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Be the MOST expensive in your market

Thursday, May 26, 2022

Be The Most Expensive In Your Market

You should always dictate your own value. Do business on your terms. And you should not be afraid to set high prices.

I first started to be concerned about my pricing early in my career when a few times in a row, people were surprised at how low it was. They ought to be in shock about how high it is, not about how low it is.

And there's a saying at the racetrack, “You've never bet enough money on a winning horse.”

After the race, when people are sitting around a table, they say you should have bet more. That’s an easy decision to make after the race, of course. But the corollary to that in business is the sinking feeling you have after you quoted a fee, and had it immediately accepted. And you say to yourself, “UMPH.”

If you're not getting any price or fee resistance at all, you're leaving money on the table.

But people think they wanna sell in a zero resistance environment. Well, no you don't!

If you haven't read Stuart Wild, by the way, get a couple of Stuart Wild’s books and read 'em. Now Stuart's sort of out there on the metaphysical side of things, but a lot of what he says about money is right on, specifically this principle, “When they show up, bill them.”

It means stop doing anything for free, unless you're doing it for a very specific strategy. Let me explain the difference.

A lot of people give away stuff at random on an ongoing basis, mostly their time. And so you will give away advice or a chiropractor will adjust somebody who comes over for dinner, in their living room, on a coffee table, giving away stuff at random, letting your time and your value be abused.

It is the equivalent of letting your time and your value be abused by people. The less of it you do the better off you'll be.

Here is the corollary for what happens when you don’t value your time.

In the ad agency business, the norm still is free pitch meetings. And so a client company will announce that they're going to consider a new agency, and every agency in town gets an appointment. So they all trot in with flip charts (and today I assume laser pointers, power presentations and so forth) and they all do ‘dog and pony’ shows, showing off an immense amount of work they’ve done ahead of time. They prepare mock campaigns and everything, and they do all this for nothing.

The smart companies, a lot of big companies, do this routinely and they get away with it, over and over and over and over and over again.

It astounds me.

Three or four times a year, they announce this and they invite all the agencies in and all the big ones, and they have no intention of changing ad agencies, but they get two days of free ideas. They got five or six really good ideas that they decide they should be doing and they got 'em all for nothing. Now, if you're on their side of the table, that's pretty smart.

But if you're on the other side of the table, participating in that is not very smart at all. And so very quickly in the ad agency business, I stopped doing it. I said, “No, we don't. That's not how we do things. The way we do things is you give us money. Then we prepare a bunch of ideas. And then if you use any of 'em, you give us more money, but the money you gave us is discounted from the money you're gonna give us.”

It’s a formula I still use today.

My motto is, “There ain't no free lunch, especially with me.”

However, a specific strategy for ‘free’ is launching a business from scratch quickly by buying the customers.

For example, one fella I knew tells a wonderful story about how he created his whole customer base for his deli and never had to advertise ever, ever, ever again. And essentially all he did is this: to everybody who worked within a reasonable circumference of the deli, they gave them free lunches. Not two-fers, just free. They fed everybody for free. And that's it.

And now there's enough customers who keep coming back, assuming that the food's good and the service is good and all of that. And that's cheaper than building the business slow over a year, two years, three years, and spending a whole lot of money on advertising is cheaper just to buy the customers in the first place in one big lump.

Now that's a legitimate strategy for doing free, but when you do ‘free’ on an ongoing random basis, it's a bad idea.

The truth of the matter is you can charge any darn thing you want and get it. There is a market somewhere for every price point and in almost every business, you can justify any price you wish to charge.

Take a dentist, take a chiropractor, take a carpet cleaner, take a pest control person, take a marketing consultant. Name the profession you wish and go into a market and I guarantee you, you will find people with very low prices. You will find people with very high prices. You will find people with prices in the middle. And in many cases, you will find the people with the high prices are prospering more than the people are with the low prices.

If you’re not sure how to dictate your value and your time (aka your price), then this may help.

In the restaurant industry some years ago, I had a client who was one of the co-founders of the Steak & Ale restaurant chain. And they started Steak & Ale during a recession. And their positioning was to come in low, to be able to provide an environment and a steakhouse dinner for a relatively low price.

After he’d sold that business, he said to me, “The strategy was perfect for the time that we implemented it. But as a long term strategy, it's a lousy strategy for the restaurant business. Because often it's a lousy strategy for every business, because somebody will go lower. But what you really wanna be if you're in a restaurant business, is you wanna be the highest priced guy in your city with the highest margins in your city, cuz there's always a market for the top-end, recession or no recession.”

And he said, “In retrospect, we took the easy way in and yeah, we made a lot of money and I got out at the right time. But if I wanted to stay in the restaurant industry for my entire life, that's not the strategy I would employ.”

I think the way you set your price is you may wanna do competitive research, you may want to consider all sorts of other factors, but the primary factor ought to be how much money do you want? That ought to be the very prime factor. You should set your price based on what you want.

You should always dictate your own value. Do business on your terms. And you should not be afraid to set high prices.

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