Engineering Your Way To Business Success – Price and Profit Breakthroughs
February 3rd, 2021 // 10:41 am @ Scott Manning
When it comes to price strategy and the money math of your business, most business owners go about it all wrong. They literally look at it completely backwards.
They look at what everyone else charges and then either go up, down, or the same but for no deliberate reason or strategy around it.
They “set” their price. And then they drive in as many customers as they can get who they can talk into paying for it.
Even reading that just sounds like torture, doesn’t it?
The way to have the greatest success with your business is to be very intentional about your price structure and actually engineer it. Yes, I used one of my favorite words – engineer – to design and build in a particular way for a specific outcome.
Let’s work backwards. I usually start with the questions flowing like this…
How much money do you want to earn every month?
What do you want to do and deliver for that money?
How many people would like you to serve each month?
Now do the math.
If you want to grow the top number you can change either of the two bottom numbers and you get a different outcome.
Now, you can also look at it from a pure experience, delivery, provider standpoint and you can say what do you want to deliver to your customers and you can elaborate on what your relationship looks like with them. Then you can figure out what makes sense for you to ‘charge’ in order to do your best work – as I explained to you last week.
For my doctors, before they get to me, they are usually trapped in what we call a ‘take what you can get’ form of dentistry. They fill up their schedule with patients without thought, reason, purpose and they just do the dentistry that is in the schedule and that then defaults to whatever the total value of the work was for the day as the final outcome.
There is no thought as to: if a procedure takes longer it should be worth more, if the procedure provides greater value it should be worth more, if the procedure actually has more hard costs to do it should be worth more, if the procedure takes a superior skill it should be worth more, and so on.
The point is they are often getting paid for the “what” instead of the “who and the how” and most importantly of all the “why” – which is worth more than any of the others in terms of building a value proposition.
I challenge my doctors to decide what they want their days to be worth and then figure out what type of dentistry they want to do inside of those days to achieve that number and then take as few patients as possible to get to their goal.
Every business can be built like this. The result? Much greater profitability and much less infrastructure (overhead) required to get there.
This isn’t for everyone. Some businesses have a purpose and objective built on volume. However, everyone of those would still tell you that the majority of their profit comes from the highest value customers which are the smallest percentage of the overall number. This brings us to the 80/20 rule which we’ll cover another time in the coming weeks.
For now, here is the biggest switch to make in your mind…
Design an experience that creates the highest value customers in the first place. Done properly, you can remove the price sensitivity from your customers’ minds.
Here is one of the greatest truths about selling and business… if you do not give people something else to base their decisions on, they will always default down to price.
If you want to have price breakthroughs you have to have value breakthroughs and if you want value breakthroughs you have to have experience breakthroughs first.
Are you doing enough to focus on the experience and value building?
You aren’t. You can’t be. There is always more you can do to build value in the minds of your customers and to actually become more valuable to them.
Sometimes all that is needed is just raise your price, sometimes what is needed is growing into the price you have set and improving your conversion, and sometimes you just need to go more fitting customers.
Most often it’s all of the above. Customers want to buy – they want solutions, they want great experiences, they want to use their money to get something that is more valuable.
We will walk through some specific examples of pricing strategy and work on building more value-based experiences (instead of price-focused), next week.
In the meantime, I gave you a formula to engineer, it’s one you should revisit often in your business, especially every time you want to breakthrough whatever limits you’ve put on yourself and whatever limits you’ve put on your customers!
Get to work, this is at the very core of the success structure of any business.
Category : Blog
