Many retailers are losing lots of money because they're limiting profitability through their pricing strategies. Marketing expert, Tony Gattari of Achievers Group doesn't mince words: A lot of businesses get the concept of pricing wrong, have the wrong view, price incorrectly, lack competitive intelligence and competitive pricing; and, in short, don't make any money because they don't realize how to maximize their pricing. In just 9 minutes time, Tony gives nine succinct reasons why your pricing strategy might suck -- and tells how to price for profit. This presentation is so good, we hope to see him do more pieces on pricing. Here's Tony's take on "9 Reasons Why Your Pricing Strategy Sucks":
Your Pricing Strategy May Suck If:
1. You price by a textbook formula, industry norm, or other standard means. Don't base price on what something costs (i.e. cost-based pricing); base your pricing on what the market is willing to pay!
2. You have excess concern about your competitors' pricing. If you look in the rearview all the time, you're going to crash the car. Set your own destiny. Lead, like Apple. They're more expensive… because they have a strategy. Define your own destiny by creating individual, unique, and memorable products and services.
3. You continue to attract customers who buy on price. Your mistake is to cater to customers who buy on price. After giving them sale after sale after sale after sale, you can't complain that the only people who come to see you are coming because of price.
4. You have pre-determined beliefs about what people will pay. It's a mistake to assume what someone can afford to pay. Base your pricing on the value you provide, not what you think someone can pay.
5. You permit apples-to-apples comparisons. If so, you're creating a commodity. Where there is mystery there is margin. It's important for you to do whatever you can to stand out with your marketing, product, service, delivery -- anything to differentiate yourself from the pack. With increasing globalization, customers can't differentiate except by price; and if they can buy the exact same product online for 40% less, they will.
6. You don't know how to differentiate yourself. You need to insure that you break from the pack, and stand apart from them. Differentiate yourself. Stand out. Be an expert in service, or whatever it takes.
7. You're not offering premium price options, like good-better-best, or bronze-silver-gold. When people are offered the premium product, they will usually go to the middle one, not the cheapest. Create that scenario. Providing a premium choice works to your favor. Always start high and then you can come down -- once you're in the gutter, you can't get out.
8. You are ignorant about business math. Understand how cash flow affects profitability, and you'll understand why just turning over products isn't necessarily profitable. Remember this phrase: Turnover is vanity. Profit is sanity. Cash flow is reality. Nothing will increase profitability more than increasing your prices.
9. You have poor self- or business-esteem… if you feel that you don't deserve more, you won't get it. If you're afraid you'll lose customers if you increase prices, you'll be wrong. Besides, those who buy based only on price may not be the right customers for you in the future. Focus on the customers you want, not just the ones you have.