Worth Every Penny

Why would anyone drive a BMW or shop at Nordstrom when, for a fraction of the price, they could drive a Volkswagen or shop at JC Penney? "[P]eople make trade-offs in their spending," writes Dale Furtwengler in his book Pricing for Profit. "They'll pay as little as possible for things they need, but don't want. Conversely, they'll pay extraordinary premiums for things they want, but don't need."

Because of this, he frowns on budget pricing for the high-quality products and services many customers want. Instead of cutting prices, he argues, you should consider raising prices by as much as 10 percent. Say what?

But he addresses four reasons businesses like yours often resist premium pricing. Here are two:

We don't have the name awareness of our rivals. Although an introductory, limited-time offer can expand a new company's client base, Furtwengler advises against permanent discounts. "Whenever you feel tempted to lower your price because you don't have a well-established reputation," he notes, "Ask yourself the following question: 'Would I rather have the prospect walk away saying 'I wish I could afford his offerings' or 'His price is so low; I wonder if his offerings are any good?'"
Low price points matter most. Were that the case, he counters, General Motors would be crushing Honda and Toyota. "Whenever you feel tempted to lower your price because you don't have a well-established reputation," he notes, "ask yourself the following question: Would I rather have the prospect walk away saying 'I wish I could afford his offerings' or 'His price is so low; I wonder if his offerings are any good?'"

The Po!nt: Price your product or service to reflect its true value, then show your customers why it's worth every penny.

Source: Pricing for Profit. Click here for more information.

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