How a Higher Price Makes You More Competitive
February 7, 2020
I was with a videographer the other day who I’ve had multiple visits with on his pricing.
“I raised my prices again,” he said. He went on to talk about the benefits he received from that move, including weeding out clients who aren’t a great fit.
“It’s made me more competitive, too.” That comment raised my eyebrows, as most entrepreneurs think higher prices make you less competitive, not more.
“How has higher pricing made you more competitive?” I asked.
“It’s gotten me into larger companies. The larger corporate clients I want to do business with see me as a serious player. They look at me and see me as a real company, which is what I am.”
If you’re a small business or solopreneur trying to break into corporate clients, pricing as a marketing signal becomes very important.
The rationale of keeping your price low because it’s “easier” for a corporate buyer to hire you is flat out wrong. Buyers inside corporations are invariably risk adverse. They fear missing the deliverable date on the project they’re working. They fear the project getting screwed up by the vendor they hire, thereby incurring the wrath of not only of their boss, but the boss’s boss, who comes down on both of them. Beyond looking incompetent, a bad decision could cost them a promotion or even their job.
This is one place where consultants, speakers, and other professional services providers get mixed up on what constitutes “value.” You are so used to getting beat up by nickel-squeezing small business buyers that by the time you start breaking into the corporate space, you don’t understand what’s valued.
For a corporate buyer, there’s value in reliability, in knowing the project will not just get done, but will be done according as agreed upon and completed on time. Value comes in knowing a vendor has the resources to get and keep the project on track. There’s value in experience and reputation, evidenced in other corporate engagements successfully completed.
By the way, it’s true for your best-fit clients among small businesses, too. The best ones—the ones you want to do business with—don’t have time to penny pinch. They’ve got big goals and they need vendors who can deliver.
I not suggesting that price is unimportant. Price is always a consideration. Price, though, is just one factor as a risk-adverse corporate buyer also weighs reliability, resources, experience, and reputation. It’s all these characteristics which make you competitive in the corporate market.
©Ray Business Advisors, LLC and John Ray
About me: I’m enthusiastic about how changes in pricing strategy can significantly change profitability for a business and enhance life choices for business owners. I live this passion through Ray Business Advisors, my outside CFO and business advisory practice, in which my pricing is exclusively value-based, not hourly. I work with business owners on how they can change their pricing not just to increase their profits, but better serve the wants of their customers. Click here to learn more or call me at 404-287-2627.