If you’re committed to pricing your products and services at an optimal level, you must be genuinely convinced of the additional value those products and services provide to a customer.
If you are, and if you do a good job of conveying this message, pricing becomes less of an issue to the customer because of what he or she will gain from the purchase. If not, this lack of conviction will be exposed during difficult negotiations. If you don’t “buy” what you’re selling, in other words, your customer won’t, either.
The concept of “value” can be defined in a number of ways. Here are a few to keep in mind:
Financial Advantages (reduced cost, improved performance, ability of the customer to command a higher price)
Experience/Expertise (we have solved similar problems for other people)
Risk Reduction/Assurance (guarantees, case studies)
New Ideas/Ways of Doing Things (the value of being first in a category – e.g., PayPal)
Types of Value
- Ease of installation
- Form and fit
- Process specs
- Particle performance
- Cost to own and operate
- Field support
- Delivery speed and consistency
- Inventory ownership and management
- Guaranteed pricing over time
- Payment terms
It’s very important to identify, design, and quantify real, sustainable competitive advantages and differentiators so customers know exactly why they should buy each of your products and services and why they should pay the price you’re asking. This is the cornerstone of smart pricing.
What are your products really worth, to which customers, under what circumstances, and relative to which competitors and substitute products?
Remember: There is no one “perfect” price for anything. The amount you can charge greatly depends not only on the value you provide, but on how effectively you convey this value to your customer.