Achieving pricing confidence in 10 steps

Pricing, for better or for worse, is a largely subjective topic. Whether you're discussing bread, diesel or branded shoes, there will always be polarised opinions about whether a product is affordable or not. So, how do you achieve pricing confidence when pricing is such a polarising subject? 

Throughout this article, we will explore 10 ways to improve your pricing confidence to, ultimately, win new clients and increase your profit margins.

1. Understand the value you provide

Market research provides you with an insight into how customers and non-buyers view your business and the value you provide. Not only can you utilise this information to address your weaknesses and capitalise on your strengths, but you can also research your customer's price sensitivity to establish a benchmark for your pricing that is both reasonable and profitable.

2. Implement value-based pricing

As we know, cost-plus pricing focuses on the cost of production before adding a premium on top. But whilst there is still a place for cost-plus pricing, this strategy concentrates almost entirely on the internal process, centring around numbers and statistics rather than value and customer satisfaction. 

To achieve pricing confidence, we recommend adopting a value-based pricing strategy instead. Then, as your skills and services develop, you can adjust your pricing accordingly, ensuring the cost of your service(s) is always equal to the quality you provide. 

3. Know how to negotiate

As the previous points have highlighted, understanding your customers (and the value you offer them) is essential to developing a fair and successful pricing strategy. However, this understanding can also provide valuable insight into customer negotiations.

Knowing your worth as a business can improve your confidence when negotiating and, in turn, ensure that you stand your ground and honour your pricing. Plus, when your focus is on preserving your value rather than winning every sale, you learn how to identify (and combat) some of your customers' negotiation strategies.

4. Market to your low-end customers

Providing discounts and charging below your worth may seem like a good way of boosting sales, but in fact, these methods are sure-fire ways to convince your customers your prices are higher than your worth. After all, why else would you readily knock off 10% here and 20% there?

To preserve your reputation and build your pricing confidence, you need to market to your lower-end customers as well as your high-end ones. Instead of offering discounts or selling at a reduced price, create a lower value product or service and sell it at a lower price point. Therefore, when a customer cannot stretch to your high-value offerings, you have a suitable alternative that doesn't discredit your original price or value.

5. Refrain from offering discounts

If your business regularly offers discounts without hesitation or negotiation, you're demonstrating a huge lack of confidence in your pricing. Instead of immediately offering a discount, try holding your ground - customers then have the choice to opt for a lower-value option, or they can pay the extra cost for further advantages. If negotiations are really tough, try offering them additional perks before you resort to reducing your price. 

6. Know your competitors

When establishing pricing, it's important to know who your competitors are. What value do they provide? Where do they have a value advantage over your business? Once you have drawn comparisons between your closest competitors, you can use this information to capitalise on your unique strengths and take a proactive approach to your pricing. Remember, this research is all about improving your business - nobody wins when it comes to competitive pricing. 

7. Increase your profits

The belief that discounts lead to increased sales and greater profits is inaccurate and damaging. Why? Because the more discounts you offer, the more you discount your value and pricing strategy. In turn, customers won't respect your pricing, making your profit margins the brunt of the joke. 

Instead of boosting sales with discounts, prioritise the quality of sales over the quantity. You can do so by streamlining your processes, targetting your niche audience and accurately pricing your products and services. These efforts will improve your efficacy - saving you time, money and resources to notably increase your profits.

8. Identify your buyer

There are four primary types of customers: the price buyers, the relationship buyers, the value buyers and the poker-player buyers. In order to demonstrate pricing confidence across the board, you and your team must be able to pitch your value to each of these unique buyers. 

(Note: keep an eye out for the poker-player buyers - they will bluff to get more for less. Remain confident in your pricing, and learn to step away when the sale costs more than it is worth.)

9. Respect your customers’ response

Increasing your prices will always elicit a response from your customers. However, you must always respect this reaction, even if it's less than favourable. Why? Because this provides you with a direct insight into your customers' pricing perception.

For example, if your price rise is met with an overwhelmingly negative response, your prices are clearly much higher than the value of your product or services. Left unresolved, this can cause a loss in sales and even damage your reputation. Therefore, you must alter your prices with your customers in mind - after all, they control your sales. 

10. Results reap rewards

Adopting a results-based strategy is a great way to demonstrate pricing confidence and win new customers. With statistics and testimonials on hand to verify your quality of service, you're able to provide tangible evidence that your prices are relative to the value you offer. So switch up your negotiation tactics and start adopting a results-based strategy. You'll soon find that customers will gladly pay extra for an efficient and effective service. 

Charge what you’re worth

Despite all of your efforts, some people will still disagree with your pricing - and that's okay. Unfortunately, you cannot please everyone. However, this doesn't diminish the value of the products/services you provide. So long as the value you provide is equivalent to the amount you're charging, you can promote your business with confidence knowing the right clientele will respect your pricing and reap the benefits for doing so.