Avoid Pricing and Discounting Mistakes

Posted by on Aug 07 2018

In 2008, Pizza Hut saw its sales drop because of the Great Recession. Competitors were lowering their prices and offering discounts — and Pizza Hut figured they had better offer a discount if they wanted to compete with Dominoes Pizza and Papa John’s Pizza for a dwindling market.

So in 2009, Pizza Hut began to offer a large cheese pizza with three toppings for $10 (the normal price was $15). Then they sweetened the deal by offering unlimited toppings for the same $10 price.

And sales rose.

That’s a good thing, right?

Fast forward to 2011. The economy was easing and Pizza Hut (and the other pizza competitors) now wanted to reinstate their normal pizza price of $15.

And customers resisted.

Why? Because of two psychological triggers:

  1. People had gotten used to paying only $10 for a pizza with unlimited toppings. When you increase the price back to the “normal” $15, people see that as a raise in price of 50 percent, conveniently forgetting the pre-2009 pricing.
  2. When you lower your prices, you devalue your product or service. You’re basically telling people, “It’s not worth $15, it’s only worth $10. We’ve been overcharging you all along.”

What do you do when sales are sluggish and you want to offer a discount, but you don’t want to imply that your products and services are worth less by lowering the price?

Enter the Concept of Adaptive Pricing

Here’s the psychology behind the concept: Customers have different needs, and place different values on the various aspects of your products and services — price being just one aspect they consider.

For example:

  • Many customers value access to a live instructor above learning on their own, so if they have questions they can get help immediately from the instructor. Therefore, they’re willing to pay more for a live class than a self-study program.
  • Some customers place value on group brainstorming and sharing of best practices to shorten the learning curve, and are willing to pay to be a member of a mastermind group.
  • Other customers value private one-on-one services and are willing to pay a premium price to get your total attention to find solutions to their problems and think strategically.

By knowing what your customers value — and creating pricing and discounts based on those values — you can increase customer satisfaction and sales at the same time.

But My Customers Want Low Prices!

Be careful of your own psychology: you might be a budget shopper yourself, but not all your customers are. If you constantly offer things for a discount (or for free!), it’s more about your own feelings about money and pricing than the needs of your customers.

For every customer who wants things as cheaply as possible, there are customers who demand extraordinary quality and are willing to pay for it. Just look at the different price/value levels of department stores (from Wal-Mart to Neiman Marcus) and you’ll see that there are huge ranges of quality, service, experience and price needs among customers.

Don’t assume your customers want cheap prices and are willing to take a lower quality service or product in order to get the lowest prices. Price based on the value of what you’re offering, and on your branding strategy. Are you the Wal-Mart of your industry or the Neiman Marcus? (Or somewhere in between?)

So, You Want to Offer a Discount

Great! Offering a discount has a lot of benefits for your business. Pay attention to your strategic purpose behind the discount — to increase sales, to increase demand, to test a pricing strategy, or to get the word out about a new product/service — and price accordingly.

When you offer your discount, test to see if your goals have been met. You may be assuming a discount will produce a certain results, and you could be wrong. Tracking your results is the only way to know for sure. (The numbers don’t lie!)

Three Adaptive Pricing Techniques to Use in Your Business

Versioning

For customers who are concerned about price above all else, offering them your product or service in a different version at a lower price-point will serve them while still keeping your sales up. Here’s an example:

  • You teach a 5-week class where students submit their homework assignments to you for review and analysis, and have access to you during class to ask questions. That class is priced at $599.
  • For the budget-conscious student, you offer similar material in a self-study version $399, (and they don’t have access to you at all if they purchase the self-study version).
  • For customers who want more private access to you to learn the topic and apply it specifically to their own business, they join an ongoing mastermind group that includes both the class and the mastermind group access for several weeks after the class.

Each customer has a different need — and by creating three versions of the service, you meet the needs of each type of customer. For example, I recently launched Synergy Core, a version of my Synergy Excel program for mastermind group facilitators. Synergy Excel is a 12-month program and includes a monthly mastermind group meeting; the Synergy Core version is a 6-month program and does not include a monthly mastermind group meeting. Two different versions of the same program, geared towards two different audiences.

Additions for Free

Another adaptive pricing technique is to offer an “extra” or “bonus” for free, but keep the base price of your product and service the same.

For example, you could offer your mastermind group to your customer at full price, but then offer them a free additional hour of your time. Walt Disney World theme park had a great success with offering their Buy Four Entry Tickets and Get Three Free package.

But don’t offer pseudo free bonuses unrelated to the product or service that customers are buying. Customers are now savvy to the free bonuses that many internet marketers offer (like: Buy Our Ebook and Get $40,000 Worth of Bonuses Free), and it just makes people think you’re trying to fool them, lowering trust and harming the relationship.

Unbundle

Everyone is telling you to combine a whole bunch of your offerings together, then give the customer a special price. But what if your customer doesn’t want everything in the bundle?

Consider offering your main product or service at full price, and then offering upgrades at a reduced price.

  • You could offer your live event for $1,200, then offer an hour of private consulting time for an additional (discounted) fee to those who are attending the live event. Or you could offer them an ongoing mastermind group for an additional fee.
  • Or you could offer them recordings of the live event for an additional fee. That way, customers can choose which upgrades are valuable to them and you can clearly see which upgrades are the winners in the eyes of your customer.

Final thoughts…

The key here is to know your customers, and know what they value when it comes to purchasing services and products. If you’re not sure, test out several pricing strategies and see which one pulls in the most revenue.

It’s also important to stop offering discounts when they are no longer needed to boost sales.

Be strategic and think through your pricing ideas before implementing them so they don’t come back to bite you later!

   

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Category: Running a Strong & Efficient Business

Why Redesign Your Business?

Posted by on Jul 27 2018

Did you know your business runs in cycles? The key to a successful business is to begin the process of change, growth and/or innovation before the preceding cycle of success runs out.

Over the years, I’ve had an influx of prospective clients come to me with these exact words: “I want to rethink my business.”  I thought:  Cool! Me, too!

For me, I want to shake things up a bit. Running my business is too easy for me. There’s not a lot of day-to-day challenge and I don’t feel like I’m reaching my full potential. I don’t know what my full potential IS — but I know I’m not there yet. Have you ever felt like that?

A great way to keep growing personally and professionally is to keep rethinking and redesigning your business model without completely wiping away everything you’ve done in the past. Take all your experience and knowledge, plus any new goals and lifestyle changes, and make a plan for your future business.

Redesigning Your Business Model

There are lots of reasons why people redesign their business model. Here are some of the ones I’ve heard recently:

  • One of my clients needs to take her business completely virtual so that she can travel extensively with her husband, who retired early.
  • Another client said he wants to make more money so that he can send his kids to college in a few years.
  • One of my business colleagues wants to expand the services and products he offers to his customer base, to be more “full service” and have multiple streams of income.
  • One of my favorites is a colleague who wants to make her business completely based on passive income by selling educational products about her field of expertise. So not only is she redesigning what she offers her audience but her marketing model as well!
  • And last but not least, one colleague wants to completely redesign herself, sell her existing business, and take everything she knows and loves, creating a whole new career/business for herself.

Do any of these sounds like you? If yes, are there specific reasons why you’re transforming your business or marketing model, or just a gut feeling you have? I’d love to hear your comments!

   

9 comments for now

Category: Business Strategy & Planning, Rethinking Your Business
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Step Into Your Leadership Potential

Posted by on Jul 16 2018

Whatever your business model, whatever your industry, your clients are crying out for your leadership. They want you to bring a community of like-minded people together to share creative ideas and solutions. They want to hear what you have to say on the subjects which are most important to them.

They don’t want to be brainwashed or bamboozled. But there are a lot of gurus out there who are talking loudly and urging people to believe that there is only one way to get the life you want: their way. You and I know there are many paths, many creative ideas, many elegant solutions to help people create the life and business of their dreams.

But if you don’t get out there and share your knowledge, wisdom and humanity with your clients, they have no choice but to listen to people who say, “There’s only one way.”

In the film, The American President, there is an incredible soliloquy on leadership:

“People want leadership. And in the absence of genuine leadership, they will listen to anyone who steps up to the microphone. They want leadership. They’re so thirsty for it, they’ll crawl through the desert toward a mirage, and when they discover there’s no water, they’ll drink the sand.”

What your clients want is to connect with you and your ideas.

They need to hear your voice and your unique ideas. Social media is a great way to do that. By blogging, by having conversations on Facebook and Twitter, by posting your videos on YouTube and your audio podcasts on iTunes, you share what you believe in with others who want your leadership on these topics.

Networking, giving speeches, teaching classes, and writing books are other great ways to spread the word. Design a webinar or run a mastermind group. Be creative.

Be the leader they seek.

If you believe strongly in something, don’t wait for someone else to step up and share their thought leadership. YOU are a thought leader, too. If it’s important, get out there and talk about it.

  • If there are rules that need to be broken — break them.
  • If there are better ways of doing things — show us.
  • If there are injustices in the world — fix them.
  • If there are things you’re passionate about — talk about them with your community.

And if there isn’t a community yet, create one.

As Seth Godin says, “You don’t need permission from people to lead them. But in case you do, here it is: They’re waiting — we’re waiting — for you to show us where to go next.”

So go out there in any way that appeals to you, find others who think and feel like you do, and create a community. Step into your leadership role. We’re waiting for you. And we want to follow you.

   

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Category: Marketing
Tags: ,

On Being YOU in Business

Posted by on Jul 10 2018

A few years ago, a client (let’s call him George) asked me whether his marketing is “professional enough.” He was worried that his text was “too personal” and didn’t make his company look like a large company.

George is a very funny, likable, insightful person. His email newsletter is extraordinarily humorous and real. He’s always telling stories about himself and his nutty family in his articles, then relates those stories to the point of the article. George exposes who he really is to his customers and prospects, and they love him for it.

People are so numb to all the marketing that’s coming to them. Let’s face it, we ignore a lot of email and offers that come our way. When I asked George what his open rate was on this email newsletter (“open rate” means the number of people who actually open his email as a percentage of the total number he sent), he said his open rate was 75%!! Wow!!! In this day and age when 20% open rate is considered industry average, 75% blows me away.

You really want to form a personal connection with your customers and prospects. It’s crucially important for you to be you, whether you’re crazy or serious, spiritual or pragmatic. Let people know who you are and what you’re all about. Don’t try to hide behind a corporate exterior. Professional, yes, but not distant, remote or unapproachable. If there is more than one person in your business, it’s okay to say “we,” but don’t say “we” if it’s only you. (Why hide that you’re a one-person business? It’s a tremendous asset to be a one-person business!)

I’m so tired of faceless companies and I bet you are, too. I’m not saying that you should expose all your personal problems and foibles which might detract from your message, but exposing your personality really helps to build relationships. It’s a little scary to let people know who you really are, but it’s also honest and full of integrity.

Me? I’m a lot of things, some of which you already know, and some that might be a surprise:

  • I love being self employed. I’m an evangelist about it.
  • I adore being in nature and hate crowded, polluted places. The photo above is my husband and I one autumn, at the top of a mountain we hiked. We’ve hiked all over the place, from Cornwall, England to Yosemite National Park, and will continue to enjoy nature until the last breath leaves our bodies. :).
  • We bought a house in the country so that we could be in nature always. It’s heaven. Okay, the deer eating my flowers isn’t heaven, but the rest of it is.
  • I have a distinctive laugh that people seem to enjoy. Which is cool, because I love to laugh! My sister and I have the exact same laugh, and when we get together the energy escalates through the roof.
  • My family is loving, warm, supportive and totally insane. I couldn’t live without them.
  • My spirituality is simple: I believe we all are here for a reason, we all have gifts to give, and it’s our responsibility as humans (and souls) to give these gifts to the world.
  • I get angry at people who are being mean to others. Or are lying to others.
  • I love to share what I know, and when I learn something new, I love to tell others about it. This is sometimes annoying to my family who really don’t care about business plans or internet marketing. Spoil sports.

What about you? Who are you and what’s unique about you? What are you going to share with your customers?

So go ahead, be YOU!

   

8 comments for now

Category: Marketing
Tags: ,

Hand-Milked by Amish Farmers

Posted by on Jul 10 2018

A few years ago in the grocery store, I had an epiphany of the effectiveness of marketing message and marketing differentiation.

My husband loves cheese — specifically cheddar cheese. He swoons over the decision about which cheese to purchase. He’ll stand in front of the display of cheeses in the market for ages and ages, reading each and every label, like he was choosing the next Nobel Prize winner.

I laughed so hard, my stomach hurt, when he rationalized his latest cheese-buying decision:

“Look. Right here on the label is says ‘Hand milked by Amish farmers.’ It must be great cheese.”

‘Nuff said.

   

4 comments for now

Category: Marketing
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Motivational Minute: Tony Robbins on Why You Do What You Do

Posted by on Jun 27 2018

 

   

2 comments for now

Category: Running a Strong & Efficient Business
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