Price Me High…

Posted by Abdul Vasi

August 7, 2008

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If there is one thing that radically changes your business profits, it is your pricing strategy. This is such a crucial aspect that no matter how many years you spend on it, you wouldn’t have done any justice to it. It is in fact so critical — but often -so overlooked — that World’s best universities have taken up on themselves to impart executive and entrepreneur’s education by deploying some short term pricing courses.

Most businesses are usually struck with a notion about the fact that prices must be kept low to gain market share, more sales, renewed contracts and in effect, a thriving business. It part makes sense, but this is exactly the approach many businesses take. This line of thinking is thought to be catharsis for ailing bottom lines and ambitious business strategies. I am of the opinion that there is a major fallacy in thinking.

Like Tim Ferris points out — in his book “The 4 hour Work Week” — that the human beings are usually scared to set lofty goals upon themselves and are usually petrified to do something that doesn’t fit the conventional way of doing things and that’s why we have so much competition in the “realistic” areas of life: like it is realistic to get a job, realistic to travel only after retirement etc. Try and do something larger than life, not many would come forward. But don’t you think that’s where the waters are pristine and that you must set up camp?

We have all sorts of products and services and we patronize most of these ourselves. We do give a sleep-inducing thought about the prices, but don’t we always shop with emotion? Think about it — if you all you had to get to was point B from Point A you would have been able to get by with a simple car that costs you way too less compared to a BMW, but why on earth would you think of the latter? Emotion, Sweet Emotion!

The price is just a perception of the value inherent in the product or service. It is what the customer thinks he would accrue once he purchases the product. Often, it works the other way too. A low priced product or service can somehow back-pedal and give an impression that the business isn’t much about value rendered, but about number of customers sold to.

Value is the focal point of a strategy called as “value pricing Strategy” wherein, you raise the price of the service 3 fold or so and give even more in return for the increase in price to justify the hike. If you answer the “What’s in it for me?” for the consumer, he is more likely to pay for it without resistance.

I recently hiked my prices in a similar manner for my web services and domain name registration company hostcats.com, and I justify that by providing the best possible customer support, a range of products and services and the best possible business offerings I can possibly provide — the key here is to provide even more for that price and constantly endeavor to delight the customer.

Businesses aren’t rocket science; it is all about giving value to the customers. You get this right; you got everything else in place.

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