Set your price
step 10
In this step, we look at why it’s important to be as expensive as
you can be:
1 How to increase your price.
2 How to feel comfortable with the price you are charging.
3
How to avoid one of the greatest failure hazards: over-trading.
Hold on, I set my price after I’ve sold a product? I’ve put price
here to underline a fundamental point that You Really Must
Understand.
This is as much alchemy as science, and can be influenced by a
whole host of factors you want to play to your advantage.
brilliant dos and don’ts
Don’t
Base your price on your costs. This only tells you whether you’ve
negotiated a good price from your suppliers.
Base it solely on how long a job takes you.
Base it on what the competition is charging.
Do
Base it on what a customer is willing to pay.
136 brilliant start-up
What influences price
The factors that influence what a customer is willing to pay
include:
Your perceived expertise. For example:
Web designer: £40 an hour. Expert in web usability for financial
services: £200 an hour.
The business value of what you are selling. For example:
Two consultants worked in the oil industry capping wells that
gushed. They were happy charging good hourly rates and driving
executive cars. Someone pointed out how much they saved an oil
company. They swapped their cars for executive helicopters.
Premium or snob value. For example:
I’m sitting on a train as I write this. My ticket is £102. The next
carriage along is almost identical, but it has little white cloths on
the headrests, and free tea. A ticket there costs £350.
Getting it sooner. For example:
Hardback Harry Potter: £15. Paperback, six months later: £7.
Be as expensive as you can
brilliant example
I was in a supermarket known for its low approach to prices, looking for
some rocket salad (that’s how posh I am). It sat in the middle of the row in
nice packaging: £1.80.
Then on the bottom row tucked into a corner, I spotted another bag with
exactly the same amount. It was unwashed, the packaging was nasty looking:
94p. Of course I grabbed it and skipped cackling joyfully down the aisle.
Set your price 137
Even the cheapest supermarkets charge as much as they can
possibly get away with for their products. They deliberately
sabotage their ‘value’ brands (I don’t mean putting in nails).
They put them in cheap and nasty packaging, and hide them
in other parts of the store where only value shoppers go. The
premium’ products have little to justify their much higher
prices, beyond a string of adjectives. It’s not simply ‘Bacon’, it’s
‘Finest Maple-cured Canadian Back Bacon’.
The problems with being cheap
Being cheap in business can be extremely difficult to maintain.
You can always come down in price. I don’t mean drop your
price at the first whiff of trouble. I mean, ‘Well, I can offer you
a special discount, seeing as its
you,or, ‘I can add an extra service
for free.’ That way, they feel good,
you feel good.
brilliant example
In the nineties, an ebullient Frenchman set up a bistro called Pierre Victoire.
He wanted to sell cheap French food with a minimum of fuss. He borrowed
the food to open up, got the chairs from a charity shop and charged £5 for
a set lunch. People loved it. Demand grew.
So he started opening bistros around the UK, and before long he had
over 100. But margins were minute: 50 covers at lunch, at £5 a head =
£250. Take off the cost of food, staff, overheads. If you smashed a plate at
lunchtime, your profit was wiped out. The chain collapsed spectacularly into
liquidation, and he left the country.
I’m pleased to say though, he’s back now, and like the true entrepreneur is
trying it again. Only this time, his prices are that much higher.
you can always come down
in price

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