We had the pleasure to listen to pricing and marketing strategies consultant Lillian Cheng share at the recent Out of the Box sales conference. Here we present 6 important pricing tips you must adopt to grow your sales figure.
Sell Offering, Not Products
One of the key takeaways from the speech is to focus on selling offerings rather than individual products. When it comes to individual products, it almost always becomes just haggling over the price. Instead, focus on offerings, bundles to create both price buffers and also the appearance of a good deal, i.e. many products/services in one bundle. Having a bundle deal also allows negotiations to take place in terms of what’s included rather than just the price itself, allowing you to maintain the overall value of the deal.
Price vs Value
While we want to talk value, customer always wants to talk price. It’s a constant struggle that we should be wary not to fall into the trap of arguing over price. The important thing here is to focus on the overall value that you are delivering to the client, for example quick delivery, higher quality, good customer support. Get customers to recognize the opportunity costs of choosing an inferior solution. For example, “Will it cost you more if your website went down periodically for hours or would it cost more if you just get a more reliable solution?”
Can you imagine if you wanted a tattoo which is permanent and you ended with what the guy above had for the rest of your life?
Pricing is Subjective
“People are unable to make absolute judgements, every judgement we make is subjective and that applies to pricing as well”.
Each individual will have their own pricing benchmarks built into their minds, almost like how some people may think that 25 degrees is cold, while others might think 25 degrees is warm. While this is a bit more theoretical, but remember that even as you are setting prices, you have your own biasedness as well. Perhaps in your career dealing with small businesses, you would have thought that a $10k or $20k service package might be considered expensive, but people who have been involved in multinational corporate sales accounts regularly sell packages worth $100k or more.
Each Deal is Unique
Every deal is unique, there are so such things as commodity products in business that you cannot have differential pricing. An illustration which Lillian quoted was the scrap metal business, which most people would think is a commodity which will generally just be about pricing. However, factors such as delivery speed, trade financing, quality of the metal and even personal relationships can be a pricing differentiator and potentially allow you to command higher margins. So again, thinking value in terms of pricing helps you to create better deals.
Analyze Customer Profitability
“80% of your sales comes from 20% of your customers.”
This is actually quite common where most of your sales will come from your top few customers. The important thing is to recognize that and focus on servicing them well and growing the accounts with them. Be mindful of customers which are not only low margins, but time intensive. In many cases, customers which haggle a lot on pricing are also the same low margin customers who demand a lot of your time but is not willing to pay. We as business owners can also make the decision to keep high value customers and let go of these customers as keeping them will only hurt profitability.
Is it more important to keep market share or to keep a higher share of the profits?
Setting Exceptions, Forming Habits
The highlight of the talk comes in the last point, “customers can be trained to expect price adjustments.” Have you had trouble trying to maintain your profits when costs are going up but your customer is not willing to bulge on your prices? Lillian cites DHL who has mastered the art of getting their customers to expect changes in pricing. Every year around the same month, they will send out notices to all their customers indicating a price adjustment on their services. In fact, they have even written into the contracts the clause that prices are subject to change at that same time every year. Customers have become so well trained to anticipate this that they even contact DHL around that time and ask them for the rate adjustments so that they can factor in the budget.
While some of the points are a little bit theoretical, there are real world examples and applications of these strategies. As always, the devil lies in the details, but it’s always good to start thinking about them and how you can incorporate them to boost your sales. Do you have any examples of sales strategies that you adopted which made a huge change for your top line?