When you factor in capacity, timing, and cash flow – no two companies will ever have an identical cost basis. So why do we focus so much energy on price?
Right. Because customers focus on price.
Consumers freak out when the price of gasoline goes up or down. But, when the price change is in line with something well-understood – like summer demand or the price of oil, then they dismiss small price variances and move on.
How do you become the company that changes its prices with the seasons or demand?
If you don’t evolve, then you can expect to lose business in slow months to competitors that lower prices. Or, you will leave profit on the table when negotiating a deal in busy season. In other words, you can enjoy lower profits year round.
“My customers will freak out if I raise prices.”
Some will. Most are wondering why you haven’t done this already.
Here’s how you do it in three easy steps:
1. Stop showing all your math to customers.
When building the budget for a project, focus on capturing all the expected costs and then add margin. Be selective about what you show customers. If a product or service is integral to the outcome of the project, then do not itemize that element. Price as part of a group or bundle of items.
If the buyer asks for details, this is a great time to talk about outcomes.
2. Talk about the relationship between timing, loyalty, and volume.
Customers want to believe they are getting a good deal. Rather than focus on the small victories of line-item price negotiation, show them how to leverage their spending power with you. Remind them of the cost savings they will see in certain times of year. Demonstrate other ways to maximize their spending efficiency.
As you change how you present pricing, a few longtime customers may express single-level objections. Be ready to swat those down.
3. Monitor your pipeline.
Knowing when to price aggressively or conservatively is all about predicting demand. Use historical data, leading indicators, and trends to determine whether an upcoming period will be high, medium, or low demand.
When demand is low, reduce your pricing to fill in the calendar. When demand is high, raise pricing to meter your resources.
Supply and demand is a concept well-understood by consumers and business buyers. It’s high time the concept was applied to your business. If you are still getting resistance from your team or customers, then make an appointment and let’s identify what’s keeping you from making money year-round.Schedule a Free Consultation