The Marketing Word | Differentiation Marketing

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Cost, Price and Proving Value

Sometimes all the stuff swirling around in my brain (yes, like the proverbial running toilet) comes together and I realize that I’ve been storing information, waiting for a few more pieces to fall into place resulting in a flash of brilliance – or at least a strong boot in the pants.

A trip to a new dentist was the final chunk in a puzzle that had been swimming in my head for the past week.  It started with a Bob Burg seminar on referral marketing (His book Endless Referrals is a marketing classic – if you don’t have it, get it.)  Bob does perhaps one of the best Zig Ziglar impressions in the speaking industry and he tells a story about overcoming the objection of cost.  When a prospect says that your price is too high, Zig says to respond with “Are you concerned about the cost or the price? Because price is a one-time thing and cost is a lifetime thing.  Don’t you really want the best possible, lowest cost?”

Another way of saying that is, “You get what you pay for.”  You can buy a cheaper item, but will it last?  Will it cost you more in time wasted on future repairs or replacement?

Now for my trip to the dentist.  I found this dentist through an ad in a local free magazine.  They have a number of locations and a very large full-color ad.  I had a first time visit for a checkup, cleaning and x-rays.  The office had a lot of high tech equipment and every patient area (not individual rooms, which made me glad they weren’t gynecologists) had a huge 50” flat screen HDTV.   The dental tech did the x-rays and some checking, the doctor came in and poked around for five minutes.  Turns out my beautiful smile is hiding some gum disease, a cavity, a crown that needs replacing and all sorts of stuff.  In fact, by the time they were done talking with me, I was scared my teeth were about to fall out of my head.  FORTUNATELY, they had this really nifty software that gave me a computerized printout of all the recommended work which came to somewhere in the neighborhood of $8,500.

Once they had worked me down off the ceiling, and I had worked out several things I could do with $8,500 (rehab a kitchen, buy a used car, spend a month in a villa in Italy with a twenty-something pool boy), I told them I might be back but I needed to get two more estimates.  (Hell, I was a rehabber, I ALWAYS get three estimates for large jobs.)

But here’s the real problem:  I didn’t have any trust in this dentist – it was a first time visit.  The dental tech caused me physical pain while the estimate caused me physical, mental and emotional pain.  They used fear tactics, which may or may not be justified, as a motivator.  And they asked for a not small amount of money.  Now, in the grand scheme of things, $8,500 for all that dental work may be a great price.  But for someone planning to spend a few hundred dollars, it was a bit of a jump.  (And I would still rather spend the money on a villa in Italy and a pool boy.)

Here’s where it fell into place for me:  I charge a lot of money for what I do.  Not as much as some people; not nearly as much as others; but more than average.  I am very good at writing manuals and courses for people.  I am fortunate in that most of my clients are referred to me and that I have built a good reputation in my particular niche industry. HOWEVER, if you do not know me or my work and you hear my stated price, your heart may skip a beat or two.

The trip to the dentist pointed out the flaw in my own marketing and positioning.  The work I do is extremely subjective.  It takes me, on average, 4-6 weeks to create a manual for someone.  I write manuals in a narrative style.  My manuals read a bit like novels. I do my best to capture my client’s “voice” and they are written in very “me to you” tone.  I have a system that I use and it creates a solid product.  But, there is the chance that the client won’t like the work I’ve done.  It’s very subjective and as in many things, when it comes to writing, beauty is in the eye of the beholder.

So, as a marketer, how do I justify my price and prepare my clients for what their end result will be?  It really comes down to communicating my expertise and the time involved and this is where I think the dental office made its mistake.

There were no testimonials from patients anywhere in the office.  No pictures of the dentist (any of them) with a happy teenager on the day she got her braces off.  There were no diplomas on the wall (if I had seen an Ivy League diploma hanging on the wall, at least I would have known I was paying off some school loans).  No articles about the doctors or the office.  There was NOTHING in the office that told me why this dentist was different from any other dentist in town and why his prices were at least twice as high as other dentists.  In fact, I had the distinct impression that the dentists rotated through the various offices much like temps.

I’ll pay for quality work.  So price really wasn’t the issue.  I like my teeth; I want to keep them.  But there was nothing in my experience in the dental office that made me feel like I could trust that I was getting top quality dental care, care that was over and above what I could get literally across the street for a lot less money.  In fact, I will not be sure I need all that recommended care until I see a second dentist.  My trust level with that office is non-existent.

When you are selling anything, especially high ticket items, you need to build trust with your prospects and build value into your presentation, be it a web page, an ad or face-to-face.  What makes you different from everybody else out there?  Do you have references (testimonials) from credible third parties?  What are the future costs that you will save people down the road?  How does using you (and paying more money) benefit your client in the long run?  Until you can answer those questions, your prospects are going to shop you on price.  Learn to speak in terms of cost, not price.

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Stop Pricing for Your Market

I was doing a talk on marketing yesterday for one of my favorite groups of people, the Sarasota Internet Marketing Master Mind.  I was going through my target market profile and reached the section that asked what income level your prospects had.  I pointed to the top line that said "Under $20,000" and said, "If you are marketing to people who make less than $20,000 per year, STOP.  They don't have any money."

Yes, they buy groceries and gas, hot dogs and team sweatshirts and other small ticket items.  But think about how many of those small ticket items you are going to have to sell to people who honestly have to think about spending $30 or $40.  Now extrapolate out a bit.  People who are making under $30,000 a year are going to have a hard time spending $2,000 for your product.  People making $50,000 per year will think hard about spending $8,000 or $10,000 for a discretionary item.  Conversely, people making $200,000 per year won't trust something that they perceive as too low in price.   (We like them.)

The upshot is that price is relative to income.  If your target market makes $35,000 per year, the price of your product or service needs to be affordable for them.

"So Barb," you are saying.  "Want to take another swing at the title of this blog post?"

Nope.

I'm a little bit dyslexic and a big fan of doing things backwards.  Say you want to make $5,000 per month.  Now, maybe you have  a little ebook that sells for $47.  You're going to have to sell over 100 of those ebooks every month to make your $5,000.  That's not easy to do.  It's not impossible by any means, but MAN OH MAN it's a lot of work. But $47 is about the right price for this particular industry.  In fact, compared to its competitors, it's a  little bit on the high side. The market set the price for the product.

What got me thinking about this?  I got an invitation to a seminar with a comedy writer from the Tonight Show.  That's about the best credit you can have in comedy writing.  So a three hour session with someone who is one of the top people in his profession was $199.  Two hundred bucks.  That's like sitting down with Stephen Hawking or Colin Powell and buying them lunch in return.  And that got me thinking...

Most people who want to be comedians do not have much money.  In fact, most working comedians don't have very much money.  Two hundred dollars is a lot for them to shell out.  EVEN TO TALK TO THE BEST IN THE BUSINESS.  The industry limits the amount of money that can be charged to the customer.

And here's where I realized the whole equation is backwards.  Instead of pricing what you're selling to meet what your market can afford, CHANGE MARKETS.  Change industries if you have to.  Work with people who can afford to pay you what you need to earn.  Go back to the example of needing $5,000 per month.  I can sell 110 ebooks at $47 each or I can write three custom ebooks for private clients.  Yeah, it's active income vs the supposedly passive return of an ebook.  But marketing the ebook is active work, too and trying to sell 100 in a month without a big name is hard work.  Trust me.

Instead of writing business plans for small business start-ups (which have no money), write business plans for large corporations.  Instead of designing clothes for the average woman, design high end stuff.  Instead of charging $25 an hour, find a clientele that is willing to pay you $250 an hour.

Maybe not the best of examples, but I've had an entire glass of wine. (Big night!)  But do you get what I'm saying here?  If you're not making the money you need to make, stop pricing your goods and services to fit your market.  Find a market that can pay you what you need to make.

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August 2017
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