Man, we have a lot of hang-ups about money. And a lot of false beliefs, too.
I’m gonna share possibly the most important thing nobody’s ever told you about money:
Price is elastic.
What do you think people consider most important when deciding to buy something? Actually, I can’t tell you the answer to that, because it depends on the person, the product and their reason for buying.
I can tell you, though, only a tiny proportion of people make their decision solely or mostly based on cheapest price. You might be sceptical, but think about it for a second and you’ll realise I’m right.
If everyone bought on price alone, the only clothes shop would be Primark and we’d all be driving Dacias (Britain’s cheapest car) and shopping in Poundland.
Do you think someone buying a Rolls-Royce gives price any consideration at all? I can tell you now: they don’t. People who want a Rolls-Royce want one because it’s a Rolls-Royce, not because they need a car to get to work or take the kids to school.
This is important to you because it means you get choose how to run your business, too. You can charge whatever the hell you want, because “the going rate” is a dangerous myth.
“But wait!” I hear you cry. “All my competitors are around the same price range. I can’t possibly go against that can I?”
Yes, you can. This sameness in pricing is great for you, because you can let those sheep get on with it.
Look, industry norms are meaningless to your business.
It’s really common, when starting a business, to look at what everybody else is charging. I did it. I’m sure you did it – and perhaps still do.
We look at what others are charging and pick somewhere in the middle. Or even near the bottom if our confidence isn’t up where it should be.
It’s a crazy way to sell for a couple of reasons. I mean, if you came to your prices like that… most other people must have done the same thing. Right? Which makes pricing completely arbitrary.
Dan Kennedy, marketing genius, puts it like this: “Understand that everybody else has arrived at their price decisions through the same foolish process as you might now. It’s price incest, which works like regular incest: over time, everybody gets dumber.”
So how do we set prices? Honestly? Get a dartboard, stick some numbers on it, and chuck darts at it. See how your sales go. Include “safe” numbers that keep you in your comfort zone… and include “I can’t possibly charge that!” numbers too – the ones that make your hands all sweaty and set you on edge.
Then go with the number the dart lands on, even if it scares the bejeezus out of you.
I’m being deadly serious here. Because… you don’t have any competitors. You really don’t, and when you get your head around this, your business will become much more fun. And much more profitable.
Your business is different from everyone else’s in the sense that it has you. How you structure your business, how you package your product, how you sell it, how you deliver it… all this means you can price it differently. It makes direct comparison impossible.
Which means: you can wave goodbye to the price buyers!
Most business owners live in fear of pricing – don’t you be one of them. A bit of healthy awareness is fine… But any business decision made out of fear is a bad one.
Fear drives people to needlessly under-price, to avoid raising prices in time (if at all), and to ignore opportunities to sell the deluxe version.
Fear leads to Comparison. Comparison leads to Discounts. Discounts lead to the Dark Side.
I’m not kidding: discounts will destroy your business if you succumb to them. I’ll explain how in my next article.
But first, I really want you to understand that you can choose your position. Are you Primark, John Lewis or Harrods? (If you’re not in the UK, Primark sells cheap stuff, John Lewis is mid-range, and Harrods is… well… Harrods.)
If you’re Primark and you’re happy, that’s cool. As long as you’re comfortable with your positioning and it will get you closer to your goals, that’s great. I’m not judging – not everybody can be Harrods! People buy at different price levels.
My point is: you don’t have to settle for average and you don’t have to compete on price. In fact, you shouldn’t.
Competing on price is a dangerous game.
The really successful business owners understand this.
If you can’t be the cheapest and make that your USP, there is no benefit at all in being at the bottom of the barrel with the rest of the “almost cheapest”. That is truly rubbish positioning.
So choose your position. Make a decision. Take control of your own profits.