If you're Jeff Bezos, you can afford to sell products at lower prices than your competitors to acquire and retain customers. But if you're not Jeff Bezos, well, you may need to consider a different strategy.
Sometimes, the best way to grow your business is to do the opposite, and raise your prices.
If you're an entrepreneur in the services business, selling consulting, coaching, marketing or advisory services, and you're struggling to generate meaningful revenues, you may want to consider increasing your prices--substantially.
Now, this advice isn't going to apply to every business. I think the majority of companies want to be perceived as having lower prices than the competition, because their customers are price conscious. But some businesses, such services businesses or luxury products companies, can increase revenues by pricing their services out of reach of most customers.
Raising your prices might be the breakthrough you've been waiting for. It was for me.
Five years ago, my company was marketing rewards-based crowdfunding campaigns on Kickstarter and Indiegogo. Our average fee was $2,500 per month for a two month project, and we'd provide the client with an account manager and social media marketing expert.
These small deals were tough to sell. The typical reaction we got after sending our proposal was something like "Darren, if I had $5,000, I wouldn't be crowdfunding," or "Can I pay your fees after I complete my raise?"
While we managed to sell deals at this level for almost two years, our revenues were small, our gross margins were terrible, and I was still working my day job.
I came to the conclusion that I was failed entrepreneur; that I simply didn't have what it takes to succeed as a business owner. I remember feeling irritated, dispirited, and incapable.
During this low point, we were referred to a serial entrepreneur who wanted us to run a crowdfunding campaign for a science fiction series he had dreamed up. He had no background in film, no script, and no creative assets.
Since I was ready to quit, I figured I had nothing to lose. As he was describing his vision for the project, I cut him off, and threw out a number I was certain would get us kicked out of the meeting: "It's going to cost $50,000," I said loudly. "The amount of work we need to do for your campaign is substantial, and we'll need additional resources to make it a success."
After a long, deafening silence, he responded: "Well, if that's what it's going to take, let's do it." I couldn't believe my ears. We had just received a verbal on a $50,000 project, a full ten times bigger than any project we had ever sold previously.
This was a breakthrough moment for my company, and I learned two powerful lessons in the process. First, I realized that raising our prices increased the perceived value of our services. Second, with a larger contract, we were able to hire more experienced delivery team members, which increased our clients' likelihood of success.
It was a win-win-win for our company, client, and employees.
Since then, we have gone on to sell projects for $100,000, $250,000, and even $500,000. We developed a premium brand that now operates at the high end of the financial marketing industry, and have worked with iconic brands like Fatburger, and celebrities like Drake.
Our secret to success? We added a zero to our price tag (literally), built a perception as a premium marketing company, and delivered successful campaigns by hiring best-in-industry financial marketing experts.
If your services business is lagging and you're seeking growth, try boosting your prices as a strategy to attract new customers. You should also consider moving upstream and focus your efforts on selling to higher net worth clients or larger companies who can afford your premium services.
The further upstream you go, the easier it will be to sell your services, even with an extra zero. You have nothing to lose by trying--so go for it. And who knows, you may even transform your business into the company you've always imagined, and deserve.