5 Ways to Charge Higher Prices

I have never liked the discount business or any business operating on a tiny profit margin.

To me, it's more rewarding to command a higher price, charge premium fees – and get paid very, very well for what you sell.

But in a competitive world where many other businesses seemingly offer products and services similar to yours, how do you command a premium price?

There are five factors you can control or exploit to enable you to charge a much higher price than your competitors in virtually any field – and have more customers than you can handle waiting in line, cash in hand, to pay it.

The first factor is supply and demand. According to simple economics, the greater the demand for something and the more limited the supply, the more the seller can charge and get paid for it.

Since you're not OPEC, you probably can't control the supply of your product or service available to your customers. So what you have to do is create an overwhelming demand for you, your product, or your service.

Perhaps the easiest way to do this is to position yourself as the pre-eminent expert or authority in your field.

If people view you as THE guru in property taxes, hazardous waste clean-up, or whatever your field is, they will come to you first, knocking each other over to hire you instead of your lesser-known competitors.

The second factor you can control is your market niche. As a rule of thumb, the narrower your market niche, the more you can charge.

Specialists can always charge more than generalists. If you are a marketing consultant handling any small business clients you can get, you have lots of competition and great difficulty commanding a premium fee.

On the other hand, if you specialize in the marketing of accounting practices, accountants will pay a premium to get your advice because it applies to their own situation.

The third factor you can control is value. If your competitors all sell audio CD albums with six cassettes for $79, and you want to charge $300 for an album with six CDs on similar topics, why should the buyer pay it?

One way to differentiate your product is to add value. In the above example, you could include a CD-ROM with software programs of use to the buyer and related to the topic of the audio album (e.g., if the album is about time management, the CD-ROM could contain a personal day planner).

The material cost is only a dollar or so per CD-ROM. But the perceived value of software is easily $100 or more, enabling you to charge a premium price for your package

And that's the trick: to add extras that have a high perceived value but don't cost you much.

Years ago, when I was selling business writing seminars to Fortune 500 corporations, I charged $3,500 a day. Many other trainers charged anywhere from $1,500 to $2,500 a day for similar programs.

To add value so I could get my fee, I offered unlimited free 30-day follow up, where the attendees could call me for advice and to ask questions without charge for a full month after the seminar date.

While this follow-up service had a high perceived value (I described it as a $1,000 value in my sales literature), and training directors loved the idea, in reality very few seminar attendees took advantage, so it cost me almost nothing to deliver.

The fourth factor you can control is ROI (return on investment). If you design your product or service so that it generates a large ROI that is easy to see and measure, it will be much easier to sell at the price you want to get.

As consultant Jay Abraham says, "Will you give me a quarter if I give you a dollar?" If you can prove a 4:1 ROI from your product or service, it's like selling a dollar for a quarter – an easy sale to make.

The fifth factor you can control is the customer's concern about whether he will be satisfied with your product. You can control this by offering a money-back guarantee.

Guarantees overcome sales resistance. If you guarantee the customer will be happy, and that you will refund his money if he is not, he is more willing to pay your price, no matter what it is.

And there you have it. Increase demand for your product or service … target a vertical market niche … add value … generate a good ROI … guarantee satisfaction … and customers will gladly pay your price, even if it's 50% to 100% or more above what your competitors charge. Believe it or not.

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Published: October 28, 2010

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