How are you going to raise your prices? Instead of a modest 5% inflation increase, how do you raise your prices by 50% or more and still have people willing to pay? In other words, how do raise your prices and attract high paying clients?
It’s a bit of a Mindshift, and I’m hoping to cover it in this article.
It’s easy to believe that you won’t be able to raise prices. The market will not support it, and you may believe that “my customers will leave.” All of these thoughts will pass through your mind. I can tell you that in most industries, this is not the case. If you raise your prices, you will not lose business. But there’s a big catch: you have to raise your prices strategically. If you do, you will be able to increase your profit margin while selling the same products and services.
Why would you want to raise your prices?
So, let me tell you a little bit about my background to help you understand where I’m coming from with this.
So, I’ve been in business since I was seventeen years old. I started my first business when I was seventeen. I knew nothing and came from a working-class family. Coming from a low-income family, I had no concept of or understanding of money. That is not to say that it is true for all working-class people. I had no idea how valuable money was. I couldn’t figure it out. I didn’t understand the world’s view of money. As a result, I was pricing and quoting clients with the wrong mindset. What I thought I could charge and what the market would bear were diametrically opposed. Because I came from a low-income family, my perception of what was a lot of money was skewed.
I was pricing my services, but my mindset was getting in the way. My research was influenced by me. Because of my value concept, my research had flaws.
Every time I tried to charge more, I would either compromise or sabotage it for myself. I was sabotaging myself because I didn’t understand valuation or the market. On this subject, I’ve gotten some good support and guidance from some good people. My outlook was shaped by my upbringing in a working-class environment.
Before we get into the meat of raising prices, accept you are not impartial.
You could over-value or under-value what you deliver.
Have you ever reduced your price before the discount asked?
Ever worried about if a customer will think you are too expensive?
Felt uncomfortable talking about your prices?
You may have a mindset issue you need to tackle.
You must reach a point of brutal honesty. It’s not being honest with yourself. It’s being honest with the rest of the world. So that your thought process corresponds to where the world is. Because mine wasn’t, I was undercharged for everything.
I’d become frustrated with how much time I was devoting to doing work for little pay. I became almost resentful of my low-paying customers, despite the fact that it was my fault. I quoted them for that price. I agreed to work with them.
People who charged more than me made me resentful.
I was becoming frustrated because I was working for pennies in comparison to my competitors. But that was my decision. I decided that. So I limited myself stating that my customers will not pay me even if they will pay my competitors.
My marketing, my sales, everything I did was influenced by my bad thinking. When I did charge more and market a higher price, I ended up discounting because I didn’t believe in my own pricing. I was attracting the wrong people because my mind was in the wrong place.
Something had to change.
I recently conducted some market research with a client through a simple experiment. We looked for more expensive competing products. After about 30-minutes, we began looking for other more expensive competitors. Why? To demonstrate that you can sell for a higher price.
We discovered four or five competitors offering comparable products after only 30 minutes of searching. They were charging anywhere between 5% and 100% more than my client.
It was an eye-opening moment for the client.
So, let’s look at how do we raise our prices?
I’ll tell you about one of the models we use.
We decided to implement gradual price increases. Rather than making a big leap, we did this so that our confidence in the price and price point could grow over time.
Some of our programmes debuted at a lower cost than competitors. We were selling comparable programmes at a fraction of the cost of our competitors. We embarked on a journey with those programmes in order to transition them to a more sustainable pricing model.
Because of the nature of our training business, we have a large number of customers. Every year, thousands of customers. We decided to price to the market, and as soon as it began to sell well, we increased the price incrementally.
Every month, we’d raise the price. We’d raise the price until we found the pricing sweet spot.
One of the first programmes we launched sold for £400. We were getting a lot of positive feedback, and it was selling like hotcakes. Over the course of a year, we raised the price to reflect our increased confidence. We raised the price as our confidence in the product’s pricing grew and demand remained stable. We now sell that item for more than £2000. The programme has evolved and improved over time, but the core product remains the same.
That’s how we’ve done it in the past. We’ve changed and shifted the prices to reflect our confidence. We did avoid making a significant price change. In the course of a year, we made the necessary improvements, and the price doubled. I’m all for incremental price increases. It helps you reach a point where you’re confident with your prices.
Now we’ve looked at how we can change the pricing, let’s unpack the drivers that make people want to buy at a higher price.
Some of you in this room may be selling a commodity service or product. I’ve worked with various businesses that price above their competitors. One of the businesses cost around three times as much as some of their competitors.
They’re selling a commoditized product for three times the price. and they are a multi-billion-pound company. How do they get into that space to be able to do that?
It takes another shift. A shift away from the features and specifications of the product or service to a value selling model.
It’s not about the features or specifications when it comes to selling at a higher price range. It’s about what the product or the service creates for the customer.
Value-driven sales and marketing.
Position your product or service around the difference it makes to the client.
For you to sell on value, there must be two things:
Customer Challenges and Pain Points as well as Desired Goals and Outcomes.
The customer must have a challenge a problem or a pain point. That’s number one, that’s point A. .Then the customer needs to be seeking a result or outcome for that challenge, point B. If I’m a business that’s struggling with A. My goal is to get to B.
The gap between A and B is how your product or service creates value for your customers.
You enable people to go from their pain (A) to their outcome (B). That’s where you can double, triple, quadruple ten times your price. You’re focused on the value you can deliver.
The value of that gap determines your price. How much you can charge is determined by the difference between A and B. Do your market research and learn what are the big challenges your customer has.
What are their long-term objectives and opportunities?
What role does my product or service play in getting them from point A to point B?
If a company is losing money, that could be their point A
If they want to get to profitability — that could be their point B.
Your value is about how you can help them get there.
The Four Drivers
There are four components to assisting people in bridging the gap. Not all of them are applicable in every situation. I recommend that you examine the gaps between point A and point B in your possibilities.
Do your research and dig into that to find out what they are.
The first one is TIME.
How can you help people in getting from point A to point B more quickly? How do you give them back time so they can get from point A to point B more quickly? How do you save time for the client?
The next one is MONEY.
How do you help them make more money? It might be that the goal is to make more money, so how do you help them do that? How does your product save money for the client? What does your service do to accomplish this?
Then we come to QUALITY.
How does your product or service assist them in terms of quality, efficiency, or any of those factors? How can you assist them in improving the quality of their work and bridging the gap between where they are now and where they want to be? Perhaps you can assist them in improving or adding a level of premium to their offering?
In which of these four categories does your product or service assist them in getting there? It will take some thought when you begin to plan this out, but you will discover that this is how to sell on value. This is how we are able to sell more products at a greater price than our competitors.
This is how we demonstrate that we can provide value to a business. This is one of the reasons why people and businesses choose the more expensive choice.
The final driver, which is trickier, is the EMOTION/EGO element.
It’s a bit of a challenge to get to this one because it appears to be fairly shallow. Humans are very emotional beings. Even in business-to-business transactions. Based on how we respond to things, we make decisions and express preferences. There is an emotional aspect when it comes to appealing to someone.
How do they connect with you? How do they feel about you? How does your product or service make them feel about their business? how do you help people their ego or their self-esteem?
Some may believe that this driver only applies to B2C transactions… and you’d be mistaken. Emotions play a role in many B2B businesses. Emotion is present in every sale in which a human being makes a purchasing decision, whether it is B2B or B2C. Every human decision is influenced by emotion or ego.
What effect do you have on the customer? Can they envision themselves working with you? Can they see you as someone who can help them get from point A to point B?
So, there’s time, money, quality, and emotion to consider.
In Summary
You’ve got to sort your own head out about money. Consider your current and potential customers. Don’t end up trying to raise your prices and then appeal to people who won’t pay higher prices. Look at the pains, challenges, opportunities and outcomes of your customers.
How does your product or service fit in helping customers go from point A to point B?
Then you need to look at the four drivers — time, money, quality, emotion and a mix of those together. It’s a combination of them, one leads, the others support.
Now you can start to reposition your product.
Reposition your marketing message. Reposition your content strategy. Re-think your LinkedIn strategy. Re-think every sales/marketing channel. Incorporate the pain and outcome framing.
Only then will you unlock higher-value, higher-margin clients.
Remember that outcome isn’t as effective as leveraging outcome and pain together. Too many companies focus on how amazing they are and outcome-centred messaging.
