Determining how much to charge for your products and services can feel daunting. After all, how do you price high enough to make a strong profit but not so high that customers don’t buy?
To charge premium prices and still have customers see you as the top choice, you must focus on creating value. This involves a few important strategies, especially during a recession.
In a sluggish economy, discerning consumers often cut back on spending. This can hurt businesses, especially those that reduce prices, as a way of stimulating revenue growth.
The problem is, dropping your prices as a response to an economic downturn can undermine your market position and do long-term damage to your profitability.
You need to ask yourself: what needs to happen for you to be the most expensive competitor in your industry and still have people lining up to do business with you?
Remember, you never want price to be your competitive advantage.
Instead, you must get potential clients to see extreme value in your products or services.
In an article for Foundr, Predictable Profits’ very own Charles Gaudet discusses five ways businesses can secure premium prices– even during a recession:
1. Appeal to the most discerning consumer.
2. Establish a risk-reversal guarantee.
3. Offer a best-in-class experience.
4. Provide options for preferred financing.
5. Target affluent markets.
Let’s dive right into these five strategies:
Appeal to the Most Discerning Consumer
When choosing a product or service, today’s consumers are more savvy and discerning than ever. With easy access to information and reviews, consumers can quickly find out which companies offer the best quality and value.
According to Forrester Research, the number of interactions required to make buying decisions increased from 17 in 2019 to 27 in 2021. This major shift came about due to changes in communication and technology and accelerated during the pandemic.
What this means is– today’s buyers are researchers. They look for answers online. So it’s important you’re in a position to provide answers when they do this research.
Keep in mind, people are often more interested in quality than price.
To benefit from this preference, winning companies appeal to the discerning consumer who asks questions such as:
- How do you compare to the alternatives?
- What results have people like me experienced after buying your product/service? (Note: This is where highlighting case studies can be extra helpful.)
- What do your buyer reviews say about your product/service?
- What makes you the best at what you do/offer?
To become more immune to market conditions, you must secure and lock in your customers. The best way to do this is to keep them happy for as long as they’re with you.
Read more about it here: “Building a Recession-Proof Business: The Customer Experience Mistakes You Have to Avoid.”
Establish a Risk-Reversal Guarantee
When you offer a risk-reversal guarantee, it shows customers you’re confident in your product or service’s quality. This type of guarantee reassures potential customers that they can do business with you without risk.
There are several advantages to offering a risk-reversal guarantee.
First, it helps increase sales. People are more likely to buy from companies that take on consumers’ risk.
Second, it helps build trust between the company and the consumer.
Finally, it helps increase customer satisfaction.
One of Predictable Profits’ business coaching clients extended his company’s 15-day guarantee to a 365-day guarantee. An extra $500 was offered if a buyer followed the company’s process and didn’t achieve the promised results.
This simple change in the guarantee allowed the business owner to increase prices by 25% (from $1,495 to $1,997). At the same time, his refunds dropped to less than 1% and sales increased by over 30%.
Risk reversal is one of the easiest strategies to test and one of the fastest ways to grow your profits. Read more about it here: “3 Ways to Increase Sales with Risk Reversal.”
Offer a Best-in-Class Experience
With an unparalleled best-in-class experience at every touchpoint, you create loyal, lifelong customers who are happy to pay premium prices for your products or services. It’s this commitment to customer satisfaction that can differentiate you from your competitors.
Tony Robbins once said, “Success leaves clues. People who succeed at the highest level are doing something differently than everyone else does.” And when it comes to providing a best-in-class experience, we can all take a cue from Apple.
From the purchasing process to customer support, Apple goes above and beyond to ensure happy customers. This dedication to customer service is one of several reasons Apple can charge premium prices. After all, people are willing to pay more for a product that comes with peace of mind.
When you buy an Apple product, you know you’re getting a best-in-class experience. If you ever have a question or problem, you can be sure you’ll get a quick and helpful response. This comprehensive and friendly expert support puts people at ease and reduces buyer’s remorse.
Companies like Apple, Nordstrom, and Zappos are all actively putting their customers’ needs first – doing everything they can to provide real value with their products and services. And that is what builds relationships.
Read more about it here: “Relationships: 3 Ways to Get Your Customers to Fall in Love With You!”
Provide Options for Preferred Financing
Especially during a recession, many customers hold their money tightly.
For some, financing with installments can be a more affordable way to make a purchase. And from a psychological perspective, parting with a large sum can feel more painful than spreading the amount into manageable payments.
This option can be especially helpful for your premium, big-ticket items that may be outside of someone’s normal budget.
You can provide financing options through your own in-house programs, or you can partner with banks or other financial institutions.
Both options have pros and cons.
Whichever route you choose, offering financing gives your customers more flexibility and makes it easier to buy your product or service.
One of Predictable Profits’ agency clients sells a high-end service for $25,000. Rather than discounting, he offered to finance the $25,000 over 12 payments.
Within 12 hours of announcing the new financing, the client received over $250,000 in new sales.
Now’s the time to recession-proof your business and thrive – and mindset is everything. When times get tough, that’s when it’s most important to get creative with your business.
Read more about it here: “How to Recession Proof Your Business – 4 Examples of Companies That Thrive In A Down Economy.”
Target Affluent Markets
Business owners and executives often mistakenly believe they need to appeal to the widest audience possible. However, this approach ignores the fact that there is more money to be made in targeting affluent markets.
Affluent consumers are used to paying a premium for goods and services.
To attract and retain them, you must focus on providing a superior customer experience at every touchpoint. This can include features such as expedited shipping, concierge-level customer service, or personalized product recommendations.
Keep in mind: the people who will be the most satisfied with your products or services, who identify with your branding, who are willing to form a relationship with your company and come back to do business again and again, are the people who are truly worth your time and effort.
Read more about it here: “Customer Experience: Why Saying “No” Could Be Your Best Sale.”
Conclusion: A Final Word on Charging Premium Prices for Your Products and Services
As anyone in business knows, it’s tempting to discount prices during economic downturns. After all, when people tighten their financial belts, you may think they’re less likely to spend on luxury items.
However, as you see, charging (and getting) premium prices can be relatively easy when you have proper positioning and prioritize your market’s preferences.
The key is to resist the temptation to discount your prices.
Instead, focus on what makes your product or service unique and valuable. If you can position yourself as a high-end option, you’ll be more likely to succeed, even during tough economic times.
So don’t be afraid to charge premium prices – it could be the advantage that keeps your business afloat during tough times.
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