ENTREPRENEUR TO MILLIONAIRE MYTHS #2 YOUR CLIENTS ARE PAYING WHAT YOUR PRODUCTS AND SERVICES ARE WORTH – FALSE, IT’S A HUGE MYTH

If you think your company has achieved the perfect “Goldilocks” of pricing – not too high and not too low, and your offerings are generating what their worth, then I have news that you must use right now. Our client engagements have shown that 95% of leaders are pricing their products and services either too high or too low. The other 5% don’t care. 

In this article I’m going to help you understand why your pricing is probably wrong – maybe even way off – and how it loses profits or turns new clients away. And more importantly how you can fix that flaw so you’re not leaving money on the table or hurting your brand. 

MYTH BACKGROUND

As I explain in the book Entrepreneur To Millionaire (McGraw Hill 2021), the majority of leaders price their products and services based on the classic cost-plus model. In simple terms, they look at all their costs and then add some percentage of margin (usually 20% is the de facto standard). The theory being that “covering” the costs and earning a “fair profit” was the right pricing strategy. It was. Last century. Today not at all. But who makes up this “fair profit” committee that made the universal decision of “20 percent” and how do they know what your buyers think and feel? 

Our work reengineering thousands of pricing models, strategies, new service launches, and Go To Market efforts, shows that the “cost plus” model is stale and broken. That’s because what worked so well in the tangible product push market till the turn of the century, is out of touch in the 86% intangible services-based economy today. Even more challenging, many companies offer a mix of products AND services with their offerings. 

Now I know you might be thinking that you don’t use a “cost plus model” so instead you might be saying, “We price our services to what the market will bear or within range of our competitors. Maybe you even have a sliding pricing model based on how much the customer buys. 

Those are all good methods for people new to business. However, we have found even using all those strategies and others, about 80% of our client’s offerings were priced too low, many much lower than they should be. The reason is none of those models incorporate the actual or true worth of the impact of the product or service. 

When the pricing is not tied to the “strategic value proposition” of the offering it is almost always priced too low. That mistakes hurts your profits, hurts your brand, and never maximizes business wealth. Your pricing should primarily be based on the “value” of your offering, not your costs, the market, or your competition. 

CONCLUSION/RECAP

You may not realize it, but there is a high probability that not only is your pricing off, it’s probably too low, and is hurting your business. Once you identify how much it is off, go through and look at the number of transactions or contracts and multiply out what you could have earned. Many entrepreneurs are shocked by what they missed. And don’t think your customers or clients will like your offering more because it is priced low – just the opposite. 

CALL TO ACTION – INSTANT PROFITS

Go to Phase II Market Ready and chapter 8 in Entrepreneur to Millionaire (go to Amazon right now and get your copy if you and your teams don’t have one) and read Tiered Pricing Strategies. Read and review with your team and discuss what you are doing right and what you are doing wrong. Use the Action plan at the end of the chapter and focus on this question – what is your offering’s value proposition? 

Look at your pricing and determine what is your core pricing strategy or philosophy for choosing what to sell your offering for? If the price point wasn’t based on value, then make changes immediately. And before you make any radical changes make sure to work through Revenue Ready and Market Ready phases and principles of Entrepreneur To Millionaire Roadmap. That is the best way to hit the “value pricing bull’s eye” and earn what your offerings are truly worth. 

If you’re ready to be even more strategic and make a lot more money ̶ sales, revenue, and profits ̶ faster, master the whole chapter on Tiered Pricing Strategies and learn how to create explosive revenue growth by giving away some things for free and others with extreme margins. These more advanced strategies will attract and retain perfect clients forever and help you Own The Market. 

BOOK INFORMATION

Is Your Business Growing or Creating Wealth?

       “A must-read book.” —Mark Cuban

Amazon: https://amzn.to/2WJSNYw

Kindle Edition – https://amzn.to/2Kw9cgW

Bulk Sales 25+ for 40% off www.porchlightbooks.com

AUTHOR BACKGROUND

Kent Billingsley is the founder and president of the Revenue Growth® Company, LLC (TRGC). He is a published author, international keynote speaker, and business transformation expert. He has become America’s Revenue Growth® Architect by helping thousands of entrepreneurs and CEOs (representing over a million employees) generate several billion in new sales, as well as tens of billions in new revenue and profits for large corporations. He has personally designed, built, transformed, and turbocharged several thousand organizations in 36 countries. Over the last 20 years, his proprietary content and trademarked programs have helped thousands of entrepreneurs and employees become millionaires and multimillionaires by “creating wealth” inside their companies. He can be reached at [email protected].