Wow! That title seems counter intuitive, doesn’t it? Like you, I receive offers every day, in every conceivable medium, and the majority speak to “discounts” – it seems that everyone is competing on price.
One thing that I’ve learned over my career is that if you try to compete strictly on price, you better have the lowest cost model of all your competitors or you are dead and just don’t know it yet. This can be a death spiral that you may not be able to control and that will ultimately lead to losses faster than you can cut or manage costs.
By allowing yourself to compete primarily on price, you are admitting that your product or service is a commodity – that it is really no better than all of those offered by your competitors. Talk about a fast way to make your business become “un” -unique in the eyes of your customers!
I read an article recently in the MIT Sloan Management Review on this topic and it reminded me of the need for management to focus on performance in order to compete effectively in the realm of premium pricing. It is critical, however, that your product actually is superior to the competition.
Even though you can, and many companies do, claim to have the highest value product or service, your customers will learn the truth very quickly and you will be punished in the market for your deceit if you are not honest. It is also critically important that the executive team have good information about and the ability to track and manage its costs as well as a clear understanding of and a simple, compelling message on its value proposition to its customers. I like to see an ROI (return on investment) calculation customized for the customer, using their own data, as a key sales tool – it is a great way to have them convince themselves rather than me trying to convince them!
In order to build a performance-pricing model along with the cost and expense drivers to make sure it will work in your busiess, you will need good information and a strategic financial partner to work with you in the process. Give us a call and let one of our experienced professionals show you what we can do and the benefits that you can derive from implementing this strategy.
Kent Thomas, Founder