It’s a Pricing Miracle!
Who is More Price Sensitive: the Seller or the Buyer?
I say this often: the seller is often the most price sensitive person in the selling conversation, not the buyer. Audiences and clients never believe me at the beginning. It’s counter-intuitive, but it’s true. I lead workshops all over the country, and I ask questions at the beginning of the workshop and again at the end. Audience members hold electronic answer devices and submit answers anonymously, so I think it’s reasonable to trust the data.
One question I ask before and after is: how much pricing power do you have in the market? The answers at the beginning are generally skewed towards “very little power.” I ask it again at the end, and I get a very different answer, skewed towards “a lot of power.” Here are the specific results from a recent workshop of business owners across different industries:
Before Workshop After Workshop
I joke with audiences that a miracle occurred in their industries while we were in the room, that their market power magically increased while we sat there. But the point is powerfully made: the people sitting in those seats in large part determine their market power through their preparation and their confidence in their value story. They are undervaluing and underpricing their products every day, reinforced by customers telling them their prices are too high. (That myth has been debunked in my last two blog posts.)
Audiences agree with me at the end of my workshops: often sellers are the most price sensitive person in the selling conversation, not the buyers.
What I’m not saying is that you can raise prices across the board just because you think you can. You still need a careful strategy to increase prices on less sensitive products to less sensitive customers. (I think I know a pricing consultant who can help with that.) What I am saying is that you are underestimating your ability to increase pricing on some products, on some extra services, on some things you give away today, and to some customers. It’s costing your profitability dearly.