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Practical Help to Grow Your Business
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Structuring Your Business - Part 2 |
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An Art, Not A Science
Charging different prices for different value is not only highly sensible, it's a highly effective way of increasing profits.
But because value cannot be defined absolutely with surgical precision, different customers with a similar perceived value of what you are offering will have different degrees of price sensitivity. In other words, just like value, an 'acceptable' price cannot be precisely defined either.
“Charging different prices for
different value is a highly
effective way of increasing
profits”
The Boys In The Band
Your various customers will have a 'price band' in mind and if your price falls anywhere within this band, they will be able to agree to purchase, all other things being satisfactory.
This band in its turn is not fixed and inflexible either, but will be determined in large part by their current perception of value. A price not outrageously beyond the band may enable the customer to re-evaluate your proposition, but of course a price significantly below it can have the same impetus, causing the customer to wonder if they have over estimated the value.
“Your goal must be to maximise
your profits, not necessarily to
fill your capacity”
If you are serving a market where people spend someone else's money on themselves, recognise their minimal incentive to economise and seize the opportunity to charge higher prices.
When you tailor your various value propositions to different customer groups, you are in a position to reserve capacity for your best customers. Your goal must be to maximise your profits, not necessarily to fill your capacity.
Vive La Différence
When I look at the promotional efforts of various businesses, I largely see that they are trying to differentiate themselves from their competitors in order to give customers a good reason for choosing to do business with them rather than an alternative supplier. Obviously there are some that don't, such as the bland "Please like my Facebook page," but thankfully these are in the minority.
“One of the biggest failures is
using things your customers
expect to take for granted,
as differentiators!”
However, they don't all make a great job of differentiating themselves! Some will talk a load of bull and some will provide facts about themselves which are not immediately appealing. But one of the biggest failures I come across is using as supposed differentiators, things that your customers actually expected to be able to take for granted!
How Can You Tell?
My simple test for this sort of thing is to ask yourself, how many of my competitors would promote the fact that they do the opposite? Thus 'top-class service' and 'high quality' are not differentiators because no-one will be competing on second-class or poor service, or on low quality! Your customers expect to be able to take top-class service and high quality for granted.
Customers also take it for granted that their problems will be solved - Just think of visiting a doctor or dentist. Solving problems is neither a strong benefit nor a strong differentiator. You need to spend some time articulating what it is about you and your business that customers value highly, and that really does set you apart.
“Solving problems is neither a
strong benefit nor a strong
differentiator. What it is that
really sets you apart?”
 
Copyright ©2011 David Winch
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