In sales and business planning, price is one of the single biggest elements in your sales process, as well as your economic engine and health of your business. How do you determine the pricing for your products and services?
Obviously, some manufacturers help in this process by establishing MAP, UMAP or MSRP pricing guidelines for you. However, you still must decide which products to sell and how much to charge for installing those products.
The product offering and price position will also have a significant role in further establishing your brand identity to your audience.
Early in my integration career, I had a great opportunity to work for one of the premier integration companies in my state. I was very excited to sell the “really cool gear” and join this great team.
I had been working in the industry for roughly 3 years at that point and still had a lot to learn. I did not have the confidence and swagger that many of my older competitors had, but I was hungry.
As I submitted my first proposal to my boss for pre-approval, I was told to add an additional line item in the proposal to account for small parts costs. The amount was maybe 3% of the total proposal and it covered legitimate costs: wire, emitters, speaker back boxes, pre-construction boxes for volume controls (this was 20 years ago), etc.
Years later when I had my own Integration company and had to write the checks for these items, I came to understand how quickly they add up. The problem was, none of my competitors charged for any of these items.
Potential clients would look at my proposal and compare it to my competitors and always ask about my charge for wire and materials. While many of my competitors may have built this into their “labor” costs, our labor costs were still higher due to the experience of our technicians.
I worked for this company for ten years and became very successful by selling systems that were installed by the talented craftsmen who worked at the company. I learned very early that it is not all about price, it is about value!
I believe a few steps can be taken to establish pricing that is a good value for the customer and ensure some financial health for the business. The following are a few suggestions I have found to be helpful in my businesses over the years:
1. Identify Your Target Customer
Your target customer may not be the same as your competitor next door. Equally important: your customer may not be everyone in need of a product or service you are offering.
For example, if you are a car dealer specializing in European imports, not everyone purchasing a new car will want or need your 12-cylinder hot rod, and that’s okay.
2. Determine the Benefit(s) You are Delivering to Your Target Customer
Take time to clearly understand the benefits that your brand delivers to your customer.
Some of the benefits that my previous integration company delivered were as follows: 20 years of experience, a lifetime warranty on the wire and workmanship, and a commitment to delivering an “easy” to use system.
Once you establish these benefits, it should become part of every sales presentation and marketing activity.
3. Establish Your Value
Carefully evaluate and identify the value you have to offer your customer: experience, team, service/support, etc.
4. Commit to Your Brand Value and Defend it
Once you have established what value you provide your customers, be proud of it and defend it!
Once you understand your company’s value, you are better prepared to establish a price for your services. Benefits + Value = Price. Then, be prepared to defend your price position and back it up with the value and benefits offered by your company.