Weekly Business Idea

July 14, 2017 – Is Price Controlling Your Business?

Posted on | July 14, 2017 | No Comments

Main Idea:

Do you get calls asking what your price is for a particular service or product?  Do they ask anything else besides the price?  When you sell, do you lead with a proposal to save your prospective customer money?  Does everything revolve around the price of your product?

Expansion of the Idea:

I received a call yesterday from a broker selling professional liability insurance.  She asked if I would like a quote.   I told her no and she thanked me and hung up.  She did not ask why I wouldn’t like to explore her company.  It might have been better than what I have.  The part she didn’t understand is that my current professional liability insurance company doesn’t just sell insurance.  They help me handle the risk of being a CPA.  They provide proactive resources and help if I have a hard to solve problem.  I am not going to switch to any company that doesn’t provide those services, even if they can save me a few hundred dollars a year.

This brought up the role of pricing in sales.  Pricing is critical for all of our businesses.  However, we first have to decide what our business model is.  Very few of us set up our businesses to be the lowest cost on the market.  The problem with being the lowest cost is that you do need to be profitable at that level and you need to be able to maintain the lowest cost.  Walmart had occupied the lowest cost portion of the local market until Amazon Prime came along.  Even though Amazon doesn’t have a store in Walmart’s local market, Amazon might be cheaper and as a result Walmart has a strong competitor.

If you are not going to be the low cost, then you have to decide how your business will operate and what price is appropriate for the market as well as what you need to be profitable.  Pricing is an important part of positioning your product or service.  Do you want to be a high price/high service business?  Who is your target customer?  Are you selling to businesses?  Do you want to serve families?  What price are they willing to pay?  There are a lot of different aspects of pricing that you need to go through.  Our prices need to be in a range that our customers will accept.  Beyond that, we need to make sure that we provide value for what we do.  Pricing is a critical component of our overall value proposition.

At the same time, we need to make sure that, to the extent possible, our sales offerings are not decided by price.  If your customers are buying from you just for the price, then you are one phone call away from losing that customer.  The problem with this is that most businesses sell by using price.  They open with it and then try to steer the sale away from it.  We need to make sure that sales calls are scripted to get as much information as possible so that we can decide how best to service the prospective customer.  At that point pricing can be used to cement the relationship.

Unless you are intentional, price starts to dictate how your business operates.  When that happens, margins start declining and owners feel like they have no control over the situation.  That isn’t a good place to be.

Places to Start:

  1. Do you focus on price when you are selling to your customers?
  2. Evaluate your pricing position and value compared to your competitors
  3. Do you need to raise prices or value or both?
  4. Does your current pricing model position you where you want to be in the market?
  5. Read Confessions of the Pricing Man by Hermann Simon


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  • About

    These weekly ideas are brought to you by FitzGerald & FitzGerald P.C. For more information about how to use these ideas with your small business contact Tim FitzGerald at trfitz@fitz-net.com.