Category: Sales & Marketing

Your pricing formula (or pricing a product or service)

I recently received a request from one of my blog readers to do an article on pricing your product. He sent me some great articles he found on the net. After reading them I realized he may have been over thinking the pricing issues. To me it is fairly simple. There are only three outcomes to consider:

1. Your product is priced too high and no action is taken (the competition is complacency.)
2. Your product is priced too high and it invites the buyer to buy from someone else (I need to make sure I am getting the best VALUE.)
3. You price your product to low and you introduce concern from the buyer because he wonders what is being missed (lack of trust.)

Pricing your product can be simple if you let it but you must price it from the buyer’s perspective. As a business owner you need to know both your fixed and variable cost and ensure you cover those cost while remembering the buyer is not concerned with your cost. They simply don’t care.

From my perspective, here is what you need to be concerned about. What does your competition charge? This is important if the consumer has a preconceived notion of the value of the product. For example, if I go to a paint store and see a gallon on paint is priced at $50, I might go to another store to see if I can get the same quality (different brand) for a better price. I may have a belief that I am not going to pay more than $30 for a gallon of paint (or $20K for a car, or $3 for loaf of bread, or $1 for a pen, etc.)

The bigger issue for me is the value proposition. I believe people will pay to solve a problem and in many respects they will pay a premium if they believe you are the right and safe choice. Making the buyer understand that you are the right and safe choice is both hard and critical. Understand this is not a universal construct. For example, if I have $1 to spend for pen it may not matter if it is a BIC or another brand as long as it fits my budget. If I have a Rolls Royce for sale and my buying audience cannot afford a Rolls (or do not want it) then price it does not matter.

The hard work is the unique value proposition, helping other to understand your value, where and how to market your product and knowing how the problem you solve will allow you to charge more.

Pricing the product is in fact telling a story about the product. For example, why would I pay $50 for a gallon of paint when I can a similar product for 40% less? If price is not an issue, you can focus on the parts of the products story that are important to a client. The higher price for the paint can be told in a story: it is safer (less smell), easier to clean (important to a busy mother because it save time), last longer (don’t have to do it as often), provide a better finish (looks better), or is easier to apply (saves time.)  If those concepts are not important to your audience, you have a different kind of problem.

Sometimes price is not a consideration. If you are selling to high net worth individuals, they are buying prestige and convenience. The price is secondary. If I am buying a gallon of paint, price is primary.

Finally, pricing is impacted by the demographics of the audience. It is harder to sell your product using “pain” as the value proposition when selling to an older audience because their life experience tells them that “been there done that. This too shall pass.” Pain works better on younger people who have a need for more immediate gratification.

Bottom line is that pricing is an effective marriage between cost to produce, what people will pay, and the story that motivates them to buy.

Same old same old just doesn’t sell anymore. To make your marketing stand out, you need to get creative. Below are five tips designed to get your creative juices flowing. Some are brainteasers or are what Michael Michalko in “Thinkertoys” calls Linear Thinkertoys. Others fall under intuition or Intuitive Thinkertoys.

Some tips may appeal to you more than others. My suggestion is to try them all. Even the ones you’re not drawn to may still open some doors that wouldn’t have opened any other way.

These tips will work whether you sell a product, a service or both.

1. Find the “second right answer.” Roger von Oech talks about this in A Whack on the Side of the Head. Don’t be content with the first good idea you come up with. Take the time to think of a second, or third or 50th idea. Quantity counts – the more ideas you have to choose from, the more likely you’ll discover an excellent or even a brilliant one. Remember, Thomas Edison discovered thousands of ways a light bulb didn’t work.

2. Change the question. If you change the question, you’re probably going to get a different answer. You say you want to sell more products? What if you changed the question to how can you make more money? Well, there are other ways to make more money than to sell more products – maybe you lower the cost of making the product or you raise the price of the product. Now you suddenly have new avenues to explore rather than just going down the same tired path.

3. Ask your product or service how it wants to be sold. Now we move into more intuitive techniques. Start by getting yourself into a relaxed state. Take a few deep breaths or practice some relaxation techniques. Imagine your product or service in front of you. Now ask it questions. Who do you want to be sold to? How do you want to be sold? What are your strengths? What are your weaknesses? Who do you think you can help? Why do you want to help them? You can also do this technique as a journal exercise. Write down the question and answer. See what bubbles up onto the paper.

4. Paint a public relations campaign. What would a press release look like if you painted it? Or sculpted it? How about a dance number? A collage? Take any part of your marketing that troubles you and turn it into a piece of art. By combining two dissimilar acts, you may discover your answer. Or you may not come up with anything at all, but just the act of “playing” and “creating” could jolt something loose. Hours or days later your idea may suddenly end up in your lap.

5. Walk away from it. If nothing is working, then stop. You can literally walk away by taking a walk, or just quit thinking about it. This is especially important if you find yourself getting frustrated or discouraged. Give your subconscious time to mull things over. The idea may just suddenly appear to you. Or, after a few days, try another exercise or two. That may be the catalyst you need.

The most important tip of all? Make sure you have a blast. Being creative should be fun. Keep it light and fun, don’t struggle too hard with it, and see how many ideas you’re rewarded with.

Want to know the secret to creating MEMORABLE promotional copy? Sales copy that actually stays with your customers long after they’ve finished reading it?

Then master the art of using words to create pictures in your customers’ heads.

If you can describe your products or services in such a way that it forms images in your customers’ heads, well, then you’ve just created something that will last long after the marketing is over.

Why else do novels stay with us for so long? Those “pictures” we see draw us into the world of the novel, and those pictures stay with us long after we’ve closed the book. If you can create that kind of staying power with your marketing materials, think about how much ahead of your competition you’ll be.

So, how do you get started? Below are three tips. (Note how all three tips have the word “specific” in common. Be specific whenever you can. We don’t think in generalities, we think in details. The more specific you are, the stronger the pictures.)

1. Use specific nouns. Quick — what springs to mind when I say the word “bird”? Now erase that image. What pops into your head when I say “cardinal”?

When I said bird, you could have pictured any number of bird species or maybe even some sort of generic bird (something brown with wings and feathers). When I said cardinal, I bet you saw a bright red bird with that distinctive triangle head.

See the difference? Cardinal is specific and it brings a specific picture to mind. Bird is generic, and it brings a generic picture to mind.

Whenever possible, use the most specific noun you can. (However, if the most specific noun is something most people wouldn’t know, say some rare exotic insect only found in the Amazon jungle, then make sure you describe it as well.)

2. Use specific verbs. Verbs breathe life into your copy. They’re the difference between words lying flat and comatose on the page or jumping up and dancing a jig.

Verbs bring movement to your copy. They tell your readers if someone is walking, jogging, sauntering, skipping or crawling. Or maybe that someone is exhausted and has decided to lie down for a bit.

Now, when I say verbs, what I’m NOT talking about are “to be” verbs — am, is, are, was, were, etc. Those verbs don’t paint a picture. Not like hug, skate, sail, run, fall, spin, flip, etc. See the difference?

While “to be” verbs are necessary, the idea is to use them as little as possible. In fact, I have a fiction-writing friend who has a “was/were” rule. Only three “wases/weres” per page.

Yep, you heard me right. Per page.

Yes, it can be done. I didn’t think I could do it either in my novels. And let me tell you, when you start pruning those “wases/weres” out of your prose, it’s amazing how strong your writing becomes.

3. Describe specific situations. Compare:

“Our bookkeeping service is the best in the area. We can take care of all your bookkeeping needs, from invoices to paying bills to reconciling your bank statements.”

To this:

“Do your invoices go out late because you can’t stand the idea of sitting down to do them? Does your cash flow suffer droughts each month because no checks arrive in the mail (because your invoices went out late)? How much hair have you pulled out over the years because of accounting mistakes? Never fear, those days are over when you hire us to do your bookkeeping.”

The first example is generic (take care of bookkeeping needs). The second example shows you HOW the business does it. (In fiction we call it “show, don’t tell.” Good advice, even for copywriters.) You can actually “feel” those business problems — late invoices, cash flow droughts, loss of hair. It’s the difference between something cold and impersonal that really has nothing to do with you and something that wakes you up with a spark of recognition (“Hey, that’s me. I need that.”)

Writing Exercises — See what others are doing

Pick a piece of copy. Something with meat — at least 300 words or so. No, it doesn’t have to be something you wrote either. In fact, this exercise might be easier if it isn’t yours.

Now analyze it. Look at the nouns. Are they specific? Or are they a bit too generic? What about the verbs? Could they be stronger? And does it describe a specific situation, something that you can actually feel and touch?

Try this with a variety of writings — novels, nonfiction books, newspaper articles, Web sites, sales letters, etc. Look at both “good” and “bad” examples. (Although good and bad are somewhat subjective, follow your gut.) See what trends you discover.

By analyzing what others are doing, you’re better able to see the strengths and weaknesses in your own writing.