Perception – The Golden Rule of Pricing

Our clients want the best value for their money. Don’t you?!

Whenever we are making a decision to purchase a product or service, we’ll most likely take a look around and compare what we are receiving (quality, benefits and results) to what is being offered for that price point.  We then make our decision to buy based on what we perceive to be the best price for the best value being offered from that comparison.

It should come as no surprise that many business owners have an ongoing struggle with attaching a fair and accurate price to the products and services they offer.

When setting prices for your products and services, remember this golden rule:

perception is everything!

Do you know how your customers view your product or service and what they are willing to pay for it is based upon those perceptions?

Pricing is all about knowing your customers — what they want, what motivates their purchases, and how they feel about the products, services and features they are purchasing. 

To help you determine how your products and services are being perceived by your current client base ask them the questions below.  The answers you receive may surprise you and have you reevaluating your current pricing strategy.

1. How do your customers perceive your product and/or service in terms of value?

2. Do they feel the value being delivered is in alignment with the price they are paying?

3. What benefits do your customers get from your product or service?

4. Are your prices consistent with those benefits?

5. What is the current supply-and-demand of your product or service?

6. Does your product have a recognizable name that allows you the luxury of overpricing?

7. How does your price compare with your competitors’ pricing?
Your products and services will be perceived as high-, moderate-, or low-priced, usually compared to your competition or to your customer’s own notion about what “something like that should cost.”

There is no danger in having the price of your products perceived in any of these ways. It all depends on how you are perceived by your target market.

You want your pricing strategy to be in alignment with the perception of your target market.  For example, being known as “moderate-priced medical-care insurance provider” might make some customers nervous and think they are getting cut-rate medical service. The point is to match the perception of your price to the perceptions of your customers.

Deer in Headlight Syndrome

In the past, every time a prospective or existing client challenged or questioned me on my fee, I would become a deer in headlights!  In my head, I would be shouting “I cannot believe that this is happening again!” and a few choice other phrases I won’t mention here.

One of the hardest and biggest lessons for me to learn and assimilate into the very core of my being has been to sell the VALUE and RESULTS that my firm provides and NOT trade dollars for hours. Once I finally got this concept, I immediately increased my annual revenue by $100,000! No lie!

I had to learn to place a value around the skills and knowledge that I have. It is so easy for me to get to the bottom of a client’s accounting and operational issues within the first hour of meeting with them. What I had forgotten was that I didn’t suddenly wake up one morning and know accounting or how to help a business run more efficiently. I had acquired this knowledge through years of education and experience AND that has VALUE. That expertise is what I am sharing with my clients, and what they are paying for.

What comes easy to you? What is it that comes to you so easily you don’t give a second thought to it? The answers to those questions are the VALUE you are providing to your clients. Most likely, it is also the part of the work that you enjoy doing the most!

Once you have determined the value you are providing to your clients, create different ways for your client to select your services. You can establish a pay-as-you-go-rate or packages and retainer fees with different levels of service such as the no frills package, basic package and deluxe package.

Give your client a choice and they will always pick your biggest package. Load it up with value like unlimited e-mail and phone calls, a monthly in-person meeting – and base the price upon what you are worth – not what you think the client will pay or can afford. You will be pleasantly surprised how many say YES when you are clear and confident about the value and results you provide.

The Dentist in Sheep’s Clothing – Grandma what Big Eyes You Have? (Part II)

Remember the Dentist in Sheep’s Clothing from my earlier blog post? Nice guy – personable, successful, busy, – knows his stuff.  He tells you that you need $16,000 worth of dental work and then he rattles off all the things that are going to be included in the $16,000.  He doesn’t provide you with a written document, nor does he tell you of all the things which is the most important and which can wait.  You cringe because, according to him you need the work and you know that you don’t have $16,000 lying around, let alone lying around for dental work.  He says, not to worry he can get you a payment plan.  He then scurries you off to meet with the person at the desk who then has you fill out an application for the dollars.  The receptionist schedules your next appointment and you are out the door.  What just happened here, you ask!

Before you knew it you were basically railroaded into signing up for services that you don’t understand and now are responsible for not only paying back at a 24% interest rate.  Guess what? The Dentist received his money and his sales goal for the month, he doesn’t care if you pay the finance company or not. 

 

These events that I experienced of course piqued my curiosity and I asked the dentist how he arrives at the “dental plan fee”.  He was quite honest with me (once he knew I wasn’t going to sign up for any of his services) and said he picks a number based on how close or far he is from his target for the month.

 

Some may regard his tactic as bold and aggressive.  In my opinion they are unethical and out of integrity.  The dentist’s main concern is how much revenue he can earn from each mouth walking through the door.  He is not caring for the person. 

 

The other thing that was obvious about the culture of the office is that each and every staff person who worked there felt the pressure of having to bring in revenue.  He made sure that the hygienist scheduled the next cleaning appointment.  At the desk, the receptionist not only made sure I had another appointment they wanted to know if I wanted to purchase any products. 

 

Don’t get me wrong, I think everyone deserves to earn a good living but you don’t have to use pressure and scare tactics to make money.

Join me for my free call on Wednesday, March 10th at 7pm EST.

The Dentist in Sheep’s Clothing – Grandma what Big Eyes You Have? (Part I)

We are all familiar with the story of Red Riding Hood who goes to visit her Grandma only to find the wolf disguised and sitting in Grandma’s bed.  Little Red Riding Hood knew something was off, trusted her intuition and kept asking questions until she got the answers she was looking for!

A couple of years ago, I encountered a wolf in sheep’s clothing when I was looking for a new dentist.  I asked my friends who they used as a dentist and ended up going to see one of the recommendations I had received.  The office was state of the art.  The dentist was very impressive – wonderful business savvy and very knowledgeable about his profession. 

 

The dental office offered a special package for new patients that included a cleaning of my teeth, x-rays and an evaluation of what other dental work I may need all for $99.  The cleaning was performed by a dental hygienist and the dentist looked inside my mouth to perform the evaluation.  After this was done, he left the room and said he would be back in a few moments with my dental plan, a summary of all the dental work I would need.  About ten minutes later came back in and rattled off a laundry list of items that according to him required correcting in my mouth with a price tag of $16,000.  He then started to rattle off my payment options.

 

I put my hand up and stopped the dentist right there and said before we get to payment options, I need to fully understand what services are required, why and in order of importance.  The dentist stopped me and said – no I don’t give written estimates because most people would do what you are doing.  I responded that his approach was unethical – steamrolling a patient into services they did not understand and most likely could not afford. 

 

Then it dawned on my, this dentist was in total fear around money and used bullying tactics to bring in revenue!  His tactic reminded me of that old con artist game, the shell game.  This is where they place an object under one of three cups, move them around and you receive the prize only if you guess which cup the object is under, but it’s under none of the cups.

 

Had I not had the courage to put my hand up and stop the dentist I would have been saddled with repaying $16,000 plus interest for dental work, all of which was not necessary!  (I did go to another dentist and the work that I needed was not even a third of the price I was quoted.) 

 

It is not easy, when you are in a situation like this to stop the train in its tracks and believe me I felt like I was on a runaway train.  The point I want to leave you with it, if you don’t understand what you are being charged for, DON”T BE AFRAID TO ASK QUESTIONS and stop someone whenever you are unclear about what something is going to cost you!  A good way to know you are in confusion is when your mind is racing and you feel pressured to come up with a quick response.  Know it is okay to say, I need time to think this over.  The other party may not be happy with your decision but your pocketbook certainly will be!

Join me for my free call on Wednesday, March 10th at 7pm EST.

Price and Perception

Attaching a fair and accurate price to your products and services can be a tricky balancing act. It should come as no surprise that many business owners have an ongoing struggle with their pricing strategies.

Customers want the best value for their money. They will always do a quality comparison where possible, and make purchases based on the best price for the best value.

When setting prices, remember this golden rule: perception is everything. How customers view your product or service and what they are willing to pay for it is based upon those perceptions.

Your products will be perceived as high-, moderate-, or low-priced, usually compared to your competition or to your customer’s own notion about what "something like that should cost." There is no danger in having the price of your products perceived in any of these ways. It all depends on how you are perceived by your target market. For example, being known as "moderate-priced medical-care insurance provider" might make some customers nervous and think they are getting cut-rate service. The point is to match the perception of your price to the perceptions of your customers.

To further illustrate:

-    If your customers are motivated by value consciousness and your product is generally available, price and value are important to your customer. Keep this in mind when setting your prices.

-    If you sell luxury products that are exclusive to customers who value innovation, a perception of underpricing may actually work against you.

Pricing is all about knowing your customers – what they want, what motivates their purchases, and how they feel about the products, services and features they are purchasing.  Ask yourself and even your customers the following questions to help determine how your products and services are being perceived.  The answers may surprise you.

1.    How do my customers perceive my product or service, in terms of price? In terms of value?
2.    How does my price compare with my competitors’ pricing?
3.    What values and benefits do my customers get from my product or service?
4.    Are my prices consistent with those benefits and values?
5.    What is the current supply-and-demand of my product or service?
6.    Am I in an industry where the demand for my product or service has a short life cycle. Do I need to cash in quickly?
7.    Do I have a product with a recognizable name that allows me the luxury of overpricing?

© 2009 Linda A. Hunt.  Reprint rights granted to all online venues so long as it remains complete and unaltered (including the "about the author" info at the end).  Send a courtesy copy of the reprint to info@lahenterprises.com.

Linda Hunt delivers simple, practical strategies for creating systems and structure that create stability helping business owners to grow their business and earn more money.  For more FREE tips like these, visit her at http://www.sumsolutions.com