Increase Your Prices

Your Fast Start Guide to Marketing Your Business Issue 5

Increase Your Prices

Quite simply this is one of the easiest and quickest ways to improve your cash flow. It makes sense doesn't it? Increase you prices and you'll make more money. But, many one business owners are reluctant to, and even scared of raising their prices. But they needn't be. Your customers aren't going to leave you in droves if you raise your prices. Some of them probably will. But you know what? A lot of businesses would be better off losing around 20% of their customers! A shocking statement I know, but we'll look at this in more detail later on in this chapter. Time after time, I have seen, and many other consultants have seen business owners raise their prices by 50% overnight and have almost no effect on the number of transactions. And in fact, depending on your profit margin, and how much you raise your prices, you could afford to lose 50% or more of your customers and still make the same money you're making now. And, with 50% less customers, you can give the remaining 50% the best customer service that money can buy, therefore justifying your price increase.

Why You Shouldn't Be Competing On Price Anyway

If you feel that the only way that you can compete is on price, your business is in trouble. For a start, studies show that 6% of people shop on price alone. That means that 94% of buyers are also interested in quality, guarantees, convenience and other factors. Price may be a factor, but it's not the only factor. In the last chapter on conversion rate, you saw how one business wrote their quote on the back of a business card. The other sent out a nice "proposal letter" that spelled out in great detail exactly how they took care of all the worries and concerns their customers had. And even though they were actually $10,000 more expensive, they still got the job. Why? Because they focused on their customers needs and wants first. And they made sure they had a system in place to tell their customers all about it. They gave their customers powerful reasons why they should buy from them. And when you are buying a big ticket item like a house extension, major equipment upgrade, new bulldozer or a new car, peace or mind is everything.

If you can show your customers how you take care of everything for them, that you are taking all the risk, not them, then your sales will take off. Make sure you use testimonials and guarantees. Find out all of the major fears that your customers have about buying from you. The major fears and dissatisfactions that people have with your industry. And then show how you take care of those problems for your customers. For example, if you're a tradesman, I can tell you straight out the two biggest fears and concerns people have about using a tradesman. Firstly, tradesmen never turn up on time. There is nothing worse than waiting around all day for a tradesman who just doesn't even bother to turn up, or turns up 5 hours late without bothering to call. And meanwhile you're missing work and your boss is ready to fire you. If there is anyone reading this manual who hasn't had this experience, then you're in a lucky minority. And secondly, tradesmen tramp mud right through your house, or leave a big pile of plaster dust or sawdust all over your lounge room and expensive stereo without making any effort to clean up after themselves.

So, if you're a tradesman and you're reading this, take note. Truth be told it's probably only a fairly small percentage of tradesmen who are like this, but it's the perception that people have of tradesmen. You see, people have either had a bad experience themselves with a tradesman, or they know somebody who has. Now, tradesmen in major capital cities get away with this, because there is always another job to go to. And that's fine. But they could send their profits through the roof by providing a better level of service. Now, you might be the best tradesman there is; you turn up on time and you always clean up after yourself. But don't assume your customers know this. You've got to tell them. Because if there is someone else out there who tells 'em, that's who they're going to call. Not you.

Making Your Business Unique

So, instead of competing on price, you're now competing on service and extra value. You're the tradesman who always turns up on time, and always cleans up after themselves. Your ad headline now says "At last... A Plumber/Electrician/Painter/etc Who Turns Up On Time and Cleans Up After Themselves". And later in your ad you go on to say "In fact, if we're late, you'll get $50 off". Now, let's say that you urgently need a plumber, would you call the guy whose ad promises all of that? Or would you call the guy whose ad just says "Bill Smith's Plumbing"? There's no comparison really. The reason you would call the guy who promises to turn up on time is that straight off the bat he's taken care of your two biggest worries. Not only that, he guarantees it or you get $50 off. The price he charges isn't really going to be an issue for you. Above all else you just don't want to have to wait around all day, or clean up a big mess afterwards. As far as you were concerned, you have finally found a tradesman who has thought of the customer. He's put your needs first. And you'd be quite happy to pay a bit more for this level of service, wouldn't you? What's more, do you think you might tell your friends and family about this guy? I reckon you would. This plumber has made himself different, he has made himself stand out. And as a result, he would have no trouble charging more than the other guys. A lot more.

If you are a tradesman, focus on what your customer wants. Guarantee that you will be there on time, and try an ad just like the one above. (You have permission to use this example in your ad). It would make a perfect Yellow Pages headline for your business. Now, you might be thinking "That would never work". No? I once heard Winston Marsh, one of Australia's top marketers speak. He told a story of working with a plumber to create a new ad and marketing campaign. He used almost exactly the same words as above. The plumbers' reaction was "I'll go broke". But you know what? After 3 years or so the plumber sold his business and retired with more than 60 vans working for him!

That is how big a difference this sort of marketing can make.

The Power Of A U.S.P.

Now, if you're not a tradesman, then I hope you got the point of being different, being unique. Because no matter what business you are in, you should be trying to be as unique in your field as the tradesman who guarantees he'll be there on time. You may be wondering what U.S.P. means. It stands for unique selling proposition. What's unique about your business? Why should anyone choose to do business with you instead of anyone else? You see, if you can't answer that question, you don't have a U.S.P. for your business. Take this or leave it, but all of the world's top marketer's say you might as well quit right now if you don't have a U.S.P. for your business. It's that important.

So, in the example we just looked at, our plumber had created a U.S.P. for his business. He guaranteed that he would be there on time and that he would clean up after himself. Let's go back to the story of the guy with the 60 vans. Imagine he's about to hire someone. Can you see how his U.S.P. would have a major impact on who he hired? He'd want someone punctual, reliable, organized and efficient. In other words his U.S.P. would be like a mission statement for his business. It would guide every major decision and action that he took. A famous U.S.P. is for M&M's - "They melt in your mouth, not in your hands". Domino's Pizza was struggling until they came up with their U.S.P. - "Piping hot pizza delivered to your door in 30 minutes or it's free". That U.S.P. took them to a billion dollar business. What's your U.S.P. going to be? Are you going to stand out because of service, convenience, price advantage, outrageous guarantees, quality, reliability and so on? Your U.S.P. should be short, snappy, to the point and easily understood by your target market.

We used the example of tradesmen because it was easy for everyone to relate to. Let's take another industry that has a common perception among people. For the moment let's say you're now a used car salesmen. As you know, they make jokes about used car salesmen. People will tend to see you as shonks, charlatans, crooks, rip off merchants and sharks. You're going to have to work hard to gain their trust. It doesn't matter that probably 90% of the industry are honest and hard working. It's the perception that people have of you. If you've ever been to a car yard, one is pretty much the same as another. Maybe they're honest, maybe they're not. But, let's pretend for a moment that you are an honest used car salesmen. You really want to look after your customers. So, why not tell them? Why not back it up with an outrageous guarantee? You see, if all your advertising and marketing says "We offer you an unlimited k/m 12 month warranty on all cars sold, and the best trade in deals in Perth. If you are unhappy with your car for any reason in the first 20 days, bring it back for a full refund, no questions asked". If anyone was even remotely suspicious that you were going to rip them off, you've just blown their concerns out of the water. You're taking all the risk, not them. If you can't see how this would have used car buyers flocking to you, you're probably wasting your time reading this manual. In Jay Abraham's excellent book "Getting Everything You Can Out Of All You've Got" he mentioned a car dealer who doubled his business simply by offering a guarantee like this.

The point is you've got to make your business stand out. You've got to communicate to people the benefits of choosing to do business with you. And that won't happen with your average, everyday, run of the mill type business. I mean when was the last time that you had a really great experience while dealing with a business? Can't remember exactly? And that's my whole point. Because if you are the one who can deliver a great experience to your customers in your chosen field, they'll pick you every time. And they'll tell all their friends and family about you as well. And the way to do this is to come up with a U.S.P. for your business. Something that is unique about the way you do things. Something that immediately lets your customers know that your are different, you are trustworthy, you are reliable, you pack so much extra value into your product or service that they can't help to choose you.

One of the easiest ways to come up with a U.S.P. for your business is to have a short, sharp, snappy saying. Domino's Pizza said "Piping hot pizza delivered to your door in 30 minutes or it's free". It's straight to the point. You know exactly what you are going to get. Bear in mind that today home delivered pizza is not so special, but back when Domino's came up with this U.S.P. it was absolutely unheard of. In fact, the very reason that home delivered pizza is so common today is because of Domino's. Their U.S.P. revolutionized the pizza industry. Now, you don't have to revolutionize your industry, although you can if you want, but you want something that lets people know why they should do business with you.

If I were to ask you what do you do, you'd probably say "I'm an accountant", or "I'm a dentist", or "I'm a landscape gardener". And you know what? Unless I'm in the market right there and then for a landscape gardener or a dentist, I'm just going to think "Well that's nice" and leave it at that. But what if you told me "I help people to turn their backyards into a lush, tropical oasis, a soothing, peaceful sanctuary with fountains and pools and cool, green plants". Now, I'm impressed. Now, I'm interested. Don't you think that's a lot more exciting than just telling me "I'm a landscape gardener"? If you can't come up with a U.S.P. like this one, there is another way to do it. Mal Emery (just in case you don't know he's one of Australia's top marketers) has a formula for coming up with a U.S.P. It's pretty hard to improve on his method, so here it is. (Let's go back to our friend the plumber who turns up on time). When people ask "What do you do?" here's what you say from now on. "Well, you know when your toilet blocks up and you just have to be at an important meeting, and you can't wait around all day for a plumber, well what we do is guarantee that we'll be there on time, and make sure that we leave your house cleaner than when we came in. And, if we are late, we'll give you a $50 discount off the price". So the formula goes like this.

"You know when (insert a common problem or frustration that customers have with your industry), well what we do is (spell out how you will solve the problem, or your price advantage, or your over the top guarantee etc etc)". Now, isn't that better than saying "I'm a plumber"? And, once you have come up with a winning U.S.P. for your business, use it in all of your marketing efforts. Let it be the guide to all of your actions in the marketplace.

Add Massive Value

Remember the aim of this is to raise your prices. And once you learn to stop competing on price, you will see that it's pretty easy to do. Just to clarify the issue, there is a big difference between competing on price and having a competitive price advantage. Competing on price means that your one and only strategy is to discount. You aim to undercut your competitors, and to always be as cheap as possible. If you're doing this in your business, stop it now. It's such hard work, someone will always be cheaper than you are and you will always be scrabbling to make your money. Instead, make your business stand out by adding extra value, great service, using a powerful U.S.P. and then charge accordingly.

Having a competitive price advantage is another thing altogether. For instance, many second hand car dealers are faced with numerous "scratches and dings" on their cars. If you were about to shell out $20,000 on a late model "Club Sport" with a large scratch in the driver's door, you would want the scratch fixed up before you agree to buy. If the dealer sends the car to a panel beater, he may pay as much as $300 to get the door repainted, and then there is always the problem of colour matching. However there are a number of businesses out there that can fix most scratches without repainting, and the car doesn't have to leave the lot. And there are no colour matching problems. Now, they do the job for about $100 -$150 depending on how many scratches there are. They have a competitive price advantage over the panel beater, and still make a 70% - 90% profit on their work. Can you understand the difference between the two ideas?

Back to adding value. Let's use our old friend the plumber who turns up on time as an example. Not only does he turn up on time or you get a $50 discount, he also cleans up after himself. And, while he's in your house he also replaces any tap washers that are on the way out. And, when he leaves, he gives you a $100 voucher towards setting up a water saving automatic watering system for your garden. The question is would you be happy with this level of service? I reckon you would. In fact, I'm sure that you'd be so happy you'd tell all of your friends and family, and you'd probably get him back to do your watering system as well. But here's the point. What has he really given you?

We'll break it down and have a look. Because what you want to do is provide as much value in your business as our imaginary friend the plumber. Firstly, he has focused on the two biggest problems that people always seem to have with tradesmen. He promises that he'll be there on time (and backs it up with $50 off if he's late), and then he promises to clean up after himself. Straight away he appears different from all of the other plumbers. He is unique. And price wouldn't really be an issue for his customers. But the important thing is what has that cost him? Absolutely nothing at all. It's just plain, common sense good marketing to put your customer's needs first. Obviously he'd need to be organized, and he might need to spend 20 minutes or so cleaning up at the end of each job, but it wouldn't cost him any money. Just a little bit of time. And then while he's there he also replaces any tap washers that are leaking or on the way out at no cost to you. By now, you'd be going "Wow, this guy gives fantastic service and great value for money". Once again, the important thing is what has it cost him? Very, very little. Tap washers are about $1 or $2 retail, and probably cost about $0.50c or less for a plumber. Even if he had to replace 10 washers, and that's very unlikely, the raw cost to our friend is only $5. And a little bit more of his time. After he's finished the job, he then sets to and vacuums not just the area where he worked, but the whole house! Now, when your wife gets home, what do you think will happen? "Thank you for doing the vacuuming honey" she will say. "Oh, it wasn't me, it was the plumber" says you. "The plumber?" says your wife. "Yeah, the plumber" you reply. Now, do you think your wife is going to tell all her friends about the plumber who vacuumed her entire house? You bet she will. More work coming his way.

For the moment, let's get back to what he's doing. When he is ready to leave, he gives you a $100 voucher towards an automatic watering system for your garden. By now, you're absolutely floored, you can't believe how good this guy is. And when you show your wife the $100 voucher, she's already so impressed by the fact he vacuumed the whole house that there's a good chance she will call him up to install an automatic watering system. What did this actually cost our friend the plumber? Once again, pretty much nothing at all except for his time. And maybe $0.20c to print up the voucher. But what about the $100 you ask? Well, he can factor it into the cost of the job, or simply take $100 off the price. To begin with, having service like this, our friend charges a lot more than the normal plumber, and his customers don't even notice at all. So he gets a $1500 watering system job and has to discount by $100. So what? All for zero marketing cost. He'd take it every day of the week, and so should you. What's more, our friend is even smarter than we think. You see, he's got a whole lot of vouchers printed up with $500 off the price of guttering, $1500 off the price of replacing all the old copper pipes, $300 off the price of a new hot water system and so on. He simply takes notice (maybe while he's doing the vacuuming) of what other work could be done in the house he's in. Then he gives them the right voucher or maybe even two with a 30 - 60 day use by date stamped on it. You can bet that heaps of people would take him up on his offers. Once again, the cost to our friend is virtually zero. Yet the perceived value to his customers is very high. It seems as if they are getting great service, with a whole heap of extras thrown in.

The whole point of this little story is that you don't have to give a free Rolls Royce away every day of the week to add value. You can easily give the perception of great value by focusing very strongly on what your customers want and need. Then give them more of it, more than they expected. Go the extra mile like our friend the plumber, and you can double your prices overnight and your customers will barely even notice. It's all about adding value to your product or service. In a world of boring, mundane, run of the mill businesses with lousy customer service that all seem the same, dare to be different. Stand out; put some energy, enthusiasm and fun into your business. Be dynamic and be different. Look after your customers like and give them so much value that they will be raving about you and your business to all of their friends and family. And remember, a lot of the value that you add doesn't have to cost you money. It's all about perception, it's all about what your customers think of you. If you provide "knock your socks off' service, backed up with a quality product, then price doesn't matter so much anymore. You see, no one is offended at the price of a Rolls Royce or a Mercedes. You may not be able to afford one, but you're not offended by the price. Because it's all about the prestige, the mystique and the quality. It's all about the perception that the marketplace has. And what you want to do is create a certain perception around your business. That you are the best in your industry, that you go the extra mile, that you're more reliable, that your service is second to none, that you've thought of absolutely everything for your customers. Some of these ideas may not apply to your business, but they are the sort of things that will get your customers raving about you and your business. Put them in place now and put up your prices.

You've now seen that you shouldn't be competing on price. Never be a discounter. It's just too much hard work, and someone will always come along who can do it cheaper than you. And, because the only reason your customers do business with you is that you're cheaper, they will go elsewhere. You've done nothing to be different or stand out other than being cheaper, and your customers will have no loyalty to you or your business whatsoever. Add value and put your prices up now.

Start looking for ways that you can add value for your customers. If you have a customer list, ask them what they want, what they liked about your product or service, what they didn't like and so on. Then do more of what they like, give them more of what they want. You can also look for related but non competing businesses that you can do special deals with. If you are an accountant who deals only with business owners, and you know a really good financial advisor, then you can get him to give your customers a free consultation worth $100. Why would he do that? Because he knows that it costs him about $100 dollars to get a new customer in the door anyway, so apart from his time, it doesn't cost him anything. He will get clients that he never would have had, some of whom will stay with him for years. Of course he'll be more than happy to do it and of course your customers will be happy too. And of course, in return the financial advisor would give his clients a $100 consultation from you. By giving some of your time, you may get a client who will stay with you for years and years. You both win, and your customers win. They feel that they're getting more value from your business. If you were an accountant you could also do the same deal with an insurance broker, a business coach or advisor, an advertising agency and so on. So, what sort of businesses could you do this with in your real life business? Just make sure that they are a related industry. If you sell baby clothes, you wouldn't want to do a deal with an explosives company, there's just no relationship between the two. But you could do a deal with a nappy service, or a childcare centre. Get the picture? This can be one of the easiest ways to add massive value to your business. You could get 4 or 5 vouchers or discounts from different businesses so that on your initial sale of let's say $150, you give the customer $750 worth of vouchers and discounts, as well as your great service and/or product. Now can you see how you could charge $150 while all your competitors charge $75? And you'd still get all the business? Make a list now of businesses in your local area that you can work with. You may have to explain to them how it works, but once they get the idea, they'll be only too happy to work with you.