Customers are constantly looking for ways to save money rather than spend more of it, so companies that position products in the premium price range may struggle. However, with the right formula, you can earn the right to charge customers more than your competitors do. If you’ve been marketing your products or services as low-cost options, it’s difficult to move up the price ladder. The best approach is to launch products as premium offerings from the beginning because it’s easier to mark products down than up.
Here are six factors that will influence your ability to establish and maintain your premium price position and reap the rewards.
1. Become a Premium Provider
Identify the features that would be considered high-end on the value scale, and then highlight those crucial elements in your marketing. Resist the urge to offer a basic service level or baseline product.
2. Define Your Value
Help your customers understand why your prices are higher. In other words, don’t hide your price; instead, explain your value to the customer, and be prepared to demonstrate the return on investment associated with your service or product.
3. Go the Extra Mile
You’d be surprised how many business owners declare that they offer superior service simply because their people are friendly. Successful companies have more than friendly employees. They have employees who are so aware of customer needs that they anticipate them and go the extra mile to offer exceptional service.
4. Don’t Sacrifice Price, Even When Times are Tough
Just explain why your product or service is worth the investment, but be a little flexible for long-time customers. Do yourself a favour, though, and make a list of the customers you are willing to be flexible with; then make sure your sales team is aware of which customers are on the list so they won’t be pressured to make snap decisions. Give employees freedom in dealing with customers, but make sure they know which customers are worthy of special treatment.
5. Don’t Play the Lowest Price Game
Weaker competitors are quick to cut prices to earn business.
Don’t play their game. Many competitors will fail because they can’t generate cash flow to sustain this discounting strategy. Another disadvantage to playing the discount game is that this strategy is the fastest way to push your product or service into the commodity category. Select businesses have carved out a distinctive market by not discounting their products. The challenge is to create and sustain a brand that supports your
premium pricing strategy.
6. Project Financial Stability
A colleague told me about his expensive dilemma. He needed to replace his entire home air conditioning system. He asked two local companies for estimates. The smaller, newer company, run by an entrepreneur, submitted a bid for R23 000.
The more established AC company, celebrating its 30th anniversary, submitted a bid for nearly R28 000. While offering significant savings, the entrepreneur didn’t realise he was competing based on both price and permanence. The owner of the smaller business told my friend he couldn’t do the initial examination right away because his service truck was in the shop.
My friend was worried that the 10-year warranty that both firms offered would be worthless if he went with the newer company. The entrepreneur would have won the business if he had projected more stability.
It’s natural for companies to focus on the weaknesses of their competition as a way to earn business. However, the true measure of a premium provider is a company that focuses less on what the competition does or doesn’t do and more on selling and delivering value to its own customers.