How to raise prices without raising prices

How to raise prices without raising prices

In their book, Mass Affluence, Paul Nunes and Brian Johnson identifiy three strategies
their research revealed as viable for helping all marketers capitalize with the
moneyed masses.

And make no mistake, there are moneyed masses – despite what we hear in the news
everyday. All you need to do is employ marketing strategies that give customers
a chance to spend more.

Remember , your customers buy what they want to buy. Your job, as a marketer, is
to make sure you create value they want and are willing to pay for.

So here’s what the research revealed in a nutshell:

1. Give customers the chance to spend more. Offer new premium versions, adding on
product upgrades and differentiated service levels to existing offerings.

2. Honour customers with the recognition they desire. Create status levels that
reward willing-to-spend customers.

3. Offer the right price to the right customer.

For today, let’s focus on the first strategy.

If you are unwilling to raise your prices for your products and/or services, try
creating premium and deluxe versions of the same products and services offered
optionally, at a premium price.

Here’s why:

In almost every case, if a premium or deluxe version of a product or service is
available, no less than 5% to 20% of your existent or traditional customers will
opt for it.

Since the profit margin built into the premium version is usually substantially
greater than in the basic offering, the 5% picking the premium can actually create
a 50% or 100% increase in profits from the same number of units of sale.

Take the “concierge ” floor at a hotel for example. Typically, the rooms may or
may not be slightly larger or better turned out but still, they all have a bed and
a bath and require the same linens, towels, maid service, and electricity; key access
in the elevator (added cost: zero); a lounge with continental breakfast and evening
snacks (cost: a few bucks per guest); and two newspapers outside your door.

The price difference may be anywhere from 20% to 50% of the basic room for those
who want the “special” treatment. But the added cost may be 2% to 5%. That differential
item, the upgrade, carries a much higher markup than does the basic room.

Here’s another example:

Say you’re a business coach. You offer one-on-one coaching sessions for a set fee.

Your client can opt for your basic program or take advantage of your premium membership
coaching program that includes the one-on-one coaching sessions and a monthly group
coaching session via teleseminar featuring a  special “guest” coach on a specific
topic followed by a Q&A.

You offer the premium program at an additional 25% markup. The teleseminar cost
is minimal. These days, most attendees expect to pay the LD costs. Your “guest”
will be happy to trade his or services for the exposure to your clients. (cost:
zero)

Presenting to one client or twenty five has a minimal impact on your costs. You
pay for the extra lines but the impact of the 25% price differential makes that
insignificant.

Does your business lend itself to this approach of including premium offerings?

If so, you may be on the verge of discovering a strategy you can use to significantly
boost your profits.

Gerry Black is a marketing writer based in Toronto, Canada who works with clients in Canada and the US.