Pricing and 1 Favor
Hey!
So, I’ve been invited to participate in a formal program to develop a cohort class on pricing with a company called Maven, started by the folks that helped Scott Galloway develop his classes with Section 4 and Seth Godin develop the AltMBA.
I guess that puts me in good company.
As part of the process to participate in the program, I need to register interest in the course which you can show by filling out the form at this link. It is four questions and will take you 60 seconds or so.
It is simple:
Name
Email
Why you want to learn about pricing
What would make the course impactful
To encourage you to consider the course, let me share some of the ideas that I’ve already mapped out as being important to teach people to set better prices. Because the key idea behind the pricing is that doing a better job of pricing is about being more profitable.
So here are the top 5 takeaways I hope to leave you with after “Set the Right F#%$ Price!”:
The power of the pricing decision:
Pricing is marketing’s MVP moment because it is the moment in the relationship with your customers where you capture some of the value you’ve created through the marketing process and the sales funnel.
Beyond the importance of capturing value, the price you set tells a story about you and your product. It can also be a point of differentiation for you and your business. And, the price you set can increase or decrease the sales velocity of your product.
Pricing is a tangible process with a tangible outcome:
A lot of the pricing decisions I see are a lot like someone licking their finger, sticking it in the air, and waiting to see which way the wind blows.
In other words, they are done by guessing.
Through my work, I’ve discovered that pricing is a tangible process, driven by research, experimentation, and learning that delivers a tangible outcome: a better price.
To set the best possible prices, you need to learn about things like:
Price surveys.
Post-Purchase Perception.
How to experiment with your pricing.
How to use the power of bundling, unbundling, recurring revenue, premium pricing, and more to elevate the perception of the value of your product or service.
The Value Ladder and using it to elevate your product:
What is the Value Ladder?
It is a simple marketing idea that is meant to convey the idea that you can improve the perception of your products and services by focusing on areas beyond just the base product you are offering.
Last week, I wrote about the 3 levels of your product:
The actual product
The core benefit
The augmented product
In thinking about the Value Ladder, you should think about a ladder and as you climb each rung, you infuse more value into your product through adding value, tangible and intangible.
To make it simple, we can put it in three categories from bottom to top:
Base level (Commodity)
Outcome
Emotional
At the base level, you are doing a job. You might sell a ticket. You might write a marketing plan. You may coach people on sales skills.
We can go on.
But the point is that you just do a job.
No muss. No fuss.
At the second level, you focus on the outcome.
Your marketing plan might help improve sales 5%.
Your ticket might get someone into a must-see concert.
Coaching a sales team might make them more effective at starting sales conversations.
Better but not the best.
The final rung is the emotion benefit.
Creating that 5% jump in sales might lead to a promotion or growing a business in a way that offers more job security and more economic security, eliminating stress for the buyer.
The ticket might open up a new relationship with a big potential client that you’ve been working on getting for years. And, that relationship builds into a new partnership that runs for years.
Your sales team opening more sales conversations could lead to more sales opportunities, helping them close more sales, make more money, and become easier to manage. Which makes your job easier, helps you make more money, and makes your job more secure.
These are emotional benefits and used well they can destroy many objections.
Get as high up the ladder as you can.
Price setting is an art and a science:
Algorithms will never fully replace the pricing decision.
And, there are lots of examples where people have turned over their pricing to an algorithm and hilarity ensued.
The challenge for too many people is that they feel like there is one absolute best price. And, that isn’t often the case.
Pricing a product or a service is an art and a science with many variables going into the decision making process like:
How fast your solution is implemented.
How important the solution is to the buyer.
How much impact the solution will have on their personal or professional life.
How easy something is to use.
We can go on here.
The point is that pricing isn’t a set-it-and-forget-it thing.
It is a fluid process that has components of art and science to it.
Discounts are for dummies:
I’ve beat on discounts here for years…really, everywhere.
Let me lay out the core argument once more.
For every 1% you can raise your price, you typically add between 10-12% to your profits.
For every 1% you discount, you can lose up to 40% of your profit.
The 40% number often makes people sputter and hem and haw.
I’ve gone back and reviewed my research and my work and I’ve found HBR cases where the average comes in at 10-12%, the same as the 1% price increase.
I’ve also looked at my own work and seen profit losses that consistently hit 25% of the bottom line.
These higher numbers like 25-40% highlight the dangers of winging it when price-setting because most people don’t know how much it really takes to market, sell, and service their products and services, leading to poor pricing decisions, and starting the cycle all over again.
There’s a lot more.
I’m working on a sprint model of building out a 3 week course on pricing that is deliver 1-2x a year, online, with group interaction, live and taped content, and a lot more.
If you are interested in learning more once the BETA starts going live, express your interest by answering these 4 questions.
And, share this if you think someone else will benefit.
See you next week!
Happy Thanksgiving to my American friends!
Dave