August 20, 2013
Far too many companies are afraid of what might happen if they raise their prices. The fear is that the high price will be a turn off to customers and sales will simply dry up.
A high price is not something to avoid. In fact, a high price can be an excellent tool in closing more sales. Vital to this strategy, though, is how you present the high price and the context in which the customer sees it.
Presenting a high price to a customer should not be viewed as a way to kill a sale, but rather as a way to generate interest and dialogue. Strategy behind the high price is not just having a high price, but having an ultra-high price too!
First, develop pricing tiers for your products/services. Begin with an ultra-high price that seems absurd even to you. Just remember that as you develop your ultra-high price offering, you need to have it substantiated with an actual product and service for the customer who does wind up buying it.
Second, develop more pricing options, each one at a price point cascading downward from the ultra-high price offering. Your goal is to have the price point at which you normally sell to be 40-50% less than the ultra-high price.
When developing the price offerings, make sure each one is supported with the right mix of features and benefits. What makes this approach work is that you the salesperson now have options you can discuss with the customer.
To help demonstrate this more clearly, below is how the tier may appear if the price at which you normally sell is $9,995.
$14,500 Ultra-High Price
$12,000 High Price
$9,995 Normal Price
In this example, there are two options priced much higher than your normal price. By having two options priced higher, you allow the customer to contrast your normal price against prices that are much higher.
When you discuss price with your customer, always start with the ultra-high price option. Allow the customer to be shocked by the price! In fact, the more they’re shocked, the better. This approach conditions the buyer to be more comfortable with a lower price, which in turn will help them be more willing to buy.
Result is you can move the customer down the tier to the high price option or the normal price. They feel good about getting a “deal” with the lower priced solution.
This strategy works for several reasons. First, you are leveraging the power of contrast. The customer sees the contrast between the ultra-high price and the normal price and they begin to feel the normal price is a bargain. Second, there will be times when the customer does choose either the high price or ultra-high price option. In either case, you win by making a larger sale.
Obviously, you can’t have this strategy be mere gimmick. You must be able to fulfill the promise of the ultra-high and high price options. Throwing out a price you can’t back up will get you in trouble and will jeopardize not only your profits, but also your credibility.
As a salesperson, if you mention a price you don’t believe in, the customer will see right through your lack of confidence and your credibility will be lost. This is why I firmly believe the ultra-high and high price options must be substantiated to allow the salesperson to believe in it.
I’m not asking the salesperson to fall on their sword for it, but I am saying they must believe in it enough to present it with confidence. Companies and salespeople who use this strategy effectively are those who engage the customer in a discussion and understand the importance of starting high.
Even when you present the normal price option, be sure to keep the ultra-high and high price options in front of the customer. This allows the customer to fully grasp the contrast of the prices. Additionally, without even intending to, you will generate sales at the ultra-high and high price levels.
The “ultra-high” price strategy works in numerous industries and channels.
Recently, I presented the strategy to a company president who then implemented it with his company. About 45 days later, I received an email from the president stating that not only does the strategy work, but it also reveals that there are customers who want the ultra-high price option. The email ended with the president stating that based on the success they were having, they were looking at moving all of their prices higher.
Strategies like this may initially seem impossible, but they are worth considering for your company. You will be surprised at the positive results.