How to make your Price seem smaller

People have no absolute sense of value. Instead we weigh the differences between different things and ideas. This is the bedrock understanding that the branch of psychology called “psycho physics” is built on.

Price is a made-up number. Whether or not this made-up number is fair is purely judgmental. How you present your price is part of the formula for influencing the buyer to buy. Here are a collection of ideas to consider, all of which are based on some scientific research:

• Anchoring – quote a big number in front of your price. “There are 1 billion cinnamon and by the way my fee quite is $12,000” makes the fee seem relatively small. Conversely, “A happy meal is $5 and by the way my fee is $12,000” has a completely different feel.

• Contrasting – compare the price to something else. “The opportunity cost for not buying this thing is immense.”

• The Power of Nine – Prices that end in nine tend to outsell all other product prices. Second place goes to the number of seven.

• Left Digit Management – the most important number in a price is the left most digit.

• Phonetic Simplification – avoid the commas and cents. 1399 feels smaller than $1,399.44.

• Verisimilitude (the appearance of truth) – Quoting a round number like $600 for a service such as tax preparation is an open invitation to negotiate. A better alternative is to quote $593 or $614 that appears to have some real policy behind it and less open to negotiation.

These are just a few of the ideas that you should consider when you present your price to the customer. I am not suggesting that you can trick people into overpaying for the value of your products. I am suggesting that you can enhance the value to price ratio by making your price seem smaller.

Pricing strategy is always a fun discussion. Please feel free to give me a call at (352) 317-5692 if you have some ideas or questions that you would like to discuss.

Great Guarantees “Make it Easy for the Customer to Buy”

Great Guarantees are the most overlooked aspect in pricing strategies. Usually because it’s the last part of the exercise in deciding how to price the product or service. It’s also scary. What if everybody tries to take advantage of me and cash in on my Great Guarantee?

While 1% of the customers might cheat you, the other 99% will not unless they feel cheated. You can easily build that risk into your price. Not offering a Great Guarantee is probably the cheapest option you are passing by when it comes to increasing the value of your product or service.

A Great Guarantee is unconditional, easy to understand, significant, and easy to claim. Providing a customer with a Great Guarantee makes the buying decision a no-brainer for them.

Here are some of the Great Guarantees that I have seen:

• The No-Questions Asked Guarantee

• Free Trial Guarantee

• Unconditional Guarantee

• Cover All Fines Guarantee – protects the customer from government penalties

I have provided unconditional guarantees for my consulting programs for several years now. It helps incentive me to go the extra mile and to have the hard conversations with clients about their satisfaction.

Profitability strategy is always a fun discussion. Please feel free to give me a call at (352) 317-5692 if you have some ideas or questions that you would like to discuss.

How to Improve Your Profitability

I believe that better profitability is an overlooked tool for improving a business owner’s life. Higher profits allow people to send their kids to better schools, take better vacations, and save more for retirement. Profits also produce the cash needed to make better investments in the business and higher pay for the employees.

It’s nice to say that you are for more profits, but just how do you make that happen? I have found three major approaches to achieving higher profitability:

· Have a written business plan that is reviewed and updated regularly

· Invest in your pricing system

· Control your overhead costs through better processes

Writing a business plan forces you to do the critical thinking. Conflicting goals become more obvious. The reality that you don’t really understand your own strengths and weaknesses suddenly becomes clear. Addressing these problems in your planning is what makes it more likely that good decision making will result.

A typical business owner hates to have a prospect reject a quote and as a result we tend to leave a lot of money on the table. A good pricing system will allow you to constantly experiment with how you present the value of your service or product to get that higher sales dollar. Increasing your sales prices by just a few percentage points can often double your net profits.

It took me a lot of years to discover the key to controlling overhead costs. Controlling the processes that consume the overhead is the only thing that works. Rather than demanding that a company save money by buying fewer paperclips, change the processes so that fewer paperclips are required.