fbpx

Worry about your business and not ‘what the market can bear’ when increasing prices

by | Aug 21, 2021

When discussing pricing, people frequently mention ‘what the market can bear’ (aka the max people will pay for your product/service) as the upper threshold. Because, in theory, if you charge more than what the market can bear then no one will buy from you. But, ‘what the market can bear’ is an inaccurate threshold and a bad measure of maximum pricing because it’s unquantifiable. There’s no good data on non-commodity products and services. We don’t truly know where the limit is or what people would really pay. We can only test it for ourselves by increasing our prices until we receive too much pushback.

And, more importantly, it distracts you from the real issues. As you raise your prices, you’ll run into all sorts of limiting factors that’re in your business wayyy before you hit what the market can truly bear. You’ll bump into issues with your service offering, perceived value, marketing, sales, service delivery, etc before you price yourself out of the market. It’s easy to say you’re getting pushback because you’re at the market limit and can’t possibly increase your prices any further. But, it’s much more likely a sign of another problem that needs to be found and fixed.

Finding the issue:

Raise your prices: You probably aren’t anywhere near your price ceiling unless you’re hearing someee grumbling about price from your quality leads. If you aren’t hearing anything, raise your prices. You don’t need to start worrying until at least 10% (or a percent you’re uncomfortable with, whichever is higher) starts grumbling.

Ask your leads: Once people start grumbling, then there’s a mismatch between the value you provide and the value people thinkkk you provide when they’re deciding to buy. Ask them if they felt anything was missing from your offer, description, discovery call, etc. Or, if they wish there’d been any additional information. (This is an imperfect way to poll your audience. But, it’s a start. You’re looking for things that can be improved.)

Get feedback from clients: Your clients view your services from a different perspective than you do and value aspects of your services that you don’t even realize are a big deal. Regularly ask your clients for feedback. Ask them what might’ve prevented them from buying from you, what additional info they learned after buying that would’ve been good to know beforehand, what they like (and dislike) about working with you, etc.

Talk to colleagues: Your colleagues are an amazing source of information. They’re in the same field providing the same service to the same clientele. Ask them what they’re charging, when the last time they raised prices was, if they received any pushback, and what they’re doing differently than you. This’ll help you find the low-hanging fruit and easy improvements.

Make things clearer: We know everything about our businesses. We’re living and breathing them, after all. But, your potential new clients aren’t nearly as familiar with your business or your industry. Things that’re obvious to you are completely unknown to your new clients and contribute to the value mismatch. Make your marketing and sales process clearer. Explain and educate things to your leads.

Action Item: Truly ask yourself, “if I was an unsophisticated buyer, would I understand the service I’m selling (from the outside looking in)?”