The Power Of Price Elasticity

  • “Price Cutting Is A Self-Inflicted Wound.”
    • Nobody put a gun to your head.

 

  • Reasons Why Entrepreneurs Fail At Pricing = By Fail I Mean A Failure To Use Price As A Marketing Tool & Strategic Advantage.  I Also Mean Failing To Extract The Maximum Profit From Your Business.
    • Pricing By Industry Norms (You’re Better Off Going At The High End Of The Scale)
    • Attracting Customers That By Based On Price
    • Not Offering Premium Products / Services
    • Poor Self-Esteem / Business Esteem (You Don’t Feel That You Deserve It)

 

  • The Power Of FREE = FREE Is The Most Powerful Word In The English Language.  2nd Most Powerful is SEX.  Throw The Two Together… (Cars, Makeup, Clothes, Personal Hygiene, Jewellery, Perfume, etc.)
    • FREE can generate traffic, drive buying decisions, build a list, motivate a prospect to take action, etc.
    • FREE has a dark side that can create the expectation of more FREE, turns buyers into mooches, etc.
    • Example:  Mainstream Media gave their news away on the internet, now they can’t sell newspapers.
    • Ultimately, You Must Think Of The Consequences When Using FREE
  • Breaking Free Of The Price / Product Bonds = There are two chains that must be cut.  One is in your mind.  The other is in the customers.  BOTH must be severed to create maximum profits in your business.
    • Your Price Product Bond is more rigid than your customers.  Theirs is far more flexible.

 

  • Brass Balls = The hardest thing about being paid high dollar fees is keeping a straight face when you ask.
    • The proposition influences their reaction to the price.
    • Types Of Propositions
      • Irresistible Offers
      • Unique Selling Proposition
      • Unique Experience Proposition 
  •  MEGA MYTH:  “We’ll Make It Up On Volume”, The Rise Of The Category Killers
    • Before Wal-Mart → Kmart → Sears & Roebuck → F.W. Woolworth Company → In A Endless Chain
    • LESSON:  Cheap Prices, Bargains, and discounts will only keep a customer for the short term.  However, true value, real quality, and outstanding service will keep them coming over the long term.

 

  • The 80/20 Rule = About 20% of a buying decision is based on the lowest price, 80% is based on other factors.
    • Other Factors: Ease Of Use, Prestige, Top Of Mind Consciousness, Referral, Reciprocity, etc.

 

  • Miscellaneous
    • If you raise your prices by 10% you’ll have to lose 30% of your business to not profit.
    • You should be raising your prices by 4% per year just to account for inflation.
    • If you charge more you can pay more than your competition to get a customer.
    • Affluent people have more expendable income.  Why not target them?
    • Native American Selling Pots Story:  People What To Pay What They Want To Pay
    • There Is A Price Point For Every Product:  Hundred Dollar Cars vs. Million Dollar Cars
    • Psychologically speaking, offer your highest priced offering first.  It makes the following options look more affordable and who knows they might take you up on it.

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