Unbelievable
It's the most amazing pricing strategy I've ever seen. The wildest thing is - it works!
I was sitting in a psychologist's office. No, it wasn't a therapy session. I'm certifiable but not dangerous. We were talking business. He was a professor at a University and just starting a corporate consulting business on the side. I asked about his strategy for pricing and attracting business. He smiled, "I tell people that they probably can't afford me."
"Aaaa-eeeee-iiiiiiii-ooooo," I worked my way through my vowels for a moment. "How's that working for you?"
He was only able to devote ten hours a week to consulting, was booked solid for the next eight months - at $300 per hour. This was 20 years ago and he was pulling in $300 per hour! You have to believe I had some questions. Here was his strategy. He put price first and not last and addressed how much the client expected to pay. If the potential client was only fishing and didn't have any resources the call ended quickly. If the conversation continued everything was focused on what the client needed to happen, the business issues. Is this strategy crazy or inspired?
Ignoring Price
Pricing is difficult, which may be why we tend to skip over it or push it to the last possible moment. Deep down there's the fear that we are either charging too much or too little. Just like any other part of our businesses we must manage price. Pricing isn't a tool it's the whole point of the game. Attract business that you can perform in a way that satisfies the customer, ensures repeat business and makes profit for the company. If pricing is wrong it's all wrong.
Scratching Their Itch
Customers don’t just want a specific product or service; most of the times they want to solve their pain points or business issues … or they want some cool new shoes. They have an itch and are looking for a way to scratch it. They don't want you to educate them on skin irritation and the development of your back scratcher - they want you to scratch.
Find Out Where To Scratch
What are the things that matter most to the customer or client? The supplier who gets the job or the sale will be the one that achieves more of these goals than the nearest competitor. So your job is clear.
Step #1 - Determine the things that matter most to the customer or client?
Step #2 - Deliver more of them than anyone else
Step #3 - Communicating the value you supply
What Do They Expect To Pay?
Notice that price isn't a step? Clients define value and, like it or not, clients control price. Every pricing strategies boils down to this - what does the customer or client expect to pay? The fancy term is reference price. If you're at or under that amount it's a fair price. Presto it's off their radar and they don't think about it anymore. If you're over their expectation you have to pinpoint other value you are providing to justify the additional cost. If the cost of the additional value is fair then price is no longer an issue again. Just as long as they feel you aren't taking advantage of them the price is cool - even if it is higher than what they expected at first.
Look at it this way. If you don't get the customer to see, understand and value how you are providing more of the things that matter most - your price doesn't matter. So deal with price first and then focus on providing the things the client or customer values the most.
The Gutsy Secret
Oh, back to the psychologist I was telling you about. I ran into him at the airport a couple of years ago after he was returning from three weeks in Europe attending a conference and meeting with corporate clients. He's an Emeritus now, which is Latin for retired. We chatted about how surprised I was at his strategy. He told me his ultimate secret.
"When I tell them they probably can't afford me most people subconsciously think, oh yeah, I'll show you I can afford you. They prove me wrong. It's worked for over 20 years."
His chauffeur and limo picked him up at the curb.
In case you're looking for more, please check this out:
Stop Scope Creep - The #1 Killer of Projects, Programs, Marketing & Events
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Andy Johnston is an multi-faceted communication professional with deep experience from strategic planning, to messaging, to marketing, to media, to events, to training, to creative direction … and there are several other ”to’s.” Andy is known for his energy, creativity and his unique ability to discover the key results that must be generated – and then to develop ingenious ways to engage and motivate audiences.
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