Have you ever wondered why a lot of people are willing to pay a lot of money for products with low quality? Or have you ever looked around shops and wondered why so many items have prices ending in the amount .99? Well, it’s really a pretty basic concept in marketing: the way you price your product affects what your customers think about it.
Here’s something every marketer should know: every customer has her own preconceptions regarding any product or service they will be buying. In other words, everyone has a price range; it’s simple psychology.
When you quote a price that’s outside their price range, whether it’s too high or too low, you better be able to justify it or say goodbye to your sale. Here are some pricing tips to help you close more deals:
1. Bundle your products
There are two ways that businesses get pricing wrong today: the first is when they bunch all their services together into one generic and vague offer: something like “IT Solutions: $3,500.” People are likely to shy away from this because they have no idea what the value of the product is. Similarly, you should also avoid pricing each item individually, as this lead customers to question the value of each element.
Bundling your service is all about giving the client an idea of the value of the product without itemizing every bit with a cost estimate. People today are task-oriented, so every service should be broken down into tasks, not timetables. Make sure that the client knows what he or she is getting and that every element of your service bundle is essential to the whole.
2. Charge for value, not cost.
A sure way to get yourself stuck working without making any real income is thinking that value is the same as cost. When you price your items, don’t price them by thinking about what they cost you and then add a bit of markup. That’s transactional thinking and quite frankly, it won’t get you either income or customer loyalty.
Think about what a specific customer would be willing to pay for what you have to offer. The key here is to get patronage, not a single transaction. Remember that repeat business is what every enterprise thrives on.
3. Don’t blink: reduce value, not just price
Some customers like to play a bit of ‘business chicken’. Cite a price and they’ll haggle, asking you to lower the price or threaten to walk away. Whatever you do, do not give a discount. This will get them thinking that the service you offer is at a lesser value than they thought. If you really want to work with that specific client, take a look at the items on the bundled price you quoted and ask them which services or elements they would be willing to forego in order to pay less.
4. Options, options and options
Avoid backing the potential into a corner where he or she has to say yes or no to your price. Make sure you offer options. This actually puts your potential customer into a state of mind where they’re already decided on getting your service, and only just have to decide on customizing their personal experience.
5. Use discounts for the right reasons
When you do offer discounts, do it to encourage right customer behavior. Don’t offer discounts just to get customers, it devalues your business. Offer discounts for paying up front, or for paying with cash, not credit card. Use discounts to make things more convenient for you, not to get customers.
The right pricing strategy will not just give you better income, it will also get customers in the right mindset about your business. Try these strategies out and tell us which of these pricing techniques work for you.