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The first article in our original series explores the advantages of hiring an external CPA firm for the accounting needs of your small business.Read more
Finding an optimized pricing strategy for your small business becomes much easier when you use an outsourced CFO that can offer a fresh, informed perspective.Read more
Pricing: The Fuel for Your Revenue Drive
Posted by Lagerquist Accounting & Advisory
Pricing goods and services is a point of severe tension for businesses. Too high and you fear turning buyers away. Too low and you make no profit. So you aim for “just right.” What is “just right?”
Before I show you what “just right” is, here is what it isn’t: “Just right” is not about fairness, in the sense that all buyers either pay the same price, or get the same value for whatever they pay.
“Just right” is the price or fee that gives the buyer value commensurate with the money they pay.
Value is variable, thus prices should be variable too. You are not going to give the highest possible value to someone who pays the lowest amount. And you better give much more value to the buyer who pays the highest amount.
When I work with executive owners, we look at the range of offerings they have on the market and we dive into the value of each offering.
- Common offerings provide utility or satisfy a short-term need. Those have the lowest value and therefore the lowest prices.
- Uncommon offerings are more useful and longer lasting. They give the buyer more satisfaction through the buying experience and with service afterwards. Uncommon offerings have the best chance of generating Regulars: repeat purchases and loyalty to your company.
- Exceptional offerings carry very high value to the buyer. The value includes ‘tangible intangibles’ such as status, reputation, superior service, convenience, and a highly personalized buying experience. These buyers are your Enthusiastic Fans and are eager to buy new, high-value offerings customized for them.
Getting pricing and fairness right begins with your strategy. Strategy is “We provide X to Y buyers.” You can have several offerings and buyers, making strategy look like this:
- We provide X to Y buyers.
- We provide X+1 to Y+1 buyers.
- We provide X+2 to Y+2 buyers.
And so on.
What makes this work? Knowing the value of your offerings and who the buyers are for them.
Do you have a nagging worry that your pricing and array of offerings are cheating your company from the revenue and profit it deserves?
What’s next for your company? Where will you apply relentless focus in the coming 3-6 months?
- Maximize revenue per customer or client
- Maximize revenue per employee
- Accelerate top line revenue growth
- Improve sales cycle speed and volumes
- Build wealth for owners
- Alleviate the major stress of owners: the business controls you instead of you controlling the business
My clients see that their dramatic results come from a a relentless focus on these Focus Areas, one or two at a time. Pick one or two and begin today!
Guest blogging content is provided by Susan Trivers, MBA, principal of Trivers Consulting Group. Susan focuses on six areas that put revenue in the fast lane for business owners. View original article here.
Image Credit: smemon (Flickr @ Creative Commons)
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