“Competition is a painful thing, but it produces great results.” – Jerry Flint
I have never liked the discount business or any business operating on a tiny profit margin. To me, it’s more rewarding to command a higher price, charge premium fees — and get paid very, very well for what you sell.
But in a competitive world where many other businesses seemingly offer products and services similar to yours, how do you command a premium price? There are five factors you can control or exploit to enable you to charge a much higher price than your competitors in virtually any field — and have more customers than you can handle waiting in line, cash in hand, to pay it.
1. Supply and demand.
According to simple economics, the greater the demand for something and the more limited the supply, the more the seller can charge and get paid for it. Since you’re not OPEC, you probably can’t control the supply of your product. So what you have to do is create the perception of an overwhelming demand for it.
If you’re selling your own services, perhaps the easiest way to do this is to position yourself as the pre-eminent expert or authority in your field. If people view you as THE guru in property taxes, hazardous waste cleanup, or whatever your field is, they will come to you first, knocking one another over to hire you instead of your lesser-known competitors.
2. Your market niche.
The rule of thumb is that the narrower your market niche is, the more you can charge.
Specialists can always charge more than generalists. If you are a marketing consultant handling any small-business clients that you can get, you have lots of competition and great difficulty commanding a premium fee. On the other hand, if you specialize in the marketing of, say, accounting practices, accountants will pay a premium to get your advice because it applies directly to their own situation.
If your competitors all sell audiocassette albums with six cassettes for $79 and you want to charge $300 for an album with six cassettes on similar topics, why should the buyer pay it?
One way to differentiate your product is to add value. In the above example, you could include a CD-ROM with software programs of use to the buyer and related to the topic of the audiocassette album. (If, for example, the album is about time management, the CD-ROM could include a personal day planner.) The material cost is only a dollar or so per CD-ROM. But the perceived value of the software is easily $100 or more, enabling you to charge a premium price for your package And that’s the trick: to add extras that have a high perceived value but don’t cost you much.
Years ago, when I was selling business-writing seminars to Fortune 500 corporations, I charged $3,500 a day. Many other trainers charged anywhere from $1,500 to $2,500 a day for similar programs. To add value to my seminars, I offered an unlimited, free 30-day follow-up service. Attendees could call me for advice and to ask questions without charge for a full month after the seminar date.
While this follow-up service had a high perceived value (I described it as a $1,000 value in my sales literature) and training directors loved the idea, in reality very few seminar attendees took advantage of it — so it cost me almost nothing to deliver.
4. ROI (return on investment).
If you design your product or service so that it generates a large ROI that is easy to see and measure, it will be much easier to sell at the price you want to get. As consultant Jay Abraham says, “Will you give me a quarter if I give you a dollar?” If you can prove a 4:1 ROI from your product or service, it’s like selling a dollar for a quarter — an easy sale to make.
Let’s say you’re marketing a gadget that vacuum-seals food. Show your prospect that, even though it costs $99, he’ll save at least $500 within six months because, instead of having to spend money on expensive restaurant meals, he’ll have a freezer that is stocked with freshly sealed and delicious frozen dinners (or leftovers) waiting to be eaten at any time.
5. Sales resistance.
You can control your customer’s concern about whether he’ll be satisfied with your product by offering a money-back guarantee.
Guarantees overcome sales resistance. If you guarantee that the customer will be happy and that you will refund his money if he is not, he will be more than willing to pay your price — no matter what it is.
And there you have it. Increase demand for your product or service . . . target a vertical market niche . . . add value . . . generate a good ROI . . . and guarantee satisfaction, and customers will gladly pay your price — even if it’s 50% to 100% more than what your competitors charge.
Believe it or not.
(Ed. Note: Bob Bly is the editor of Mailbox Millionaire, ETR’s program to help you start your own successful direct-mail business.)