows you much more flexibility in your business model. It allows you to spend more money to bring new customers in. It allows you to deliver a higher-level experience, a higher-quality product or service. It allows you to recruit and retain better talent. It gives you more profit, which can create freedom in your business and life to think about ways to deliver higher value, or reinvested in the business in other ways.
Low prices can and should be used strategically. They can be loss leaders to get new customers in the door. They can be used for inventory liquidation. They can be used to drive short-term cash flow, such as during holiday, “end of season,” or “end of year” sales.
(And if you want to insist you want to serve a lower-end market out of the goodness of your heart, just do so knowing it’s more of an act of charity than a business. Or do it intentionally with the goal of moving those customers up the ladder as their purchasing ability grows, accepting that meeting their needs today helps you meet your needs tomorrow. There’s nothing wrong with serving the community with lower pricing, just understand that it’s a business model that’s very difficult to sustain.)
In general, you should aim to sell your products, services, and experiences at higher prices, rather than lower. Deliver a better client or customer experience, and make their investment worth it.
What you’ll find is that the prices your clients and customers are willing to pay are far more elastic than you might expect at first.
Find or create what makes your product unique. Find what you can offer that nobody else can. Find out how you can deliver a superior experience — both in terms of doing business with you, and how your product fulfills on your selling promises.
Define your unique selling proposition.
Determine what you can add on to your offer to increase its perceived value in the eyes of your customers. And then, set a price that supports this higher level of service than they can get from going elsewhere.
In terms with very specific recommendations for how to raise your prices, I’ve found that there are two major criteria that will allow you to charge more.
— A proprietary product or service. Proprietary can be your brand. It can be design. It can be user experience. It should probably be patented, if possible, but it doesn’t have to be for it to provide an immediate selling advantage. What you want is to deliver a unique product or service that competitors either can’t or — at the very least — aren’t yet replicating. Then, in your sales process, you must establish your proprietary advantages as buying criteria to justify the higher price.
— A good cost-benefit ratio. At some point, high prices are no longer justified. If a customer looks at a product or service and thinks, “That’s worth what I have to pay for it,” your price won’t be very flexible. However, if the perceived value and benefit of purchasing a product far outweighs the asking price, that price becomes flexible. What distinct benefits does your product offer that justify a higher price? How can you present that to your customers to help them see why they should spend more?
If your product is a commodity — meaning there are a number of others who sell the same or similar items and you provide no tangible unique benefit… Or if your product already appears to have a price in line with the value it delivers… Then you’re probably range-bound in your pricing.
But if your product is unique and proprietary — if they want it, they’ve gotta come to you — and the value delivered is seen as much greater than the cost… Well, test a higher price.
You may be surprised what it can do for your business.
Speaking of getting paid more, here’s a reminder that you can pick up a copy of The Copywriter’s Guide To Getting Paid, free, when you click here. (And yes, there’s pricing strategy behind offering this particular item for free!)
The first batch of books I got sold out in 24 hours. They’re on back-order. But I should be shipping any order that comes in today by the end of the week.
Did you already get your copy?
Niels Teunis, from Berkeley, California got his yesterday, and sent me this note…
“Thank you for your book, Roy. I am eating it up. I just received it an hour ago and it’s gold.”
I think this book is going to change a lot of copywriters’ lives. I’m excited.
Yours for bigger breakthroughs,
Editor, Breakthrough Marketing Secrets