You Charge How Much?

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Author: Anders Christian Hjort

I found this brilliant article re-reading an old tweet from my clever colleague at Huthwaite, Ian Newall.

It a very inspiring read, if your colleagues are in the “negotiating price” mode too often, or too early:

Why High Prices Are A Good Thing

By Robert Craven, Managing Director of The Directors’ Centre

Just had a fascinating discussion with a potential client about why (my) high prices are often a good thing. We were talking about a premium-priced service. A Mastermind Group that charges £1,000 per month. On the scale of mastermind groups it is the price point that is interesting: some are free, there are lots in the sub-£500-a-month range and a few at £10,000-a-month.

The conversation started with the usual price-related issues: “What do I get for the money? What will it look like? How does it all work?” Somehow the questions missed the point….

…The point, of course, is about what the client really gets for the money.

The client doesn’t buy what you do… they buy what it does for them. They buy benefits. And the more overt they are then the easier it is to sell.

Suddenly the sale becomes easier for both buyer and seller.

A clear expression of the overt, explicit benefit clarifies the situation. “30% increase in profits within six months… clients from 2001 have grown thirtyfold… return on your investment in the region of 500%…”. Measurable, tangible results make the service come to life (yet so few of us offer more than a few features when trying to sell, eg six meetings, monthly conference calls…).

But still this debate has not got to the root of premium-priced service sales.

The centre of this debate was really around exclusivity.

The client could get cheaper offerings (and sit with other people obsessed with buying the cheapest). But that wasn’t what was wanted!

The client could get cheaper offerings (and sit among people who could afford the cheap, cheap prices). But that wasn’t what was wanted!

The client could get cheaper offerings (and work with a facilitator who had read the books rather than someone who has written them). But that wasn’t what was wanted!

The price point pre-qualifies the sort of people that may wish to participate. The price point excludes certain potential clients. The price point sends out a clear message about what the programme is and is not.

For many people, the higher price point actually makes the offering more attractive. In the mind of the client, the high price point creates exclusivity and scarcity; it is a statement of intent. If a product offers a return on investment of, say, 500%, then I would rather have 500% of £1,200 than 500% of £120. Stands to reason. Suddenly the client wants to give you money!

In order to cement the overt business benefit there are two additional components required.

First you need to demonstrate why the client should believe you can deliver. Here, the use of customer testimonials and statistics and invitations to talk to past clients removes most barriers.

The second component required to cement the overt business benefit is what makes you different from the rest. After all, if you are the same as the competition then I cannot think of one reason why people should bother to buy from you.

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The Financial Times called Robert Craven “The Entrepreneurship Guru”, and he has become one of the most authoritative voices on development strategies for independent businesses – businesses large and small that have an entrepreneurial spirit.

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