Innovation & Change

Pricing - The Final Word

The comments on this blog are something very special. But I think I’m going to strike my first medal and award it to Sarah Shafi. Thank you for your comment last week, Sarah – I strongly suspect there have been shorter dissertations.

(And as an aside, how many people clicked through to Sarah’s website? Intelligent, reasoned comments on blogs work.)

OK, back to the grindstone, and the final part of the trilogy. Return of Son of How Much Should You Charge?

I finished last week with four key points on pricing. To save you going back a page, in summary they were:

1. Be consistent: define what you do, what you offer, who your target market is – and stick with it
2. Have faith in yourself – as the saying goes, you’re worth it
3. Have faith in your pricing as well: discounts and loss-leaders rarely work in the long term
4. Perception, position and ‘message’ are vital. Everything needs to support your core business proposition.

Let’s look at those four points in more detail.

1. First of all, what do you do and who’s your target market? Every really successful business I’ve ever dealt with, worked for or sold to could say neatly and precisely what they did and who they were doing it for. I’ve quoted this before but I always come back to this one: “I’m a fitness coach for pregnant women.”

Yes, it rules plenty of people out but it still leaves a significant market: there were over 700,000 live births in the UK last year (just in case anyone in North Yorkshire fancies a change of direction…)

So job number one is to apply the FCPW test to your business – if you can do that it will underpin and define what you charge. (Not to mention preventing the business running off down several blind alleys.)

2. It can be tough to keep faith in yourself when a few people have said no and I don’t know many successful businesses where there hasn’t been a moment – or several moments – of self-doubt. Even if you’ve got a success rate of 50% it won’t be win-lose-win-lose. There wouldn’t be casinos if black couldn’t come up ten times in a row.

3. And once you’ve decided on a price – stick with it. To paraphrase Desiderata, there will always be persons charging greater and lesser amounts than yourself. I am always astonished by the amount some online ‘consultants’ charge when the only wisdom they have is the wisdom to believe in themselves.

As I said last week, I have very strict rules if I’m giving a discount on my consulting services. Sometimes you can appear heartless doing this, but I have to say that it has never let me down. Everyone in business knows that you have to harden your heart from time to time. ‘That’s why it’s called show business,’ as the saying goes. ‘Not show friends.’

4. Finally, as we’ve discussed many times, everything has to support your core business proposition. From your business cards to your website to your appearance – and above all to your clients. I’m sure many of you have read Michael Port’s highly successful Book Yourself Solid. In it he talks about the “velvet rope” – the one that marks out the VIP area. Try that approach – define your ideal client and only take clients that meet the criteria you’re looking for. Yes, it will be hard and yes, you need faith in yourself. But how good would it be to only work with clients who met your ideal criteria?

So what should you charge? Something that makes you a profit, something that values your time, something that makes you feel worthwhile. But above all, something that makes you feel ever-so-slightly uncomfortable. And then go out and earn it…

Ed Reid York's Blog

14th May 2012

Recommended Blogs

Stephanie Flanders

BBC Economics Editor

Welcome to Stephanomics - this is where I discuss the UK economy, how it relates to the rest of the world, and how it affects us all.

Robert Peston

BBC Business Editor

Welcome to Peston’s Picks - the home of my reports and analysis of the issues in business that matter to us all 

Laura Kuenssberg

ITV News Business Editor

Business Editor Laura Kuenssberg (@ITVLauraK) leads all business coverage for ITV News, providing analysis of the latest business stories, both in the UK and internationally. Laura's blog.

Ed Conway

Sky News Economics Editor

Ed Conway is Sky News’ Economics Editor; he joined Sky News in August 2011. He is the author of ‘50 Economics Ideas: You Really Need to Know.The Real Economy.

Marketing

Building Long Term Business Relationships

Building long term relationships is a cornerstone of most successful companies. Poor performers suffer from high levels of churn and spend more time replacing business lost than anything else. They are characterised by being unhelpful, failing to deliver to an expected quality, or failing to delover within an agreed time scale, or finding the bill littered with extras and added cost the client had not been aware of. The root cause of high churn is usually found in a lack of client confidence. Trust is a huge issue – if you don’t tell the truth you get found out and if you try to be too cleveror unhelpful you get rejected.

Few really understand or measure the long term value of customer loyalty and long term relationships. But there is anecdotal evidence that the cost of acquiring new customers is a multiple higher than keeping hold of an existing one. There is often a concentration on trying to get more work from existing clients to reduce the amount of sales effort, rather than an effort into truly understandingwhat you must do to keep existing customers. There is almost an assumption that because they are existing customers they would stay and give you more! Is it the case that when you get a client and you have had them for a while, the whole company begins to take them for granted? Does the passion wear off after a while!

The top performers don’t take their customers for granted, they continuosly help with solutions and decision-making, assisting with expertise and sharing freely what they know. They move heaven and earth to constantly make the customers feel important. They always deliver on their promises and put measures in place to prove it. They manage expectations and don’t get caught out telling lies, because they don’t tell them in the first place.

Good companies also choose their target customers well. They make sure that their equipment, services and values match the client requirements and constantly re-appraise what they need to do to make sure they continue to fit.

Then when it comes to billing, they have no hidden extras and they charge a fair price.

- Do proactively help with decision making

- Do make clients feel important – move heaven and earth

- Do share freely your experience and expertise

- Do tell the truth – and always deliver the promise

- Do target the right customers – look for a best fit – in order to reduce the churn

- Do supply a reliable product or service at reasonable prices with no hidden extras

Tim Wilkinson

TWA Business Consultants

2006 research for PrintYorkshire and Vision in Print

27th April 2012