Why You Should Increase Your Price 400%

Price hiking is the most under-used strategy in business. Shaz Nawaz, founder of AA Accountants, describes when it makes sense to inflate prices instead of slashing them.

How much more can I charge? This is a question I am often asked by most of my clients. The challenge in answering this question is that even I don’t know how much more they can charge. The reason for this is that you get to your magic price (optimal price) by testing and measuring.

A naive approach would be to charge in comparison to your competitors – this usually results in businesses charging less than others! The problem with this is that your competitors may not be offering exactly the same service or product. Which means you cannot price based on what they’re charging. Unless, of course, you’re very clear on the quality and value differentiation.

You’ll understand this better once you’ve read all the way through this article. What I do know is that many businesses charge far less than they should. They do this for a variety of reasons – too many to discuss here.

Increasing prices

What you should be interested in is ‘how do I increase my prices without detriment to my profits’ – now that’s a much smarter question. The truth of the matter is that different people will pay different prices for different things. It’s based on preference and more so on perception.

If you perceive something to be of better quality or if it solves your exact pain/problem then you’ll be willing to pay more for the solution. The difficulty is that most businesses don’t always understand the value they’re delivering because they aren’t their own customer.

I was charging the wrong prices in my business for over 8 years. I basically established how much the client was paying their previous adviser and I did one of two things:

  1. Discounted the price – if they came across as price sensitive or they weren’t referred to me by an existing contact
  1. Charged a bit more – if they were referred to me. This was because the referrer had done some of the selling for me by singing my praises

Increasing profits

Like most businesses, I was totally focussed on winning more clients. That’s how you grow a business, don’t you? Or at least that’s what I thought! I couldn’t have been further from the truth. Yes, more customers do help grow your business. But better pricing helps grow your profits.

“My profits went in one direction only – exponentially north”

In order to prove this I embarked on a journey of discovery. This journey led me to try and test different ideas. And I soon established that the quickest and simplest way to really grow my profits was to increase my price. You may be thinking this would lead to losing most of my clients. And I thought the same thing. But I was wrong!

To my amazement everyone agreed to the price increase. Now this wasn’t because I caught them on a good day or they were feeling overly generous. It was, in fact, the method I adopted for increasing the price. See, as soon as I established that different people pay different prices, I used this to my advantage.

Buyer’s behaviour

I discovered that a good, better and best service offering would help me secure higher prices. If we pay different prices for different things then surely some people will naturally want the best option while others would want an option better than the standard offering.

This judgment came to me when I stayed at the prestigious Burj Al Arab in Dubai. The penny dropped as soon as I walked in. The hotel was fully booked even at their premium prices. This helped me realise there’s pretty much a buyer for anything and everything. All I needed to do was position myself as the premium service provider.

Burj Al Arab

There were two things I did which helped me increase my price from a minimum of 28% all the way through to 400%. The first was to position myself as the go-to expert. I did this by doing everything an expert would do in my industry thus leveraging my profile and credibility.

Three-tier pricing model

The second and the one literally everyone (with a very few exceptions) can do was to offer different options. I developed a 3 tier pricing option. It was the good, better and best model. How this helped me was that I seldom left money on the table.

The client always chose the service that suited them the most. What it also meant was that due to giving more options, I won more business. With one price, the client can either buy or go elsewhere. With 2 or more options they are more likely to choose one of the offers because of the choice they have.

My profits went in one direction only – exponentially north. The reason for this was that all of my fixed costs were covered. I was paying rent, rates, utilities etc anyway. If I had more, or even less clients, these expenses didn’t change. So, as my prices went up, most of the increase went straight to the bottom-line. If only I’d have known this when I started my business!

It’s common

You’ll see from your own experiences that a tiered option is offered in one of the toughest and price competitive industries in the marketplace – the retail & electronics industry. Be it Apple and their products – you get to choose the size of the screen and the capacity of the memory and you pay more. The same applies to many other suppliers in that space.

You buy gym membership and they give you two or more options. You buy a ticket on a plane and they do the same. You buy web-hosting services and it’s the same. I mean when you start looking around, you see this being done more and more.

Your next step

What you need to do is think about how you can add some additional value to your customers. All this can be (if you want) is things which are low-cost to you but which have a high perceived value to your customers. You can then have a 2 or 3 tier pricing model.

What you’ll find is that between 10%-20% of your customers will buy the top option. This is based on their own self-worth. They’re doing this because of who they are not and necessarily based on what they’re buying.

What you’ll also find is that most people will opt for the middle option. Why? Simply, because it’s perceived to be the best value for money, and the most sensible option. Staying in the middle seems to be a rational choice for various reasons.

Most people don’t want to miss out by buying the cheapest. They also don’t want to look cheap by buying the lowest-priced offering. There are many other reasons which I’ll explore and share with you in a future piece.

http://minutehack.com/opinions/why-you-should-increase-your-price-400

 

WSJ: Apple pricing music service at $10/month, updating iTunes Radio

WSJ: Apple pricing music service at $10/month, updating iTunes Radio
Jun 1 2015, 15:18 ET | About: Apple Inc. (AAPL) | By: Eric Jhonsa, SA News Editor Contact this editor with comments or a news tip
Apple (AAPL +0.4%) is expected to unveil its new subscription music streaming service (a revamped version of the existing Beats Music service) at the June 8-12 WWDC conference, the WSJ reports.It adds the service will be priced at $10/month, on par with Spotify and many other rival services. Prior reports indicated Apple was hoping to undercut rivals, potentially by charging ~$8/month. A 9to5 Mac report also stated the service would be offered through both the iOS Music app and a standalone Android app (the first developed by Apple).Also: Apple plans to update its iTunes Radio service (available either on a free/ad-supported basis, or for $25/year ad-free via iTunes Match) to include “channels programmed and hosted by human DJs.” Pandora (P -2%) has fallen moderately in response.Apple reportedly hasn’t yet reached licensing deals for the subscription service with Universal Music, Sony, and Warner Music, but the WSJ adds “many in the music industry expect such deals soon.”Nielsen SoundScan estimates paid U.S. music downloads of albums and songs respectively fell 9% and 12% in 2014, and that streaming usage rose 54%. The WSJ’s music industry sources estimate Apple accounts for 80%-85% of global paid music download sales.

 

http://seekingalpha.com/news/2555146-wsj-apple-pricing-music-service-at-10-month-updating-itunes-radio

 

CRTC to review wholesale high-speed access services

CRTC to review wholesale high-speed access services
OTTAWA – The CRTC has kicked off a call for comments as it prepares to review certain issues associated with wholesale high-speed access services.

The Commission said Thursday that it wants to gather information from the industry to better understand whether certain costing assumptions, such as those in Telecom Regulatory Policy 2011-703, remain appropriate, as well as consider whether a streamlined tariff application process should be established to lessen the regulatory burden. That should be welcome news for CNOC which complained last month to the CRTC that its cost studies for wholesale rates are out of whack.

The CRTC is asking for feedback on the following six issues:

– Should the cost and rate structure of wholesale HSA services (whether based on the flat-rate billing or CBB model) be simplified?

– Should the Commission’s 20% annual traffic growth assumption be modified to more accurately reflect current usage growth trends?

– Should the annual unit cost reduction assumption of minus 10% be modified to more accurately reflect current equipment cost trends?

– Should the study period be changed from the current ten years to a shorter period? If so, would a five-year study period be appropriate?

– Should the usage-sensitive equipment (e.g. CMTS, Optical Node) be assigned to the traffic-driven portion of cost models? If so, to what extent (e.g. 100%)? and

– How should the Commission determine final rates for de-standardized services?

Interventions are due by July 6, and all parties may file replies to interventions by July 16, 2015.

www.crtc.gc.ca