Make Your Price Sell!, The Masters Course | Page 7

Benz is an excellent example of luxury pricing.
Unlike the VCR, Mercedes can sustain its top pricing model for as long as it delivers
a superb automobile and maintains the image.
Online example -- High-end design companies capture a niche market based on
their uniqueness which can’t be copied. These companies usually can only handle a
limited number of clients at a time. Customers are willing to pay a higher price for this
selective service.
Before you adopt this strategy, remember that market penetration (i.e., unit sales)
will be hurt. Does that make a difference to you? If so, then decide when you will
switch strategies.
Be careful, though. You have to carefully watch the public relations side of this. If
people hate your company for taking advantage of them, your death will be quick
and painful. One thing Macintosh always did right -- their users loved (and still do!)
the Mac. They never felt gypped, even though they could have bought
comparable computing power for far less money.
It applies to services, too…
Professionals and consultants often don’t give enough thought to the rationale behind
how they price their services. Basic goal-setting and strategizing up-front will clarify
matters. For example...
Pretend that you are in the price consulting business. One of your services sets up
pricing surveys for companies .
Let’s examine two scenarios...
Scenario #1, Top pricing -- you don’t want to grow a huge consulting business --
you just want to support yourself and shoot a few games of pool the rest of the
week. So you charge a higher price, $500. The last thing you want to do is to have
too many clients, which means working more hours per week and making the same
(or less) money. Instead of shooting pool, you’ll be...
... behind the 8-ball!
Scenario #2, Penetration -- you want to use this pricing service as your “foot in
the door” for your higher-priced services. You don’t mind breaking-even or
possibly losing some money in return for more customers. Each customer has a
lifetime value, in terms of future business, referrals, etc. So you may decide to offer
this service for $100 as an “introductory offer.”
Model #3 Price to Kill
Large companies will often price a product at a great loss, just to drive smaller
competitors out of the field. In many cases, it’s not strictly legal. But who has the
resources to fight gray-zone cases?

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Model #4 Price to Lose
Do you know the irony of the “price to penetrate” and “price to kill” models? Most of
us do neither... or both, depending on how you look at it.
Let’s say that you price to penetrate -- you want to pick that price that finds the most
customers, right?
Let’s say that you top price -- you want to pick the price that makes the most
money, right? Unfortunately, most business people tend to skew a penetration
price too high, trying to make more money. Likewise, top “pricers” tend to worry
about scaring too many people off.
Don’t price in that in-between “No Man’s Land.” Decide whether you want to price
to penetrate or to get the top price.
Now apply this information to your business. Ask yourself these questions…
1) What was my goal when I chose my pricing model originally?
2) Knowing where I am now with my business, should I have chosen a different
approach?
3) What are the pros and cons of my pricing strategy?
4) Which model do I see myself using three months from now… with confidence?
Pricing is a complex topic for almost all of us. The key is to look at it from different
angles. Each new perspective gives different chunks of information to increase your
understanding of pricing theory and how it affects your business.
Finished with the reflection exercise? Good timing. The next “angle” is stepping up
on the podium…

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5. The Psychology of Pricing
Psychology influences our daily lives. Sometimes, it’s so subtle that we don’t even
know it’s happening. Consider these powerful examples…
• the comforting smell of fresh-baked bread in a house to ignite childhood memories
of food or family in the prospective home-buyer.
• fresh flowers/produce near the grocery store’s entrance to encourage impulse
buying -- something that’s not “on the list.”
• big sale signs at the back of the boutique to force the customer to walk by all this
season’s trendy clothing styles.
• the offer of coupons or big prizes on a Web site in order to get the visitor clicks
and cookies.
All four of the strategies above involve psychology. It’s a reality in the business
world today. You’ve got to be able to get inside your customer’s head. And not
leave one empty space for your competitor! It’s a race for “share of mind.”
Pricing is no exception. The “Perfect Price” is that price that maximizes your profits
while building a lifetime