Traditional accounting education teaches students that there are several different ways to price a product. Picture a range. The lowest end price is the cost of manufacturing your product or service, while the highest price is generally the maximum the market will bear. That price, particularly if you are a small player in a large market, is determined by the large players in your industry.
Conventional wisdom says you cannot charge more than your competitor – or else your clients will move over their business. But this is based on the assumption that all products and services are identical and the only way you can differentiate from your competitor is through price. The Price is Right game show follows this line of thinking too – you have a short amount of time to pick a price for an object on display, without knowing anything else about it.
But conventional wisdom isn’t always right. There are so many factors that can separate you from your competitor, even if you are in an industry where your actual product is identical to everyone else’s.
Let’s explore how can you charge a premium price for your product and still have customers come to your doors. Before, we talked about making your business strategic plan different from the other guy in ways that will have people begging to pay more. Now, it is a matter of communicating those differences.
Personally, I don’t spend a lot of time in the makeup department store Sephora, but the females in my life explained how it is an excellent example. While Sephora almost corners the market on having the most cosmetics under one roof, it still competes with larger department stores, Shoppers Drug Mart and others. Sephora sets itself apart with the customer appreciation points program. You earn points on every purchase which you can redeem for merchandise. And via email, you get major perks such as coupons, free offers and a gift on your birthday. Sephora understands that the key is to define, deliver and communicate the way in which its business is different from everyone else who says they can do the same thing Sephora can. Here’s their communication bonus: the company places “members-only” products under glass in seductive looking packaging at the cash. It entices you to spend more for these great products.
As an entrepreneur, you must stand out in the minds of your perspective and current clients. If your customers can’t identify some way in which you are unique – they will just go back to the price tag.
There are many other non-cosmetic ways to set you apart from your competition. It can be in the quality of experience your customers have and dealing with everyone in your organization or in the way you package your product or deliver your service. It can be as simple as sending a hand written thank you note to your customer after you have completed their job or sending a cookie-gram on their birthday.
You can consider offering a guarantee for your product or service that is so strong none of your competitors would ever consider offering it. For example, a common concern in dealing with professionals (doctors, accountants, lawyers, etc.) is that every time you call to ask a question, you are going to receive a large bill as historically these professions billed on a rate per hour basis.
At Silver & Goren, we differentiate ourselves from a lot of our competitors by offering a fixed fee, all inclusive, contract at the beginning of an engagement that has been discussed and approved by our clients. We then combine this with our guarantee that you don’t have to pay if you are not satisfied with the results.
Our objective is to remove the anxiety and concern of our customers as to the nature and amount of their bill. We are able to offer this type of comprehensive guarantee as we take the time to understand our clients and their industries at the beginning of the process, so that we can define what our clients needs are and comfortably charge a fee that our customers are happy with and that is profitable for us. You may not find us on The Price is Right…but we guarantee you’ll be happy with yours.