What should you do when your competitors charge cheaper rates? Should you lower your rates to stay in the game? Charging less may make sense but it isn’t the best solution. The simple answer is you should charge more.
Here’s why. Think about how much money you save by buying a cheap pen at the dollar store. How would you feel if you lost that pen the next day? Most likely you’ll just get another one without a second thought.
But say you bought a Titanium, 18K limited edition gold pen for $24,000. (Maybe you won’t ever spend that much on a pen, but let’s pretend for a minute that you do.) You bought it to reward yourself for some hard work.
Every so often, you use it to sign only the most important of documents. You invested a huge sum into it, so you store it in a secure place and you always know exactly where it is. You will cherish the pen that costs you more money.
Let’s apply that line of thinking to your clients. How can your business become as valuable to your clients as that gold pen? There’s more to it than just a higher price point. Here are three quick tips on how to charge more while keeping clients satisfied.
Tip 1: Provide Clients with Time
The first reason you should charge more is people value their time. No matter how much or how little money you have, you cannot buy time. Everyone has the same 24 hours a day, and none of us can get that time back when a day has passed.
Exactly how much do people value time? In one marketing experiment involving a lemonade stand, a sign about spending time got twice as much business as a sign about spending money. Another study involving college students and iPods had similar results: time had more value.
If your business provides a service, think about how you can save your client time. For example, what can you do to anticipate your customer’s needs before they make the request? Are there questions they usually ask that you can answer while explaining your services?
A survey by Forrester found that “73% of consumers say that valuing their time is the most important thing a company can do when providing customer service.” When you provide the service that they are looking for, then 93% are likely to return to buy from you again.
That same survey also found that “consumers are willing to spend 17% more on a company that has outstanding customer service.” People will pay more to be treated well.
As a consumer, I’ve returned to a company even if they charged more, because I know they will get things right the first time. Less time to get something done means less stress and money well spent.
Tip 2: Give Them Value for the Price
Now you know that customers are willing to pay more to save time and get decent service. But what if you just started your business and you’re facing tough competition? Would you charge less to stay competitive?
Times are uncertain these days with unprecedented job losses and talk of a possible recession. However, going cheap won’t help your business.
An example is a free workshop. You’ve probably seen plenty of them offered on Facebook, meetups, and other sites. A free education can improve your skills or knowledge. However, if you have a scheduling conflict or you’re feeling sick that day, dropping the workshop is an easy decision to make. You paid nothing, so you lose nothing by not attending.
It’s a different situation if you paid for the workshop. Let’s say you invested $1000 for the workshop in advance because it will be a gamechanger for your life. It’s highly likely you will make every effort to attend, even if you had a stressful day, or you were sick and lacking sleep.
It’s about the value. If you bring quality experience to your new business, or you know you’re selling a quality product, charge what you’re worth.
Always think of a pen analogy. You might think that the Graf von Faber-Castel Pen for $2 thousand is kind of pricey. But, consider this: the Fulgor Nocturnus by Tibaldi has a price tag of $8 million.
For one pen.
At a higher price point, you customer will go out of their way to ensure that they value your product or service. They will take care of that expensive pen. They will immediately apply what they learn from your $1000 workshop. You get the idea.
Tip 3: Raise Your Value
You might have done this before: stood in front of two products at the store, comparing them and wondering what exactly you are getting for that price difference. What it comes down to is perceived value.
An example is how Shreddies marketed their square-shaped cereal. They turned the product to the side so it looked like a diamond instead of a square and called it “Diamond Shreddies.” Some people then thought the product had better taste.
Wine tasting is another example of expecting more value with a higher price tag. Some people wonder if expert wine tasters can actually tell the difference between cheap wine and expensive wine.
In a test where an average bottle of wine was poured into two bottles, one with a superior label, and another with an ordinary label, “Forty experts said the wine with the fancy label was worth drinking, while only 12 said the cheap wine was.”
Even expert wine tasters agree: if you pay more, you think you are getting more value. As a business owner with great value to offer from your service or product, don’t be afraid to charge more.
What do your customers consider as a good product or service? It’s about perception. Understand what they are looking for and what they need. Then provide them with great value at a higher price point. Offer them that gold pen.
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