Here in the business world, some of us love to use the sort of annoying, pretentious, and useless corporate jargon that drives normal people nuts. We reach out to new customers, onboard them, and circle back to touch base with them. We drink the Kool-aid, think outside the box, identify core competencies, take it to the next level, and leverage best practices.
Here at TaxCoach, Lisa will happily acknowledge she’s the worst offender. She’ll randomly take a noun, add “ize” to the end, and congratulate herself on inventing a new verb, paying no mind to the low rumble of Daniel Webster rolling in his grave somewhere. But yesterday, she introduced me to a key learning that can help you make your business even more impactful: the concept of “price signaling.”
Lisa was filling in for Keith with me on the Wednesday Marketing and Management Call, and the topic turned, as it often does, to pricing. One member made the following comment:
“I remember years ago reading a marketing book by [Harry Beckwith]. He maintained that your pricing strategy said a lot about your company. That a mid-priced service sent the message that you are average. By being expensive you are sending a message that you are an elite service.”
Lisa identified this as an example of price signaling, which is simply using your pricing to send information to your market. TaxCoach-style tax planning lets you signal your market that you’re worth more than your competition, which naturally translates into charging more. Eventually, you’ll realize you’re so much more valuable that it won’t even matter what they charge.
I’ve been thinking a lot about price lately. Here are three random examples to get your mind going now that extensions are filed and you can focus solely on planning.
- The other day I was waiting in the car line to pick my son up from afternoon band practice when I heard about a business opportunity on the car radio. The ad was for a Budget Blinds franchise, and touted the flexibility and income opportunities of owning your own business. But with one big handicap, right? The word budget in the actual name of the business! There’s a name that signals the biggest reason to do business with you would be your price – and guarantees a steady stream of cheap, crabby price shoppers to your door! Hard pass.
- On last week’s call, a member asked if anyone else had experience as a Dave Ramsey “endorsed local provider.” Ramsey, as I suspect most of you already know, is a financial educator who has built a $50 million net worth by espousing a bible-based approach towards money management, a philosophy built around frugality, thrift, and avoiding debt at all costs. Several of the members on the call reported disappointing results with Ramsey’s program, with one going so far as to say that the “the referrals feel that our fees should be low or Dave would not send them to us.”
- The first weekend of October, I spent three nights at a friend’s wedding at a ranch in Montana. It’s a 6500-acre facility nestled a mile up in the mountains, with amazing luxury cabins and homes accommodating no more than 120 guests. (I sent my daughter some pictures from inside my “tent,” and she replied that it looked like something out of a Ralph Lauren catalog.) Pricing is all-inclusive, including meals, drinks, and activities like fly fishing, horseback riding, skeet shooting. And the service is amazing, with up to 200 staff on site in peak season.
Now, you would expect a place like this to be pricey. And you would be right – depending on when you stay, it ranges from $1,000 to $1,500 per night, per person, with a three-night minimum. But you’re not just paying for a room, or for meals, or for outdoor activities. You’re paying for an amazing experience that you’ll be grateful to share with your friends. (Look at me, I’m sharing it with 9,000 readers right now!) And the business model works just fine, with something like 60% of the guests returning.
Here’s the bottom line: as we’ve said before, don’t be afraid to charge more when you’re worth more. And don’t be afraid to use your price to signal your superiority to your prospects and clients. Enough of them will be happy to pay your higher fees that you can safely ignore the rest.