If your newsfeed is anything like mine lately, you would have seen ad after ad for business coaches who want to help you:
- “just double your prices”
- “just charge a premium price”
- “go after the niche who has money”
On the surface, it makes a lot of sense, if you’re spending 40+ hours a week in delivery of your product or service, in order to grow, you either need to bring in more people to spread the load or increase prices.
For many people I speak to, they have horrible experiences with hiring staff… which leads to the “just charge more” argument.
But you can't just raise your prices can you... if it was THAT easy you would have done it already.
So, as a supporter of premium pricing models, what gives? Why would I say you can’t just raise your prices...
Yes, I think most business would benefit from having premium products / services. That’s true. But you can’t JUST slap extra zeros on your price point and expect everything to be OK…. far from it in fact.
Reason #1 - You’re Not In The Headspace To Charge More… yet.
There are significant psychological and mindset factors that go into increasing prices - that is an article in its own right.
In short, if doubling your prices is going to lead towards a mental breakdown or major overwhelm… chances are you need to make some intermediate steps and get some runs on the board first - don’t just add zero’s and hope for the best. Now this is not an excuse to just stick your head in the sand, but it is a consideration you want to think about when rolling out a price increase strategy.
There’s a lot more to it than that, but for the purposes of this article, let's talk a little more about the strategic challenges most people face when attempting to increase prices - assuming they have their head right and are mentally ready to charge higher prices.
Reason #2 - You'll Lose All Your Existing Clients!!
Now... this is not entirely true, but if you’re worried that you’re not “worth” the new price - it’s quite possible you’re not - AND THAT'S OK!
Firstly, check in with yourself that you're not just being a humble martyr who thinks they're not good enough, and you're actually #1 in the world at what you do....
If you're legitimately feeling like you don't have the skills to deliver at the higher price point, use that knowledge to inspire you to get better, to improve, to do a BETTER job for your clients. To help them achieve better results, to improve your process and methodology, to prove to yourself that you're worth the extra fees.
If you “just” increase prices without doing something else, you're at the mercy of supply and demand. If you double your prices without doing anything differently or adding value from the client perspective, you’re looking at halving (or worse) the demand for your service.
Now, that may be EXACTLY what you’re after, to drop off clients to free up time, but either way, it’s something you need to be aware of.
You need to be clear about the value you offer your clients and the return they are going to get from that - and have a process that proves that return for them. A process that demonstrates without a shadow of a doubt how your (increased) price, is worth it.
Reason #3 - Your Current Clients Are Not Your High-Ticket Clients.
If you’ve already got a lot of existing clients, what attracted your current buyers (at your current prices) aren’t the ones who’ll be buying when you increase your prices. They will be a different client altogether. If you’re running an ascension model you would have experienced this first hand. Buyers who buy $197 things are unlikely to buy $10,000 things - and more importantly…. people who buy $10,000 things are NEVER going to buy $197 things.
As a gross generalisation to illustrate the point - for example, someone who eats sausages and potatoes 5 nights a week is unlikely to want to go to a silver service restaurant 5 nights a week. Sure, finances and price may be a part of their reasons, but what if we dive a bit deeper than just financial concerns. Many people just look at cost when addressing their niche - so let's look deeper.
Chances are, Mr Sausages and Potatoes would be very uncomfortable going to a high-end restaurant. It’s just not their type of place. It's not the food he's used to, it’s not the people he’s used to interacting with, it's not the environment he enjoys being in. Even if you gave them $5k and said go nuts, they probably wouldn’t go there - he'd find something more his style.
Why? It’s just not a match to what they value and their mindset.
Now I’m not judging Mr Sausages & Potatoes, it’s not like he’s somehow wrong for loving his bangers and mash. It’s just to illustrate the fact that if your client base is predominantly sausages and potatoes types of clients, simply offering them a higher ticket option is not serving them the best way - in fact, he’d probably get rightly pissed if you assumed he somehow wanted to be high brow and that he should aspire to that.
Reason #4 - Your Word of Mouth Referrals May Be VERY Reliant on Your Current Price Points.
If you do the bulk of your business via referral or word of mouth - it’s highly likely that those referrals are coming in with a price point expectation. That may be an issue when you change price points.
If you don’t have a clear process for demonstrating value and aligning prospect expectations to what you do, you may experience a huge drop in referrals & referral conversion if your new price point doesn’t match the expectations of those inbound referrals. Remember those referrals have a better relationship with the referrer than they do with you.
This effect is amplified if you don’t have an existing process in place for generating your own leads and converting them to sales - because you aren’t in control of who’s coming through the door. You’re relying on your old and existing clients to somehow know that you want a different type of client.
So How Do You Do It Then?
So, if you want to change your pricing, and go after a premium price client - there's a few things you need to have in place.
- You need to be able to deliver value at that price point. Remember value is what the CLIENT values, not what you WANT them to value.
- You need to be able to define who that client is, in detail, so that you can craft marketing messages and offers around that new client.
- You need to be able to sell to that client. Your sales process may need to change to cater for this new type of client.
If you feel like you've got a few gaps and you're looking to launch a new premium product or service, maybe we can help.
Download the On Point Agency Checklist and learn the pieces you need to have thought about BEFORE you consider engaging an agency to help you with any of this.