Is Your Thinking Keeping You Poor? Article 49: 5 things you need to know about pricing
by Douglas Kruger
While charging a healthy fee, the rich ensure they’re worth it
The danger is being seen to be overcharging for an inferior product. That’s a bad idea. Not only is it unethical, but it also only takes two or three clients to get burnt before the word gets out and your business falters.
You have to be the quality for which you charge. If you genuinely are the Mercedes-Benz of your industry, you are entitled to charge a premium. Your market will expect it and pay it.
It’s an interesting dynamic: the more you increase your price, the more you will be seen as a quality offering. The higher the quality of your offering, the more you can increase your price.
So, if you hit an income-to-capacity ceiling and want to earn more, consider whether you are simply trying to carry more bricks. There are smarter approaches.
Here are four suggestions for how to choose better positioning over more hours carrying bricks:
Fire your low-paying, high-input clients
These clients have become a liability, not an asset. They are a drain on your time, they are not worth the financial reward and, perhaps most importantly, their high visibility in your own consciousness can keep you believing that you operate at that level. After all, if you see them often, they are your norm.
Give them up to the entry-level operators. You go ahead and own the top end of the market.
If you’re having difficulty with this idea, think about it this way: doing one job for thirty coins is worth more than doing three jobs for ten coins. How do I reach this apparent mathematical impossibility? Well, each job implies a certain amount of cost. If you do one job for thirty coins, you will incur one instance of cost. If you do three jobs for the same amount of money, you will be down by three instances of cost. Doing less work for more money is much more lucrative.
Doing a few big deals is worth more than doing many small deals.
Dump the bricks and carry gold
What do you offer that is high input (costs you a great deal of labour or money to make or do), but low yield (doesn’t bring in very much income)? You know that you are not obliged to keep doing that thing, right? You are free to drop it and start offering only the thing that brings in good returns.
Are you scrambling to sustain the small-profit-margin part of your business? Perhaps it’s time to dump it and focus on the high-yield things. You do not have to be all things to all people. Rather be the thing that generates high income. That will free up more of your time to chase the less frequent, higher-profit-margin deals, goals or sales.
Increase your fees
Raise your fees and your quality concurrently. Try to position your fees in the middle-to-upper cost range of your industry, and never in the middle-to-lower range. If you position yourself in the lower range, you become a commodity, which means that you are interchangeable and clients will only shop for you on price.
Your competitors in this range will have to decrease their prices to beat you. And you will have to lower yours to beat them. Everybody loses, and the offering becomes less valuable.
That’s not clever positioning. Also, it will become remarkably difficult for you to raise your value later on, because you will have created a reputation in the market as a cheap player.
Put the word out
Whenever I speak on the topic of expert positioning, I always point out that technical knowledge alone will not cause your market to see you as the leading name. Knowledge alone makes you a specialist. But add publicity to the mix and suddenly you can be perceived as an expert and an industry celebrity, which allows you to position yourself at the high end of the market.
Find forums to achieve this. Appear on radio talk shows with interesting messages pertaining to what you do. Appear on TV. Get into newspapers and magazines. Speak in public as often as possible. Raise the value of your brand’s perception.
To become king of the world in your industry, the world must see you crowned.
Poverty mindset: I must please every customer.
Wealth mindset: Some customers are a poor investment in my wealth. I will constantly raise my customer base to higher levels.
Douglas Kruger is a business author and professional speaker. See him in action, or read his articles, at www.douglaskruger.co.za. Douglas’s books, including ‘Is Your Thinking Keeping You Poor? 50 Ways the Rich Think Differently,’ are available at Exclusive Books, Estoril, CNA, and as ebooks from Amazon.com