As we all watched radar images from Hurricane Florence last week, and we all benefited from modern scientific pre-knowledge of these sort of events, I thought about what it would be like to have had no warning whatsoever about that kind of storm. Even 100 years ago, there wasn’t any kind of advance warning. Imagine that.
And it made me remember that old Russell Crowe movie (an under-appreciated one), Master and Commander. One of the memorable images of that movie was a brief close-up of an old sailor’s hands during a big storm, and the tattoos on them:
Hold Fast. A letter on every non-thumb finger.
Turns out this was a common enough practice in those days of seagoing warfare. When bad weather strikes, those old sailors needed every reminder they could get to keep their hands from slipping on lines, and to secure themselves to the rigging when working aloft in weather.
And, well, it’s the perfect segue for what I want to write about for you and your business, today. Because I’m actually thinking of something very specific when I think about “holding fast” — and it’s not just your grip, or even your state of mind.
Here’s What Happens When You Use A Penetration Pricing Strategy For Your Company
“Everything you’ve ever wanted is on the other side of fear. ” – George Addair
I discuss this all the time with my business owner clients — how to price their services. You see, often we might hear consumers say, “Well I would buy it — if it were in my price range.” And that idea tempts many business owners or sales people to lower their prices — just to sell more products.
This penetration pricing strategy can be an extremely powerful urge.
However, as you already know, price reductions often create more problems than they solve. I’ve seen too many businesses (my clients) jump down to lower prices without consulting someone objective, only to see their revenues, profits AND business fall.
Here’s some of what you might see a price reduction create within your business:
* Decrease of net profits
* Customers rush to the purchase of lower quality products
* Increasing customer demands to drop the price even lower
* Requirement of even more sales to make up the difference in revenue
* Needing a larger quantity of products and inventory to make up for lower margins
And, in the end, there will always be someone willing to go out of business faster than you. And you can’t (nor should you want to) keep up with that.
Remember this: price is not a benefit. The close of a sale is usually not determined on the cost of your product. If you properly “sell” your customers and prospects, they will purchase your products/services no matter what price you determine.
That’s the plain truth — and you’ve probably seen it in your own purchase patterns.
If a customer or prospect doesn’t buy — and they claim the cost had something to do with it — you can guess they probably wouldn’t have purchased anyway.
As a small business owner, and marketer, your job is to sell your products and services. But the actual art of selling has nothing to do with the price of the product.
By the time your contacts find out about the price, they should be determined to purchase no matter what the cost.
So, find “real” benefits (value) to sell to your customers and prospects. Help them to see how great their life is with your product, and you’ve got a customer. Point out their current pain, and your contact will do anything to get rid of it.
Set your prices and hold fast. If you’ve marketed correctly, you will still have customers anxious to do business with you.
If you’d like to sit down and conduct an analysis of your pricing strategy, this is something which we’re very equipped to help you with. Give us a call ((951) 679-2610) or send me back a quick email through the email button at the top of the page…
Feel very free to forward this article to a business associate or client you know who could benefit from our assistance — or simply send them our way? While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.
Garrett & Associates, CPA