Is Your Value Worth Your Price?
That is the question!
One of the most common mistakes new entrepreneurs make is not charging enough for what they sell. The root of this problem lies in a fear of rejection and an insecurity as to whether or not the market believes that what the seller is selling is worth the price.
There are two problems that derive from this fear. First, price shoppers can “smell” inexperienced salespeople who do not know how to price their offerings appropriately. They will sniff them out and take advantage of their naïveté. They’re usually very flattering as they scoop in and devour what you are practically giving away. Then, after you go out of business, they will start nosing around for the next inexperienced victim.
The second problem is that you cannot stay in business and be competitive if you’re pricing yourself so far below your value. Remember that a business can survive longer with sales than it can with unprofitable sales. One of the biggest problems you face in this situation is that if you are underpricing yourself, your customers may not tell you since it means they will be spending more money. This is something you either have to figure out on your own or get help from someone more experienced than you. This could be a mentor, a friendly competitor – perhaps in a different city, or a business coach.
Don’t fall into a common mistake of basing your price on your costs. Aunt Anne’s Pretzels sell for about $2.50 to $4.50, depending upon what toppings you want. Aunt Anne’s Pretzels only cost about $0.26 to make. The company does not worry about having high profit margins because they put out a great product that many people like and continuously buy. They’ve sold over a billion of them!
As you look to price your products, figure out what the value is. People are paying for the value you provide, not to cover your costs. Start with how much profit you need to make in order for you to earn the living you want and then work backwards to set your price based on the perceived value of your customers. If you’re still unsure how to do this, you can hold a focus group. Get a bunch of potential customers and demonstrate the value of your offering. After you’re done, ask them, independently, to write down their perception of what the price should be. Ultimately, the decision is yours to make but gaining greater insights from your potential buyers will help you validate when your pricing is reflective of their perceived value.
“Only a fool thinks price and value for the same thing.” – Antonio Machado
This excerpt is taken from the seminar entitled Anyone Can Sell I: Preventing the Top 10 Sales Mistakes. I encourage you to
click here to register for the exclusive live Zoom presentation of Anyone Can Sell I: Preventing the Top 10 Sales Mistakes on Thursday, September 28, 2023 from 9 AM to 12 noon Eastern Standard Time.
BLOG SPONSORS
