I read a great article by Lucinda Lions on Smallville recently. The topic of the…
Is It Time to Double Your Prices?
One of the fastest ways to increase profits for many businesses that sell a service is to increase their prices.
I had an interesting experience of doing this way back in 1991. It occurred when I produced my first sales training newsletter which was two pages long. My intention was to make it a weekly training programme and write 48 newsletters a year.
When I wrote my first two sample newsletters, I asked a good business friend what I should charge for it. My friend suggested I charge $100 for a year-long subscription. I then made appointments with 40 of my existing clients and showed each of them my newsletter idea. To my surprise and delight, 39 of these clients liked what I showed them and took out a year-long subscription to my sales training newsletter. I continued showing my sales training newsletter to sales managers in a variety of different organisations, and within three months I had over 100 subscribers.
I soon discovered that writing each newsletter was taking a good amount of time each week. I then worked out how much money I actually was making from the whole project; 100 subscribers at $100 a year each, made only $10,000 gross sales before costs, like printing and postage. I was only earning about $200 a week before expenses from my newsletter, and I began to wonder if it was really worth it.
So I did an experiment where I changed the price for a one-year subscription to $195. I then showed the newsletter concept to 20 more business people, and 17 bought it. (This was very encouraging because I had now doubled my income with no extra effort.) Over the next two months, I tested half a dozen different prices; these varied from$195 right up to $795 for a one-year subscription.
My best results seemed to come at $495 for a one-year subscription; I made a sale to about one person in three at this amount. Over the next six months, I added another 200 subscribers to my newsletter, and they all now paid $495 each for a one-year subscription. This was great for me because I was now making five times my previous income from exactly the same product. This was a great experience in charging higher prices and increasing my profits quickly.
So how can you double your prices and still have happy clients?
There are actually seven different strategies you can use to do this.
The first strategy to double your prices and still have delighted clients is to ‘offer a different package’:
Here’s a good example of this. Many years ago I decided to become a paid business speaker on sales and marketing. I set a price of $300 to give a one hour talk and persuaded about 20 sales managers that it would be a good investment to hire me to speak to their sales team.
I presented my one hour talk on sales and marketing; each was well received. However, I soon discovered that I wasn’t making much money doing this. It was actually taking a lot of time to sell each talk, prepare each talk and then travel to and from each client to present each talk. I decided to ask a very successful sales trainer and business speaker for advice on what I was doing wrong.
Des had been speaking on sales for about 20 years and his fees were between $1,500 and $5,000 each time he spoke; he was also booked up months in advance. He explained that I needed to, first of all, raise my speaking fee to at least $750. I also had to give each talk a title which was the benefits a person would get from hearing it, and he suggested I provide a handout covering the key ideas and give this out at each talk. Finally, Des told me I should make each talk for either 45-minutes or 75-minutes but not for an hour. He explained that an hourly fee of $300 seemed expensive to just give a talk. However, a $750 fee to give a 45-minute training session on ‘Five ways to increase your sales by 25% in the next three months’ did not seem expensive.
I put into action all the suggestions that were given to me.
Over the next few months, I earned an extra $15,000 from giving a number of 45-minute sales training presentations. I gave each presentation a catchy title, gave out informative handouts which covered the key ideas I presented, and I charged $750 for each one.
My clients loved what I did, and I loved the fact that I was now making a lot more money giving these presentations. I also found that I could tailor my prices depending on the group I was talking with, and for some 45-minute presentations, I was paid between $1,000 and $2,500 for doing them. (Fast forward to 2018 and the prices I now charge for speaking to groups is a lot higher and each ‘package’ of speaking services is unique, compelling and crammed full of value for my speaking clients.)
If you are becoming better at what you do every month, you will be in a position to provide more value for each client you serve.
When you provide more value, each client now receives much greater benefits; so you should charge more for the extra value you are providing, and a good way to do this is to put up your prices. You may want to increase your prices firstly to new clients only, and you may also want to provide something extra with your increase in prices.
If you have a business that sells a service I invite you to think about how you could double your prices by offering a ‘different package’. It could be something worth testing.
“Price is what you pay. Value is what you get” – Warren Buffet
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