This is something that I think too many of us don’t think of and it can negatively affect our lives and businesses. We have all seen the case studies on product pricing. A product is created and sold through various channels at a certain price and it bombs. Change that price a couple of dollars up or down and all of a sudden you have a runaway success.
There are even stories of people changing their price from $25, where they sold no products, and moving it up to $125 and all of a sudden they are selling out. If people perceive value from this product they will purchase it; and sometimes the price is an important factor in that perceived value.
I was working with a small business owner who was having trouble getting new clients. Her service was very unique and very much met the needs of a niche market. To promote her business she had been handing out flyers that entitled new customers to a free session. She was flabbergasted at how many people did not take advantage of this.
As we talked about this and what was happening I told her that maybe people do not value her service because she is giving it away. She had never thought of this before. Other options here would be to change the deal to first session is free when you sign up for a second or bring a friend and it is 50% off both your sessions. There are many ways to entice people, but still keep the perceived value the client welcomes when they purchase a product or service.
It is also something we deal with in our personal lives. How many of us feel like we try to do we get taken advantage of? You might volunteer to help with a local event and all of a sudden everything is thrown on you and people expect you to do it again next year. I am sure we have all seen this happen to either us or someone we know.
Often times we are trying to do something out of the kindness of our hearts and we feel like it was expected and that it will continue to be expected. I don’t know about you, but this makes me not want to do it again.
There is a fine line you have to walk in this instance. You want to find a win-win situation where you get what you want and the client gets what they want. This can be achieved in many different ways and is something you have to consider. It is also something you will have to research and track.
I am a big fan of the work of Jay Abraham. In essence, his central message is you do not need a marketing budget. It should be unlimited, but you pay for results. Here is an example he gave. It is the story of Icy Hot. He went into this company and looked at the numbers. What he found was that for every one out of three people that purchased the product would come back and purchase, on average, six times a year forever.
So what Jay did was he went to catalog companies and asked them if they were willing to sell this product. They would sell it for $3 a jar and keep that amount. All Icy Hot wanted was the prompt delivery of the customer’s name and address so they could ship the product. It only cost $0.48 to manufacture, ship, and package the product. For this temporary loss one of three of these customers would purchase 6 times a year. This worked out to a cost of about $930,000 a year, but the annual profit came in at $10,500,000.00.
This example was a little of base from what we were talking about to start, but the same basic premise is there. We have to understand the value of something before we can make an educated decision on what we can give away and what we can expect in return.
The point is if we do not place a value on what we do, how can anyone see the value in what we do?