When Steve Jobs and Steve Wozniak founded Apple Computer in 1976, they decided to embark on a premium pricing strategy in an otherwise commoditized industry. Jobs focused on differentiating the Apple product, making the mundane into something more. The rest is history—a $347 billion company with profit margin of more than 21 percent in the most recent fiscal year.
Smaller businesses can make the same choice. Here’s how. As CEO of Beryl, a company that handles hospital interactions with patients (like people calling for physician appointments or clinical advice), we charge more for our product than our competitors. In fact, we are as much as 40 percent more expensive than the rest of our competition. And, we don’t apologize for that.
You may wonder how we pull that off. After all, when you strip away everything else, Beryl is in the call center business, which is known for low margin and high attrition, and often seen as a commodity. Yet we achieve profitability five to six times higher than our competitors, and we sustain it year after year. We invest in our employees and our company "culture," so our staff enjoys what they do and where they work, and, as a result, deliver better, more hands-on service.
Premium pricing isn't about profitability for the sake of profitability. What allows us to charge more is the fact that we offer our hospital customers a better way to maintain relationships with patients, if they choose to pay for it. Here are five tips explaining how we implemented our premium pricing strategy and how you can, too:
1. Articulate your value
It’s up to you to communicate why your product or service costs more. Apple customers pay for unique design, and peace of mind from security concerns. At Beryl, they pay for our culture and customer service. We act as an extension of local health systems, and we assure clients the best people represent their brand. We invest heavily in a community of fun because happy people provide better service. We also invest in recruiting and training people with empathy and compassion, something that is very important in health care.
2. Align your offering to their core objectives.
If you want customers to pay more, it is important to connect your product or service to their most critical strategic initiatives. At Beryl, we do more than just conduct phone calls on behalf of our hospital customers. We also gather real-time data that helps them better understand their customers—patients—and build their business. This is even more essential now that hospital reimbursement for Medicare is tied to the patient experience. Apple did this by reinventing the computer into a device that combined a computer, phone, and music player.
3. Elevate the conversation beyond the product or service you sell.
By attaching your mission to a more global topic, you have the opportunity to connect with clients on a more strategic level. One of The Beryl Companies, The Beryl Institute, generates research and dialogue about one of the most important topics in health care, the patient experience. Similarly, when people commit to the Apple brand, they aren't just buying a computer or a music player or a mobile phone. They are buying into a desire to "Think different," and stay on the cutting edge of technology.
4. Put a price on everything.
If you are more expensive, you should be able to put a price on what your customers receive for their extra expenditure. For example, since Beryl’s calls cost customers $1 more than our competitors do, we're sure to explain that extra dollar: $.20 for better data, $.15 for more extensive training, $.10 for recruiting better people, etc. This helps the customer understand why our business charges more. If your customer cares about the premium features you offer, they'll continue to choose you over the competition.
Apple conveys the value of its higher prices by being first to market with new features. The iPhone's debut caught competitors off-guard. The "apps" interface was a superior experience, and its novelty allowed Apple to price it accordingly.
5. Stick to your decision.
Once you become a premium provider, you must commit to it if you intend to maintain your pricing. Sometimes that means turning away potential clients who value low prices over quality services. Negotiating down your price is a slippery slope. Notice that Apple only cuts the price of its products once the next generation is introduced. At Beryl, it is tempting for us to price some of our new services more competitively in order to gain entry into the market. However, we realize that once we go down that path, we can't go back.
Not everyone wants to drive a Cadillac. Not every customer will choose to pay more. No wonder some businesses compete solely on price. But, if your business has a sustainable competitive advantage, like Apple's ownership of creativity and design, or Beryl's impeccable customer service, take a bold step forward and ask the market to place a higher value on it.