When it comes to being an entrepreneur, it is important to be good at producing and delivering products and services as well as running a business. Running a business involves getting paid, paying bills, and generating profits to be sustainable and grow.
5 Key Lessons for Pricing & Salesmanship
Whether you are a one-person business or a growing startup, the founder always finds themselves putting on the salesmanship hat. When it comes to pricing and salesmanship, there are five key lessons to keep in mind.
1) Developing Your Pricing Approach
When it comes to developing your pricing, you can choose a mark-up or a market price approach.
- Mark-Up Price: With this approach, you total your expenses for creating and delivering the product or service then add on a mark-up percentage.
- Market Price: With this approach, you determine what customers are willing to pay by comparing your product or service to comparable products and services on the market. This approach focuses on the value created for the customer.
Often, a market price results in a different starting point for prices. The right pricing approach for you may also depend on your product or service. If it is a generic product with fierce competition, you may go with the mark-up price to remain competitive. If it is a service that you want to be perceived as premium, you may choose market price. Often higher prices are associated with higher quality.
2) Tailoring Your Price to the Customer
A principle of good salesmanship is that prices do not have to be the same for all customers. You can tailor the price to what customers are willing or able to pay. Perhaps, you have products of varying quality from low to high. Or, perhaps, you offer the same service to different customer groups at different prices.
3) Negotiating a Good Deal
Everyone wants to feel like they are getting a deal. Often, the price you offer is rarely the price the customer pays. Discounts are a great way to enable negotiation. When you develop your pricing, account for discounts. There are all types of discounts including introductory discounts, quantity discounts, seasonal discounts, referral discounts, etc. Setting your prices higher to account for discounts is a great way to go.
4) Communicating Price Increases
If you start too low, it can be challenging to increase your price. Your customers likely have gotten used to and budgeted for a specific price. If you start raising prices incrementally, it may take you years to get to the right level. When it comes to increasing prices, communication is key. It is always a good idea to give customers an early heads-up and a good reason for the increase in price. Your goal is to make the customer feel that the increase is fair, and they are still getting a good value.
5) Keeping Your Promises
Satisfied customers are essential for sales and retention through price increases. It is important to deliver and keep your promises. Always make sure to set accurate expectations and hold up your end of the deal. The customer is far more likely to be satisfied when you promise and over deliver rather than under deliver.
Getting Started with GrowthWheel
The first step is connecting with a GrowthWheel Advisor. Mark Johnson, the Executive Director of the Technology Innovation Center, is a Certified GrowthWheel® Business Advisor.
Once you have connected with an advisor, he/she will send you a 360 screening. After completing the screening, your GrowthWheel Advisor will recommend decision sheets to help guide decision making and create a 30-60-90 action plan that outlines the decisions and timeline.
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Pricing & Salesmanship
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