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Don't do it ... Don't cut your prices!
Don't do it ... Don't cut your prices!
4 (proven) tactics to create more value so price isn't even an issue
Read the headlines and it would seem that the only way to sell something right now is to price your product lower than everyone else.
No wonder we're seeing companies laying off workers by the thousands while others are shutting down completely. There's much more to pricing a product than just coming up the lowest figure. Unfortunately, very few companies ' even those with millions of dollars or resources at their beck 'n call ' haven't learned how to price their products.
There are 4 important tactics to creating value in your product. And the price you charge is only one of them.
Tactic #1: Packaging ' It's not butter; it's margerine
The first element of creating value ' and one of the most overlooked ' is the packaging of the product.
Take margarine for example. Louis Cheskin, a giant in 20th century marketing and packaging, salvaged margarine from the trash bin of ideas. How? He repackaged it in foil and made it yellow so it looked more like butter. Everyone recognized butter as yellow ' so a butter substitute had to be yellow too. (By contrast, remember green ketchup? That was a bad idea.)
Cheskin coined the idea of 'sensation transference', which means that people, on a subconscious level, don't make a distinction between the package and the product. The packaging is innately part of the product.
Take 7-Up as another example. The marketers of 7-Up tested several different packages and fiddled around the coloring of the can. If they added 15% more yellow, people in taste tests reported that it tasted more lemony. Add 15% more green, and it had a lime flavor. It was the same soda. The recipe hadn't changed at all but the perception had simply changing the packaging.
Takeaway: Take a look at your packaging. What does it say about your product? What perception do you want to leave with your customers?
Tactic #2: Pricing ' It's all about perception
Bear with me here because I get so frustrated when talking to business owners about how they come up with their prices. They either begin to tell me about how much the product costs them to produce or they tell me about what their competitors are charging ' or they tell me about both. By this time I'm looking for something to punch!
Your pricing has very little to do with your costs or what your competitors are charging. It's all about the value in the minds of your customers! Imagine you're selling software to help businesses manage their employees. You may sell it for $89. But you can take that same software and customize it for very specific industries, such as consultants. You can add templates with the proper legal disclosures for hiring freelancers, give specific guidance on the laws regarding work-for-hire contracts and how it may vary from state to state; you could create sample hiring documents, add a website for customers to download forms and get answers to questions while on the road, add an online Q&A and offer a quarterly newsletter with tips just for consultants.
Simply by adding a few information resources that don’t cost much to develop, you’ve significantly increased the value because it’s specific to consultants. So instead of charging $89 you can charge $489. Did it cost you $400 more to produce it? No. But in the minds of your prospects, they’ll rightly assume you understand their needs and have the answers to their unique challenges.
Takeaway: What low-cost information resources or tools can you add to your product that will enhance the value in the minds of your prospects? Notice too that when you create those “value-added” resources, you’re redefining your product so your product can no longer be compared to a competitor’s. You’ve created what I call a competitive bubble where price comparison is no longer an issue.
Tactic #3: Believability – why should anyone believe you?
Take a look at the ads in your Sunday newspaper and they all say they have either the best price, the best quality or best service. But why should you believe them? Whether the ad is for home repair, auto repair, mortgage loans, jewelry, clothes, etc. they all offer one of those 3 things.
Most ads never answer the question everyone wants to know: How can I know for sure this product or service will truly help me?
They don’t give prospects a reason to believe. (Alert readers may also recognize this element as Law #5 from the 8 Absolute, Essential Laws of Marketing.) You have nearly twice as much chance of success if you provide your prospects with a real reason to believe, according to a terrific book, Meaningful Marketing by Doug Hall, Jeffrey Samp, Ph.D. and Sergio Zyman.
We live in an age of advertising resistance and in age of distrust. You therefore must make sure you provide overwhelming amounts of credibility (an element we’ll discuss more in a moment.)
Takeaway: Review your marketing claims and ads with a skeptical eye. Ask yourself, “If you knew nothing about this product or service, would you believe its claims? Do they seem realistic? And are they easily understood?”
Tactic #4: Credibility. Can you pass the smell test?
Here’s a statistic that puts everything into perspective: 93% of people will not believe you unless you provide them with credible evidence to back up your claim, according to research from the Yankelovich Monitor and Consumer Trust Study.
So if you’re making a claim, you must back it up with proof. And the bigger the claim, the more proof you need. Here are three ways to build credibility:
• Back up your claims with the single, most powerful word to get your prospects to respond. The word is: because. When you hear the word, it immediately relaxes your trust filter. In fact, Harvard psychologist Ellen Langer found that 94% of the time students were allowed to cut in front of a long line of people at a library copier simply by telling them “Excuse me, I have 5 pages. May I use the copy machine because I’m in a rush?”
• Use specifics. For example, you may say, “We have the fastest service in town in Peoria” then add a quote or a statistic such as, “Our average customer wait is less than 38 seconds”. Generalities roll off your customers like water off a duck’s back. But specifics grab your customers’ attention. In another example, a Virginia mortgage company sent a letter to prospects that said, “I am sending you this letter regarding your property at 613 Cedar Avenue with your current mortgage from Baywood Mortgage. Based on your current adjustable rate mortgage you can expect an increase of approximately $487 per month. In order to stop this increase from happening, contact us immediately.”
• Let your customers speak for you with testimonials. As soon as someone buys something from you, capture his or her testimonial RIGHT AWAY! Capture them on your cell phone. Be sure to ask for specifics in your testimonials such as, “After refinancing, my expenses were cut about $1,000 per month.” Use your testimonials to overcome objections: “After seeing what Joe could do for me, I knew that I get at least 10 times back what I had paid! It was no-brainer.”
Takeaways: How can you create more credibility by simply using the word because in your marketing? What objections do you have to overcome with your prospects before they finally decide to buy? How can your testimonials speak to those objections? How can you make it specific?