Where Should You Be Priced?
A question that a lot of businesses tend to grapple with is where their pricing should be. There are a lot of inputs that go into the price an organization can charge, and not all of them are fully considered. The age-old first rule is to charge what the market can bear. This requires competitive intelligence, and if your pricing is out of line, generally, the market will let you know pretty quickly.
Second, you need to have done the math in your financial model to know the pricing you need to achieve your desired operating profit. This may be the required gross margin contribution to cover operating costs for product sales, or the billable rate per hour for professional service firms.
But the story doesn't end there. Why is it for the same product or service some organizations can charge considerably higher than the market, and customers are happy to pay? While at the same time, other organizations struggle to capture the average price and are continually discounting?
The premium your organization can or cannot charge is due to the intangibles of your organization:
- The customer experience you create
- The quality of your offering (a product or a service)
- The knowledge of your team
- The ease of use or ease of working with
- The overall value your offering provides to the customer
All of the above adds up to your brand experience. And when customers or clients experience an exceptional brand experience, they will not question paying a premium for dealing with your business.
None of these items get recorded on your income statement as a line item, but they influence the top line item significantly up or down. If you're struggling to measure and improve your customer experience, we can help. Read more here or give us a call today.
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