I have been asked this question hundreds of times by salespeople, marketing teams, business leaders, CEOs and business owners.
In fact, I’ve even asked myself the same question a number of times regarding my own business.
Are you ready for my answer?
Here it is: It doesn’t matter whether you sell less or not. That’s right, it doesn’t matter if you sell less or even if you sell more.
The reason is simple — it’s not the amount you sell that matters; it’s the amount you make that counts.
Selling huge sums at breakeven isn’t going to get you very far at all. Conversely, not selling anything at a huge margin isn’t going to work either.
The solution lies in creating a value proposition that matches to your customer base. This is where most companies get it wrong. They try to price their product based on a value proposition that doesn’t support it to an audience that doesn’t understand it.
Matching these 3 up is essential. I call this the “3 Pillars of Pricing.”
- Value Proposition
- Target Customer
The biggest problem companies have is they fail to understand the role the customer plays in the process.
Example I like to use is the person who lives in Manhattan is not going to place much value on buying a Ford F-150 truck regardless of the price. Conversely, a male living in West Texas is going to place a high value on the same vehicle. Anyone thinking they could have the same value proposition for both people would be crazy.
The price you earn is an outcome of the job you do presenting your value proposition to your target customer. It’s a very simple equation:
Target Customer + Value Proposition = Price
This means you don’t set your price first and then work backwards. No, the price you’re entitled to earn is an outcome of the other two.
I’m going to be writing a lot more about this in the coming days here in this blog. Stay tuned and I’ll help you understand in a methodical manner of how you can maximize your profit potential.
Copyright 2014, Mark Hunter “The Sales Hunter.” Sales Motivation Blog. Mark Hunter is the author of High-Profit Selling: Win the Sale Without Compromising on Price.