The Art of Pricing
I was recently talking to a technology support provider about packaging and selling services. He doesn’t sell any equipment if he doesn’t make at least 15% margin. He said he got some customer pushback on one of his equipment quotes, “But, I can buy it direct for $20 cheaper.” His response (the correct one) was, “Go right ahead. You’ll also have to install it, test it, and manage it.” The customer signed the deal.
This brings us to value pricing. These days there are no secrets. You can find pretty much any product price with a quick Google search – can even access ready-made comparisons. Worst case, you may have to make a couple of phone calls. So, trying to make good money by simply marking up a product won’t work. It’s your brain, hands (and hand-holding) the customer should value and buy – not the box.
And – unless you’re the size of Wal-Mart – if being the “low cost provider” is your sole competitive distinction, you won’t be in business for long.
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That is so true. Price wars don’t help anybody, and can hurt everybody in the end. It is so critical for businesses to offer consumers value that goes beyond the price tag. I personally think that customer service (which encompasses what you mention about hand-holding) is super-critical. My last post addresses this as a critical success factor for long-term business growth. Check it out when you get a chance at http://www.oncardblog.com
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