Making too many sales isn’t always a good sign
Is pricing a presence in your life that’s constantly hovering in your mind and eating up your attention? Is it a thought you frequently come back to because it taps at your biggest insecurities?
What if I’m priced too high and I’m turning away people without knowing it? What if I’m priced too low and I’m losing money without knowing it?
The less you know, the bigger the mystery pricing becomes. And the bigger the mystery pricing becomes, the less you want to fuss with it. Thankfully, pricing is a knowledge base you can learn and gain confidence in with the right direction and some practice. Here are some examples of that —
Selling too much isn’t always a good sign.
We all do a happy dance when we’re on a sales roll. Closing sales left and right makes you feel like a sales-closing master, when in truth, making too many sales can actually indicate a pricing issue.
When you’re closing at an above-average close rate, it could be a sign that your pricing is too low and that you’re leaving money at the table. To keep tabs on this, figure out what your average close rate is (you can calculate this number by tracking how many sales you convert from warm leads) and track it every month.
For example, my close rate is 50–60%. If I close above that consistently, it’s a sign that I need to increase my prices. You can do the same by gathering data on your average close rates and/or Googling close rates for your industry to compare and contrast. Same logic applies to products — close too high (averages vary by industry) and you may be leaving money at the table.
You only thought about your numbers when pricing
Pricing isn’t just a numbers game, it’s also a brand perception game. Would you buy a handbag for $5 more if it meant that you were supporting a business that employs artisans in low-income countries and makes environmentally-conscious production choices?
The answer is always yes for me, and I bet for a lot of you as well.
Does your pricing bake in this perceived brand value or is it super straightforward, only calculating material and operation costs? If you have a strong brand perception held by your customers and your pricing doesn’t reflect it, that’s $5 per purchase you’re losing.
Pricing is irrational sometimes and that’s ok
There are people out there who will dish thousands of dollars a night to stay in a bougie resort or buy a $6 bottle of asparagus water. Sometimes pricing is highly irrational and that is the playbook you have to roll with. There is no spreadsheet out there that can rationally explain these types of numbers to you or your CFO, and this is where you have to trust your insights on your business.
When all logic flies out the window with pricing, always come back to your deep knowledge of your customers and make brave calls. Don’t downplay the importance of instinct and gut decisions — if anything, it’s something that you should spend more time sharpening for important pricing plays like this one.
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