Price Elasticity: How To Charge Premium Price For Your Product Or Service – Part Three

Not charging what you are worth can get you into trouble

Not charging what your product or service is worth can get businesses into trouble. Don’t take my word for it, ask retailers.

Most businesses do not command premium price for their product or service because they have a one size fit all pricing structure. 

To repeat the points I have made in the first two articles of this sequence, we base our prices on our cost of production instead of the value of our product or service to our customers.

When you set your pricing structure, you need to realise that all of your customers do not derive the same level of benefit from your product or service.

      If you are a business consultant for example, a 1% increase in sales resulting from your consultancy could mean different levels of benefits to diverse segment of your market.

      This is the reason when you create your pricing structure, you focus on the benefit your customer is likely to accrue from your product or service rather than your cost of production.

      When you book a flight from London to Amsterdam, almost everyone on the same flight may have paid completely different amounts.

Firstly, there is the different classes…

      Secondly, everyone in each class might have paid different amount depending on the time they booked and their length of stay.

Try airlines pricing strategy

Try airlines pricing strategy

It’s the same flight, yet there are different prices for each passenger and there have not been instances in which passengers on an airline protest because they paid more than the person sat next to them.

You could use similar pricing structure for your business.

      It does not matter what business you are in, you have the ability to create a premium pricing structure if you segment your market well.

Remember Eli Goldratt statement:

“Options, service level, guarantees, response times, etc. can change market perception of value of the same physical product or service”.

      When I call my mobile phone service provider, part of the automated message is there might be delays because of high call volume.

However, I could get on the priority queue for 50p.

They tested it, they know a few people accept that offer.

      If you took your kids to Disney Theme Parks, your kids could queue for hours waiting to get on a ride or you could pay extra and jump the queue.

      The point I am trying to make with these examples is, no matter the product or service you sell, you could create a premium version of it.

      You simply need to understand that, right at this moment, there is a section of your market that will be willing to pay higher for your product or service if they are offered the option.

      Just in case you wanted to validate my premise, the next time you are on board a flight, ask the person sat next to you, the amount he/she paid for the ticket, you might be pleasantly surprised.  

 

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      In this fiercely competitive business environment, the tiniest of things can make an enormous difference to your sales and profit margin.

      Click on the links below to gain access to highly valuable resources specifically engineered to help business owners like you increase your sales and profit margin:

http://romeorichards.com/social-media-marketing-plan-online-marketing-strategies/

Meanwhile, please call 020 8798 0579 or email: info@theprofitexperts.co.uk for a FREE strategy session

Small Business Growth & Marketing Consulting Agency London

Small Business Growth & Marketing Consulting Agency London