I love reader mail, because so often the emails I receive are awesome stories like this one from Ben of the Boyne City Gazette :
Hi Amy,
I read your column about the necessity of raising prices if your product is undervalued and it motivated me and my business partner to grow the balls necessary to raise the display advertising rates on our community newspaper.
We had been charging approximately five times too little for our ad space and we knew we needed to make the change.
We have increased our prices by approximately two-thirds and have not lost one customer as a result.
Among the many mistakes we made when we started our company two years ago was the flawed thinking that offering dirt-cheap pricing would bring customers in droves.
Truth is we busted our butts for far too little and the only thing we succeeded in was making people wonder why our pricing was so much cheaper. Today we are still a few dollars a column inch lower than our competitors, but we feel the price is fair for our company and the customer alike.
Thanks again for the great advice.
Sincerely,
Ben Gohs
P.S. We were really sweating leading up to our price change. I understand completely why people may hesitate, but if they do not value their product neither will anyone else.
Emphasis all mine.
If you’re feeling a little hesitant to take my pricing advice, I hope you’ll seriously consider consider taking a page from Ben’s book. After all, he just did it. And it worked out splendidly: not a single customer lost.
Ben’s story is a perfect example of the true nature of pricing: The fear itself is real enough, but the consequences you imagine exist only in your head.
Now that he & his partners have conquered that fear the first time, they’ll feel more able to raise prices again.
Ben, thanks for your letter. I hope you’ll keep increasing your price until you’re charging for all that value you create for your customers!
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Ah yes pricing, my arch-nemesis.
I’ve had similar experiences with pricing my book and my consulting work. I’m starting to get over it and see what a Price actually is (with a capital P).
Price is another feature of the product/service. It can be used in many ways: to improve the experience of your product (Bugatti) or to refine your branding (cheap Walmart).
Price is really easy to screw up too. Up until about 2010, I used it as a way to sell in “volume”, even though my business was not a volume business (i.e. pricing cheap to attract more customers that I couldn’t handle).
Congrats to Ben for taking the leap and raising his prices to a level closer to his value. Next step is to increase the value, and that’s a good thing for both him and his customers.
Eric, so you’re saying that the low prices didn’t really help you sell “in volume”?
I have another article brewing on just that mistake… which is a realllllly easy and tempting one to make.
It’s so beguiling to think that lowering your price will == more sales.
But what most people don’t realize is that the products we tend to sell are inelastic markets. That means that lower prices will NOT stimulate more demand. It will just lower our revenue, leading to sadface.
You got a nice blog! And not to mention, a great topic. We really need to trust our products before we can raise our prices and work hard on improving our strategies. That is what I learned from top entrepreneurs that have made their way and success in their field. Here’s a great video about raising prices: http://marieforleo.com/2011/12/should-you-raise-prices/