The true relationship between pricing, worth and strategy
Week in and week out I have this conversation with someone, about pricing and worth.
“You need to raise your prices and charge your worth”
“You need an abundance mindset, you need to spend money to make money” this one is partially true. Make smart and informed investments. After all it’s your money, and as a responsible adult you have the right to make sure those investments will make a difference in your profit margin and positive impact in your life.
Pricing is part of your strategy not a reflection of your worth
One of your competitive advantages can be your pricing. You can offer low prices and still make good profit margins and charge your worth by introducing efficiencies in your processes.
I was buying toothpaste yesterday, I saw a Colgate toothpaste at $1.99. Do you think Colgate-Palmolive board of directors don’t know their worth? Should they raise their price to reach their weekly sales quota?
I think somewhere in the mix something got lost, and I’ve seen so many people telling entrepreneurs: you need to charge your worth, you are unique and special, people can pay you otherwise they are not your ideal client.
I’m sure you are unique and special, but you are running a business with your head. I’ve seen so many people running into problems when it comes to delivering that uniqueness and greater value, damaging their reputation and the one of their industry.
This is not a call for you to doubt yourself, go into analysis paralysis or fall into the trap of the imposter syndrome but to encourage you to do a competitive analysis and list the driving forces in your industry and to start thinking strategically in your business.
It took me two years of running Wellfulness to realise that an online business is no different to any other business, that I needed strategy and the same tools and analysis that I used on a corporate jobs to make my little business successful. I was racking up costs, responding to trends not planning and if I wanted to make any money and take it from a side hustle to something bigger, I needed to start thinking strategically and measuring what matters.
Be clear on which strategy you want to follow.
One approach you could use to gain competitive advantage is Michael Porter’s generic strategies, called this way because they can be applied to any type of business. The categories are:
- Cost Leadership: running costs are low and process efficiencies allowing a business to offer a price point that is very competitive in their industry or at a lower cost than your competition making.
- Differentiation: your product or service are unique.
- Focus: offer a specialised service in a niche market. This can be subdivided into “Cost Focus” and “Differentiation Focus.”
You just need to be clear in which group you want to play in. It’s a business remember, not a reflection of who you are or your worth.
I don’t think these strategies are mutually exclusive in a business. You can offer two different products and market them differently. Apple does it, offering the iPhone and the iPhone SE covering the same need at a different price point.
A strategy needs time to work
Don’t let anyone convince you that their method is the only method that will bring success to your business. Also stop searching the internet or signing up for every other webinar that offer the secret to success.
Stop scrolling through social media looking for the answer. Take a deep look into your business and the surrounding circumstances.
A strategist doesn’t spend a lot of time reading industry reports, they spend time learning about their organisation through action. The best way to learn is by doing. Even when a “formal” strategy doesn’t exist, a strategy is present. It is possible to collect information to analyse patterns and introduce improvements or start crafting a strategy.
Pick one and run with it.
Sometimes strategy is born after taking action.
You can think and deliberate for as long as you want, we can draft a perfect strategy from the point of view of the book, but we need to go out and test it in the real world.
Your job is not to continuously seek change but to manage stability, making your current strategy as effective as possible.
How much time is enough time to test that strategy?
Reassessing your strategy continuously will often result in stress and therefore inaction. Changing your strategy every time that you see a coach popping up in your feed offering the holy grail for overnight success and convincing you that what you are doing is wrong, will do the same.
You need to allow enough time for it to work, to identify patterns and events that you can then use for your advantage.
Price is not a reflection of quality.
Quality is perception. I like to feel that I’m always getting my money’s worth, whatever the amount I paid.
I won’t go in detail here on how to price your product or service, it covers a whole chapter in accounting and marketing books, it responds to multiple factors and there are infinite methodologies. The basics are that your costs will set your lower limit and demand the upper limit.
Abundance mindset and pricing
$1 x 1,000 people = $1,000
$1,000 x 1 person = $1,000
“It’s your mindset babe”
This sentence is my pet peeve. It triggers me. I consider myself to be spiritual, and I use spirituality in my business to keep in the flow and moving forward, but I’ve seen a lot of people getting scammed and blaming the lack of results to their mindset.
While your behaviours and beliefs influence in your mindset, personal development should be at the top of your priorities hence me still blogging and sharing my techniques in Wellfulness, you need to be careful at differentiating what is holding you back, if it is your mindset or your strategy (or the lack of it). Therefore the question on fact or belief. Check this blog on identifying limiting beliefs >>
Thought leaders with low cost offers
Joe Vitale, a spiritual leader and mentor who talks about abundance mindset and wealth creation, author many books on the subject of wealth, including the Abundance Factor, sells courses for less than A$100, just like this one which I found very useful, The Awakened Millionaire, which gave me a great perspective and expanded my views about creating abundance and being comfortable around money.
Bruce Lipton, biologist, epigenetics specialist, charges US$7 for his membership. I haven’t join it yet, the decision doesn’t respond to price but to time management. I don’t want to over schedule myself. As much as I do money budgets I also focus on budgeting my time.
It’s about efficiencies
In Bookkeeping for Wealth we’ve introduced efficiencies in our processes, we cover a sector of the market that want to get their finances in order, know the importance of tracking their numbers and where their financial sit in their overall strategy, but their business are not yet at the level of requiring 10k worth of our services.
I can help you identify the same efficiencies in your business, not necessarily to offer a lower price but to make you the most profit.
If this is you, get in touch.