WOW #026: A Test That's Worth the Price

Quote of the Week:
"Risk goes up, price goes up. Let's make it an even ten bucks.”
- Morgan Freeman, as Red

In the movie The Shawshank Redemption, Morgan Freeman’s character (Red) was something of a tenured inmate. 

Known throughout the prison yard as a “man who knew how to get things,” his value was immeasurable to everyone else. 

A box of smokes. A fifth of sipping whiskey. The other inmates knew the value.

Red set the price.

No one knew how Red got the goods, who was on the other side, or how many hoops someone had to jump through. They just knew he delivered and was the only one who could.

How do you feel about your current pricing? If you feel like pricing is not that complicated of an exercise in business, you are likely doing it wrong (or not as well as you should be).

It's common for business owners to implement a Goldilocks pricing strategy - not too high or low, but just right.

Chances are you’ve wrestled with the following questions at some point along your journey in business ownership:

Am I leaving potential profits on the table? 
Will I scare current customers or new business away if I ask too much?
Can I test different prices with confidence and comfort?

Like the 5th Beatle, pricing is sometimes forgotten amongst the 4P’s of Marketing: 

• The steady drumbeat of automated promotions. 
• The loud vocals of campaigns and social media to introduce products.
• The infinite chords and arrangements of new channels that emphasize place.

Think of price as the refrain, the chorus that anchors and keeps everything, (your business) on track and humming along. 

Renowned Marketing Professor Philip Kotler said it best, “Pricing is the only element in the marketing mix that produces revenue; the other elements produce costs.”

2 Takeaways:

1. The Word No Is Your Friend in Pricing. No one likes hearing the word no, but for One-Person Business owners, it’s kind of a big deal. Pushback is a good teacher. And not all “no’s” are the same. If you are getting “yes’s” across the board with every customer pitch, you might be charging enough and earning a healthy margin to support your business. However, you should be charging more. 

2. Test Price Increases and Decreasing Discounts. You can test pricing levels in different ways. Much depends on the type of business or service you offer, length of sales cycle, price point, and the competitive landscape around you. Know what you sell, who you're selling to and implement the tests that make sense.

1 Action:

Quick quiz: When was the last time you raised (or lowered) your price? Why? How did it affect overall profit (not revenue)?

If it's been awhile since your last price change, consider testing. Read my free guide here and schedule a future date for a price test that aligns best with your product or service.

Please share this issue with others and I’ll see you next week!

Hubert