All roads in business eventually lead to the bottom line. Everything we have done to this point has been to create value for our clients. This value will in turn give us the opportunity to charge more then would be normally possible. How do we charge for our products and services? The cost-plus method is the typical, trusted formula, however, this is leaving money on the table. Of course, we should have a very accurate method to measure all costs, and there are great accounting tools that are available to measure profitability.
However, when we successfully exceed expectations, we can charge more because the client will happily pay more. Value based pricing needs to be an integrated philosophy, considering every aspect of the client experience with your company. Only then can you ask for a higher price, and your clients will be thrilled to pay.
When you price with the consideration of perceived value, you focus on the results, not the process. Everyone on the team must be committed to staging this concept, so that nothing that the client sees will sacrifice the margins.
If you want to establish your business as "value based", then you need to target the proper consumer for your offering. Not every consumer is a potential client. The effort to communicate your "value message" needs to be directed to a receptive ear. You must make the value you create very apparent and understood. For example, just because you are efficient in running your business, doesn't mean the client will care about that, and therefore it may not create any value that you can charge for.
With this in mind, you must focus on serving the segments in your marketplace that will respond to the value you create. Who wants to buy a great experience, as opposed to those who only care about price.
Once you have zeroed in on your target market, you can begin your work on delivering value, but to do this just like anything else in business you must create value that your competitors do not offer. Remember, when all things are equal, it is up to the entrepreneur to make things unequal. This will separate you from everyone else in the mind of the consumer, as long as she understands what the value is, that you are offering.
Your team needs to understand this mission in order to pull it off successfully. All employees must see how their responsibilities contribute to creating and delivering the value message. Any lapse in staging a great performance for your client will potentially hurt the bottom line.
This all sounds great, but no one will buy without at least considering the price. This is where most of us get frustrated. Price is important, but it is not the number one reason why consumers make buying decisions. Still there are plenty of times when we hear this infamous question, "can you do any better?"
Negotiation, the dreaded word. How can you successfully negotiate a price when everything you have done to this point has been to demonstrate the amazing value you offer? The first and most fatal mistake is to offer a lower price without the client giving up something in return. Why should you give a lower price simply because your client demands it? You do this because you leave price as the only negotiated option. You should negotiate the offer not the price.
If you are asked for a better price, you need to be prepared with a proper defense. You could say: "The price I have offered you is based on providing you with making your interior beautiful, but if you want to spend less, perhaps we can reselect other choices of fabrics that are in a lower price range." This way the client has to make a decision that there is a trade-off in order to get a lower price. When you negotiate the offer, the client must deal with the choice of deciding whether the value you initially presented is worth giving up for a lower price.
Pricing, however, is rarely the issue. Clients who want to negotiate usually do so because you have not effectively communicated your value message. It is up to your team to fully understand, that the success of the organization depends on each and everyone performing. Nothing can be left to chance if you want to charge based on the perceived value.
If after all is said and done, and you loose an order, one of two things have happened: Either they went to the competition or they decided to wait and do nothing. In over 80% of the time it is the latter. Why, because usually there is not a competitor that is a perfect alternative. This happens when you have positioned your offer in the mind of the consumer as unique and they can't shop value. Therefore, a lost opportunity may not be lost forever.
Image by Masta
Neil Gordon, The Designer's Coach is a coach and consultant for Interior Designers. His website, http://www.thedesignerscoach.com offers seminars, articles, newsletters as well as valuable advise for designers willing to improve their business. Please visit the site to sign up for the free newsletter.