“Any customer can have
a car painted any color
that he wants so long
as it is black.”
-- Henry Ford (1922)
Clearly, Mr. Ford felt that he controlled the car market...
to the point of disdain for the desires of his customers. Think about this for
a second....
Henry Ford knew his customers wanted their cars in other
colors. Yet he felt that he had such a lock on the market place that there was
just no need to listen to them. Ford went on to lose serious market share to
“upstarts” like General Motors. That’s why Bill Gates keeps a picture of Henry
Ford on the wall of his office... an object lesson of “fatal attitude.”
Mr. Ford ignored customers when it came to one of the big
P’s... Product. Do you think he listened to them when it came to Pricing? I’m
sure he never asked! Do the majority of business owners have that enviable
position today? Sadly, no -- we all work in a hyper-competitive market place.
Yet how may owners ask their customers for input about perceived value (i.e.,
what it’s worth to them) and pricing? Do you?
This is a “reality check” chapter. Get ready to plant your
feet squarely on the ground... and set those rose-colored glasses aside for the
time being. Most business people don’t need those glasses anyway.
Why?...
When it comes to pricing, their heads are firmly embedded
underground. Profit. You have to make a profit or you won’t survive. The right
price is critical to your commercial future. As I said in the Introduction,
pricing is your most important marketing decision.
Misjudging your price points in this digital era costs
dramatically more than it did in the past. Internet markets mature rapidly. You
have to be prepared to adjust pricing frequently or upgrade your
product/service to maintain your price. Price is never static.
So, what do you need to do?
Get the e-commerce success equation right!…
Great Product + Perfect Price + Right Process + Satisfied
Customer = Success
A lifetime of e-commerce success, that is.
A buyer decides if the price is acceptable by determining
the benefits of the product and by considering the competition.
The seller prices to maximize profit, while considering the
bigger picture business model (i.e., high price/low volume or low price/high
volume). The price must pay for the cost of production, marketing and overhead
costs, and still make a profit.
Let’s say that Product X costs you $20 to make, market,
sell, and distribute. But let’s say that your customer is only willing to
exchange $10 for it.
This success equation is definitely “off the rails” at this
point and will stay there, permanently, unless some major modifications are
made.
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Pricing Isn't All Logic. Discover The Hidden Pricing Tactics You Can Use To Increase Profits!
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Bottom line?
The most important determinant of price is always what the
product is worth to the customer.
Before your prospective customer can tell you what your
product is worth, she must understand what it will do for her. So you must be
able to answer the question...
“What’s in it for me?”
That's where an effective Web site is absolutely necessary.
A great site educates the customer about your product’s benefits and features.
It builds perceived value.
Features are elements of a product (or service) that do, or
that are. Benefits are the results that do for your customer. They connect at
an emotional level by delivering a gain or curing a pain.
All benefits add to the perceived value of your product or
service. The higher the perceived value, the greater the chance you have for a
sale (or a download, or a subscription, or a contract, or whatever is your Most
Wanted Response (MWR) -- i.e., whatever you most want your customers to do when
they are on your site).
So… figure out your target group. Who is most likely to see
the benefits of your product immediately? Do the words on your Web site reflect
that awareness?
Picture your customer. Now write for your customer. Thinking
of a single person automatically helps your copy feel “one-to-one” as you
write. If you think of thousands of people as you write, your copy will take on
an impersonal, broadcast tone. You know your customer best so talk to him or
her!
Bottom line?
Your site not only has to get the sale, it has to build
perceived value in your product. When the customer “gets it,” both the
perceived value and the Conversion Rates will be high.
Only benefits answer the critical question... "What's
in it for me?"
Now for the next “reality” lesson of the day... A
theoretical price for your product may look reasonable and saleable on that
fancy spreadsheet or after a discussion with your hired pricing consultant.
But it might be totally off-base to your customers’ personal
prices. And if it doesn’t jive then you might as well leave the dance hall.
You have got to know confidently at which price point your
customers are thinking... “Yes, this is worth it.” Or conversely, at which
point price-resistance kicks in. That’s the price where your customer starts to
think... “I don't need that as much as I thought I did.”
how well you know your customers -- what their needs are…
what gains they want to achieve… what pain they want to eliminate.
Not sure how well you know your targeted market… or how well
you let them know that you understand them?
Use these questions to clarify your thoughts…
1) What method do you use to get to know your customer? How
do you know what they think about your product, its price, and your
competitors? Have you ever used an e-mail survey? Do you have a regular
scheduled e-zine that has a feedback section? Have you tried contacting your
customers by phone?
2) Does your site “fit” with your customer profile? Will it
effectively attract (“flag”) your customers? Does it provide the type of
information they are seeking?
3) How would you rate your Web site for “Builds Perceived
Value”? Will your customers be able to clearly answer the “What’s in it for
me?” question? Or do you concentrate more on features than “benefits.”
Everything in business should be customer-focused, including
how you price your product.
Do what I do. Get a picture of Henry Ford and put it on your
desk with a yellow Post-it note... “Listen to the customer... s/he has all the
answers.”
Your customer’s perceived value of your product or service
will determine whether s/he pulls out the credit card or not. A high perceived
value is more than an important consideration…
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