Man, we have many complexes for money. And many false beliefs, too.
I am going to share what is possibly the most important thing that nobody has ever told you about money:
the price is elastic.
What do you think people consider most important when they decide to buy something? I can’t really tell you the answer to that, because it depends on the person, the product, and the reason for the purchase.
Yo can However, I will tell you that only a small proportion of people make their decision solely or mainly based on the cheapest price. You may be skeptical, but think about it for a second and you will realize that I am right.
If everyone bought on price alone, the only clothing store would be Primark and we’d all be driving Dacias (Britain’s cheapest car) and shopping in Poundland.
Do you think that someone who buys a Rolls-Royce gives any consideration to the price? I can tell you now: they don’t. People who want a Rolls-Royce want it 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 that you too can choose how you run your business. You can charge whatever you want, because “going rate” is a dangerous myth.
“But wait!” I hear you cry. “All my competitors are in the same price range. I can’t possibly go against it, may I?”
If you can. This price uniformity is great for you, because you can let those sheep move on.
Look, industry norms don’t make sense for your business.
It is very common, when starting a business, to look at what others charge. I did it. I’m sure you did, and maybe still do.
We look at what others charge and choose something in the middle. Or even near the bottom if our confidence is not where it should be.
It’s a crazy way to sell for a couple of reasons. I mean, if you arrived at your prices like this… most people must have done the same. Good? Which makes the prices completely arbitrary.
Dan Kennedy, marketing genius, puts it this way: “Understand that everyone else has arrived at their pricing decisions through the same silly process you might have now. It’s incest pricing, which works like regular incest: with time, everyone gets dumber.”
So how do we set prices? Honestly? Get a dartboard, hit some numbers on it, and throw darts at it. See how your sales are going. Include “safe” numbers that keep you in your comfort zone…and include “I can’t collect that!” the numbers too, those that make your hands sweat and make you nervous.
Then go with the number the dart lands on, even if it scares you a lot.
I’m very serious here. Because… you have no competitors. You really don’t, and when you understand this, your business will become a lot more fun. And much more profitable.
Your business is different from others in the sense that you have you. How you structure your business, how you package your product, how you sell it, how you deliver it… all of these mean you can price it differently. It makes direct comparison impossible.
What it means: you can say goodbye to price shoppers!
Most business owners live in fear of prices, don’t be one of them. A little sane awareness is fine… But any business decision made out of fear is bad.
Fear leads people to needlessly understate prices, avoid raising prices on time (if at all), and ignore opportunities to sell the luxury 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 will 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, great. As long as you’re comfortable with your positioning and it gets you closer to your goals, that’s great. I’m not judging, they can’t all be Harrods! People buy at different price levels.
My point is: you don’t have settle for average and you don’t have to compete on price. In fact, you shouldn’t.
Competing on price is a dangerous game.
Really successful business owners understand this.
If you can’t be the cheapest and make it your USP, there’s no benefit in being at the bottom of the barrel with the rest of the “almost cheaper”. That’s really rubbish positioning.
So choose your location. Make a decision. Take control of your own earnings.
