I’ve had a lot of discussions lately with clients about pricing and how to determine what the right price is. I believe that your product or service is under-priced until you have lost at least 10% of your potential business due to price. (The % is not always the same for every industry….call or email me and I’d be happy to explain how to determine what your exact % should be.) However, before saying the business is lost to price, make sure it really is because of price. I often find customers will say the price is too high, when really it’s just the price/value relationship is not high enough. Price increases cause problems when a company institutes a price increase without really thinking through their pricing strategy and how they will expose the customer to it. Note my word choice of “expose” instead of “explain.” “Explain” automatically conveys a lot of talking by the salesperson. “Expose” uses questions to get the customer engaged, and to allow them to explain to you what they feel the price / value relationship should be. Unless you can objectively and authoritatively say you’ve lost 10% of your potential business to price, you cannot even begin to say your price is too high.
A word of caution: don’t use this to justify why you should institute a price increase. I’m a firm believer that once you take a price increase, you don’t step back from it. If you’re facing resistance, it really means you need to step up your sales and marketing efforts even more.
Later this year, I will be releasing my book, High-Profit Selling, which has an entire chapter dedicated to this topic.