What Are You Worth?
How To Get The "Best"
Money You Can For Your Products Or Services
How much am I worth? How much are my clients willing to pay for my
products and services? These are questions that you may be asking
yourself. I frequently hear them as a consultant. Whether you are an
independent consultant or a manufacturer, these
questions are extremely important in determining your success and your
The pricing you choose does more than directly affect your bottom line. It also creates the perception of the
value of your product. Pricing should be part of your marketing strategy.
(Think for a moment how you would perceive your favorite luxury sports car
if it were half the price.) Pricing leads to your
positioning in the market in the eyes of your prospects and against
I want you to think about the following questions beyond the simple
economics and consider the marketing perception you create when
establishing your pricing strategies. What do your prospects think the
moment they see your asking price? How do you or your sales people handle
negotiations, once you have set your price "in stone"? (Ha ha.)
Is your pricing helping or hindering a successful sales cycle?
The Simple Math
If you manufacture a product or publish software, it is a little
easier to create a baseline price from which to start. Many companies follow a business model of adding profit margins once they have
calculated the total cost involved in bringing the product to market.
These costs involve administration, R&D, marketing, and the cost of sales and
supporting a distribution network. Mark up the product by the amount of
profit you want to earn off each unit, and you've found a price.
First To Market
Being first to market can be good and bad. The good news is that your customers have less competitive noise
to sway them from your product, and less data for comparative shopping with
your competitors. The bad news is that prospective customers are generally nervous
about buying "bleeding" edge technology. So, establish where your
company sits along this line to determine whether you're just updating a model
with additional innovations or improvements, or are bringing a new invention to life.
Supply And Demand
Supply and demand is the grandfather of all pricing models. You experience it every
time you buy gas or groceries. This is more than traditional pricing; it is damn
near Stone Age economics. The more the population desires your product or
service, and the lower the supply, the more you can charge. The more
competitors are offering the same thing, the greater the pressure for a
lower price. This is especially true for items that are considered
commodities. Think of Intel's memory chips, for example.
The greatest danger in supply and demand pricing is in times when there is an abundant
supply. Customers remember when prices were higher and supply was less.
They may perceive the supplier as having been "gouging" and taking
advantage of them. Play nice when you're in a high-demand position, because your customers will
inevitably have their turn.
"Oh, You're One Of Those"
In general, it is better not to fall into what I call the
"commodity chasm." When this happens, the marketplace has too
much power in controlling your pricing. As a technology company, you must
continually add value and continually educate your clients about the value
you deliver in solutions. It is all about eliminating their pain, not how
your gadgets work or how you consult. Think results, not process. People
will pay a dentist anything to stop the pain of a toothache without
stopping to ask what brand of drugs he's using.
I have stated before that many companies underestimate their
accomplishments. As a manufacturer, remember and recognize all that you
have had to do and endure just to get to a prototype. If you are a
knowledge broker or service provider, consider the investment made in
education to have the ability to deliver your consulting. At a minimum,
you have to make this back. Again, you have to continually communicate
this type of information to your prospects and customers in your
marketing. Don't forget to take these costs into account.
Yes, it is a fabricated verb just for you. By bringing depth via
description and education to your services, you can ask for more in
compensation. Make a list of every detail required in the delivery of your
service to let your customers know exactly what is involved. How many
people at what level of education? How many years of combined experience?
The most meaningful question you want in your prospects mind is,
"What would it cost them to do it themselves?" The conclusion
being, "Too much."
Be Fair And Stubborn
Once you have committed to your pricing and it has proven to be fair
market value, you do not want to get the reputation of being the "price
dropper" at the negotiating table. Once you are, you're jumping off
that cliff into the commodity chasm I spoke of earlier. Stand your ground
rather than accept a lower valuation of your service by the prospect.
Their confidence in asking for a lower price is a direct reflection of your own confidence in
your asking price. You must commit and remain confident in your pricing. If it
is fair, you can walk away. How many headaches do your "cheap"
clients cause you now? Don't get more of them. This doesn't mean some
negotiation isn't going to occur. Just don't forget you're entitled to a fair profit.
You're A Winner!
When you or your products gain recognition in your industry or market
niche, that third-party recognition adds value to what you do. Therefore, apply for those awards you
see others winning. Why not you? In my experience, I have found that half
the battle is just filling out the darn forms. There is a ton of brass
being awarded. If you're not at the top of your game technology-wise then
think of alternative awards in other areas of your business. Your business
process could snag you Entrepreneur of the Year. Your involvement in the
community could garner you needed recognition too, as a top "Business
in the Community." Get creative and improve your presence.
The Value Of Publicity
My favorite strategy for adding perceived value -- and therefore
gaining the ability to
increase your prices -- is often the most affordable. You need to implement
an effective public relations campaign and maintain regular contact with the industry
press. Your prospects respect the people and companies that are publicly
recognized by the media. Once you get coverage in the media don't think
that your prospects have read it, heard it, or seen it. Take it to them. I
repeat, show your prospects your media hits and awards, or most of them
won't be aware of it. You should also send press mentions to your customers to add to
their confidence in having made the right investment. This will also keep
you at the top of their mind so they refer you to others.
When establishing your pricing strategies, think beyond the economics
to the emotions created by your pricing model. Remember that people buy on
emotion (even your technology) and rationalize their decision with the
facts you present, including your price.
Make your money back. Get what you deserve for delivering your product
or service. Commit to higher quality and better customer service to back
it up. What message are you sending with those numbers on the price tag?
Commodity or value? It's a testament to your success to get the price you've earned while
keeping clients happy with the value they're receiving from your products
Martin Wales, The Customer Catcher™, is a business development
specialist helping companies win and keep more business through better
customer relationships. He is a technology-marketing specialist, speaker,
and facilitator. Using your company's existing resources, Wales is able to
create maximum results with minimum risk. Contact him at firstname.lastname@example.org.