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I can’t raise prices; I won’t be competitive.” This belief represents one of the greatest frustrations business owners experience. One homebuilder spent 45 minutes telling me why his homes were better than his competitors’. Yet he didn’t feel that he could raise prices, even though his prices were 10 percent below market.
How does this happen? Why do businesspeople feel trapped by industry pricing even though they know, with absolute certainty, that their offerings are superior? They don’t know how to quantify value.
During my 19 years as a business consultant helping clients increase proﬁts, I’ve found that this is the single greatest challenge they face in increasing revenues. The inability to quantify value makes it impossible to communicate that value. This, in turn, leaves customers with the impossible task of trying to decide which offering really has the greatest value.
As a CPA, I’ve been taught to quantify all sorts of things, including the value that client offerings have for their customers. Once my clients understand how to quantify value, they have no problem communicating that value and distinguishing their offerings from those of their competitors.
Pricing for Proﬁt provides the tools – formulae and sales scripts, as well as an understanding of buyer and seller psychology – to help you command and get higher prices.These tools will give you the conﬁdence you need to stand ﬁrm on your price.
Conﬁdence comes from knowledge.When you know how to quantify and communicate the value of your offerings, when you know that you’re charging a fair price, when you know how to bundle offerings to meet a variety of budgets, you’ll have the conﬁdence you need to:
*Attract customers who value what you provide.
*Gracefully walk away from prospects who don’t.
*Avoid the scarcity mentality that plagues many business owners.
The goal of Pricing for Proﬁt is to help you get compensated well for the value you provide. In subsequent chapters, I’ll share the approaches that I’ve used to help my clients raise prices and increase the number of customers they serve.
While that may seem improbable or even impossible, the reality is that when you can quantify and clearly communicate the value your offerings provide, buyers feel more comfortable buying from you. That’s how you attract more customers while charging higher prices. That’s how you overcome the fear of losing sales.
My consultant friends jokingly label me “the leading cause of inﬂation” because I help so many business owners raise their prices. The reality is that I’m simply helping my clients get compensated well for the value they provide. What isn’t so obvious is that I’m also helping their customers and prospects make better buying decisions.
Buyers equipped with a clear understanding of value make better buying decisions. They are not as easily swayed by emotional arguments because they have facts.They are also not as likely to postpone decisions. Often, we can trace buyer inertia to their uncertainty about the value they’ll receive. Poor decisions and no decision are costly to both you and your customers. How expensive can this be?
In Chapter 1, you’ll discover:
*How low prices created the subprime debacle and how costly it is for consumers.
*The hidden costs associated with attracting a WalMart store.
*How costly American Airlines ﬂight cancellations were to passengers.
Once you get a sense for how costly low prices can be in Chapter 1, subsequent chapters will provide answers to such questions as:
*Why can’t my salespeople sell value the way I do?
*How do I attract more of the right customers?
*How do I generate more dollars on each sale?
*How can I improve my sales close rate?
*How do I price in a down economy?
*How do I make more money without working harder?
Not only will I provide the answers to these questions, I promise that the answers will be simple, easy to implement, and inexpensive. Here’s the kind of result you can expect:
After only six hours of coaching, a horse trainer learned how to bundle her offerings and communicate their value. In doing so, she was able to increase the price of her core offering 33 percent. Within 60 days she went from a 95 percent vacancy rate to 5 percent.
How was she able to effect such a dramatic turnaround? She knew how to communicate value to her customers and prospects. Her knowledge, and the conﬁdence it afforded, instilled conﬁdence in her customers and prospects, making it easier for them to buy from her.
Another client’s change-order revenue losses were eliminated with a two-paragraph memo. Not only did the memo increase revenues, it reduced the age of their accounts receivable by 15 days, freeing up more than $350,000 in cash.
Free yourself of the chains of competitors’ pricing. It’s time to be compensated well for the tremendous value you provide. Develop the conﬁdence you need to command and get higher prices so that you and your customers can avoid the high cost of low prices.
Excerpted from PRICING FOR PROFIT by Dale Furtwengler. Copyright © 2010. Published by AMACOM Books, a division of American Management Association, New York, NY. Used with permission.
All rights reserved. http://www.amacombooks.org.
1 Ignorance Isn't Bliss: It's Expensive 4
Costly for You 4
Lost Revenues: Leaving Money on the Table 4
Productivity Costs 7
Wrong Customers 10
Other Hidden Costs 12
Staffing Costs 14
Quality Costs 14
Costly for Your Customers 17
Subprime Mortgages 17
American Airlines 20
The "Big Three" Automakers 20
Our Lack of Name Awareness 22
Our Customers Only Care About Price 23
Our Competitors Won't Raise Prices 24
We'll Lose Market Share 24
Executive Summary 26
2 Know Thyself...and You'll Know Others, Too 28
Selling Styles Mirror Buying Habits 28
Know Thyself 29
Auto Repair 31
Home Furnishings 31
Business Equipment 32
Business Supplies 32
Business Services 33
Are You a Price Buyer or a Value Buyer? 33
Sales-Side Confirmation 36
Nature and Strategy 37
Know Others, Too 40
Evaluating and Recruiting Salespeople 42
Wasted Training Dollars 43
Matching Styles 45
Professional Management 45
Admired Companies 46
Sales Experience 46
Pricing Policy 46
The High Cost of Low Prices 48
Executive Summary 49
3 Elementary School Math: Quantifying Value 51
Are Things as They Appear? 52
Are Customer Preferences Constantly Changing? 52
When Customer Preferences Change, Do Customers Expect the Price to Change? 53
What Customers Value 53
Calculating Value 56
Time Savings 67
Executive Summary 77
4 Customers' Delight: Discovering the Value 79
The Power of Discovery79
What Your Prospect Values 80
The Degree of Interest 81
Little or No Interest 81
Some Interest 84
Genuine Interest 85
Your Ideal Prospect's Interest 85
Time Savings 95
Executive Summary 100
5 Icing on the Cake: Bundling for Greater Profits 101
What Bundling Can Do for Your Business 101
Sweetens the Deal for Your Customers 102
Increases Your Average Sale 102
Boosts Your Employees' Productivity 103
Reduces Your Risks 103
Creating Bundles: Examples and Exercises 104
Horse Trainer Example 104
Clothing Purchase Example 112
Computer Example 116
Consultant Example 121
Investment Advisory Example 126
Executive Summary 131
6 Avoiding No: Using Options to Close the Sale 133
Offering Options 134
Budget Considerations 134
Delineating Options 135
Pricing the Options 142
Consulting Example: Value Calculation 143
Consulting Example: Price Calculation 146
Deciding to Sell Up or Down 147
Retail Product Sales: Home Theater Systems 149
Business Loans: Increasing the Close Rate 153
Executive Summary 165
7 Value as a Marketing Tool: Attracting the Right Buyers 166
Attracting the Right Buyers 167
Understanding the Value You Provide 167
Crafting Messages That Have Meaning for Your Buyers 168
Using Language That Conveys Your Value 171
Avoiding Price Language That Diminishes the Value You Provide 177
Creating an Effective Call to Action 178
Gaining Experience with Marketing Messages 179
Horse Trainer: Attracting the Right Buyers 179
Clothier: Attracting the Right Buyers 183
Executive Summary 187
8 The Value Trap: Avoiding the Pitfalls of Change 190
Identifying Pitfalls 190
Customer-Directed Change 191
Competitor-Directed Change 191
Self-Directed Change 192
Technology-Directed Change 194
Avoiding Pitfalls 195
Executive Summary 197
9 The Economy: It Just Doesn't Matter! 198
Why the Economy Doesn't Matter 198
The Right Way to Lower Prices 201
Executive Summary 202
10 Make More, Work Less 204
Bigger Isn't Better 204
Avoiding Price Competition 205
Executive Summary 206