18 Mar Making the Case to Raise Your Prices
“There is no truth. There is only perception.” Gustave Flaubert
In any organization, there comes a pivotal point when prices need to increase. While essential to growth, increasing prices is not always a simple solution; especially when it comes to communicating this to clients.
How do you seamlessly increase prices while keeping clients satisfied? It all comes down to one word: value.
Increasing your organization’s perceived value isn’t something that happens over night. Surprisingly, it has little to do with the actual cost the client is paying for services.
According to a value pricing resource developed by BDC, “how much the customer is willing to pay has very much to do with how much [the customer] values the product or service they’re buying.”
Customer perceived value can be determined by the relationship between perceived benefits and perceived costs:
What does perceived value look like? It can come in many forms. Whether it’s the overall return clients can get from your work, the functionality of your product or service, added-value features, market connections, or superior to market customer service. There are many ways to add to your customer’s overall experience and increase your organization’s perceived value, making it easier to charge more for your product or service.
Perceived value also ties back into where you want your organization to be perceived and positioned in the respective market. Do you want your clients or prospective clients to perceive your offerings as prestige or affordable? Do you want them to see you as being exclusive or having mass market appeal?
At Incite, we’ve worked with a variety of clients and their market positioning strategies. From our experience, it’s critical to understand where you want to fit in the market to ensure your perceived value matches what your clients expect. See the example below with some key automotive brands.
Where does your organization fit on the positioning chart?
Here are a few ways to increase perceived value and justify an increase in your organization’s pricing…
When it comes to perceived value, credibility is essential. When an organization has a higher (or perceived higher) level of credibility, the client or customer is generally willing to pay more for a product or service. Why is that? It comes down to trust.
In order to build on credibility, it’s important that it’s not only your word on the line. Customer testimonials and strategic partnerships are critical to adding credibility to your organization. Referrals, case studies, or promoting partnerships with other reputable organizations, and leveraging those third parties to help tell your story will help give you the ability to increase your credibility and perceived value in the eyes of your clients.
One of the most effective ways to increase a client’s perceived value is to appeal to their emotions or values. In order to do so, it’s important to know what types of things your client may appreciate. Whether it’s a community event or a local initiative, find out what clients truly value and align your organization with strategic emotional ties that matter.
Sticking with our car analogy above, people may convince themselves they bought a car because it has great fuel efficiency or the latest technology. But, they really bought the car when they pictured their young child in the back seat, and felt that they would be safest in this particular vehicle. What are your customer’s emotional drivers as they relate to what you sell. Identify and speak to those to drive more value.
While I stated earlier that cost has little to do with perceived value, price still does play an important role in your positioning.
Marketers Neil Patel and Ritika Puri have put together an excellent resource on understanding consumer psychology.
“Instead of showing prospects what they should expect to spend, show them what they are going earn.” You are better off discussing investment and overall cost of ownership with your clients, rather than simply stating cost.
When it comes to pricing psychology, keep the following things in mind:
- Avoid option overload: you can’t be everything to everyone and you shouldn’t try to be. Pick 3-5 services that you truly excel at and market those towards your clients.
- Anchor against a relevant option: The most expensive item in a retail store is typically on display near the front of a store. This isn’t because they sell the most of those items. Rather, it is to make the rest of the store’s offering feel more affordable. If you have options, don’t lead with your least expensive offering. Make sure your most premium offering is included along with your mid-market alternatives.
To confidently move your organization in the right direction, you need to have clarity. By taking a 360° view of your organization, Incite identifies that pivotal point where your organization’s strengths, market needs, and unique differentiation intersect. That intersection helps define your market position and your best path forward. Connect with us to learn more about how Incite can support your organization.
About The Author
As Founder and President of Incite, Ted brings over 25 years of strategic marketing and consulting experience to the table. His proven ability to engage in complex business strategy and multi-stakeholder environments has enabled him to help a diverse range of private and public sector clients with growth strategy, communications, strategic issues management and brand development.
Incite is a marketing and strategy consulting firm specializing in growth, brand, and communications. From market expansion and brand development, to supporting post-merger integration and building internal engagement, Incite’s strategic approach helps clients to better understand their market, clearly articulate value, align organizational resources, and connect with key stakeholders to achieve success.