Pricing Confidence
Pricing is hard, I get it. It is hard enough to come up with a price in the first place but can then be even harder to communicate it. In meetings with buyers there will come a time when you are asked ‘how much’? How you answer that question will either set your business up for success or failure. There is a lot riding on it. All too often it comes down to pricing confidence.
You know the value of your product but to get a listing or to make the conversation easier, it’s all too easy to go in with a lower price. Whether it is fear of rejection or confrontation we go in a little lower than we probably should. And then think, just this time a little lower still because I really want the listing. And I know, I can offer a discount too even though they have not asked.
Before you know it, you are only just selling above cost (if you are lucky) and are certainly not selling at the value your product is worth or deserves. However, with confidence it does not have to be this way.
In this article I am going to give you 5 tips on how you can increase your confidence before your meeting. How you can gain the confidence you need to sell your product for its true value.
LEARN YOUR WAY:
Pricing Confidence 1: Do your Research
It is a simple truth that if people value what you are selling then they will buy it. This works for consumers and retail buyers alike. When you designed your product, you did this with the consumer in mind. You have (or should have) conducted market research and investigations into what the consumer wants and why. You will have tailored your product to what the consumer wants and needs.
When you are preparing for a meeting with a buyer, think along the same lines. You need to know what they want. What they need. The buyer will have their own criteria. You have to make it easy for them. The more your offer suits them, the greater the value they will get from it and the more likely they will buy from you.
Whether it is understanding their margin expectations or being able to show how your product suits their customer and why. Do your research. Make sure you know how your product will help the buyer. It is only too obvious to buyers who has done their homework and who hasn’t. Doing your research will put you in a better position. If you are more prepared you will have more confidence.
Our article on how to price a product for retail can give you more ideas to help you understand retailers needs.
Pricing Confidence 2: Know your value
Your pricing confidence will increase if you know your value. Once you have done your research and know what the buyer wants, you need to prepare how to communicate your value to the buyer. If you do not have a clear idea of the value you will bring, the buyer will not either.
By matching your product and your offer to what the buyer needs you will be making it easier for them. The easier you make it, the more likely they will buy. There are tools you can use to match your product’s strengths with your buyers needs. I particularly like Stratagyzer Value Proposition Canvas but there are others too. Even if you simply brainstorm on a rough piece of paper it will still get you to a better place.
Know your value, know how to communicate it and the confidence will follow. You will be better prepared and more confident to have the pricing discussion. This quote from a connection of mine says it all:
“The turning point for me was when I equated what I was selling to the outcome they were receiving – as my clients have said, I transformed their world. Knowing your value, your true worth gives untold confidence.”
Pricing Confidence 3: Know what you want
Before you go into any meeting you should know what you want to get out of it. Pricing discussions are no different. It may feel like this one is a no-brainer. You want the buyer to buy your product! But it is not as simple as that is it. There is another layer to drill into. You must be more specific.
If you know what you really want, you know what you might be willing to negotiate on. Do you want listings in all stores? What about shelf position or being included in advertising? What else do you value? If the buyer does ask you for a discount or to reduce your price it helps if you know what you would want in return. I don’t think giving discount without anything in return is a good idea. It can be a signal that you’re happy to erode margin every time the customer asks. Once you move away from your first price it needs to be for a reason.
‘You want 10% discount? maybe I can do that in return for ….’
It could be faster payment terms, a volume commitment or anything else you value. It shows the customer you’re more than happy to discount if they can provide value in your direction and it also shows that you’re offering a genuine discount if it requires justification. It is the buyer’s job to get the price lower. Do not be put off, be prepared instead.
Pricing Confidence 4: Knowing what you can afford
It’s all very well knowing what you want but you also need to prepare what you can afford. As part of your pricing process, you have hopefully calculated all your costs so you can be sure that you can make a profit from the price you sell at.
You have your price or package for your product that you want to pitch at your meeting. You should know what profit this gives you. In an ideal world this is the price you should sell at. However, you may have to compromise on this. You need to know BEFORE the meeting what your minimum price would be that would still make you the profit you need. Be strict with yourself on this.
Remember that any price you agree will set a precedent. If you know what you can afford, you should not be tempted to agree to something you can’t. Here is a simple margin calculator that could help.
Pricing confidence 5: Practise makes perfect
It is human nature to be more confident in familiar situations. In areas of our comfort zone. When we have done something many times before we learn to believe in ourselves. We find it easier to predict the outcome and become more confident and less fearful. So how else can we build confidence before our meetings?
We can practice. Try performing your pitch to yourself in front of a mirror. Think about the words you will say and how you will say them. You can even try videoing yourself and watching it back to see how you come across. It will be awkward at first, but it is far better to practise at home than in the meeting itself.
You could even try it with friends. Give them your sales pitch and your price. Listen to their feedback. You could get them to challenge you, so you get used to a pushback. Try different ways of introducing the price. Find the one that you are most comfortable with.
Practising saying something out loud is powerful. Even if there is that inner wince or uncomfortable feeling when you say it to someone and await their reaction. The more you practise something, the easier it gets, so be brave and give it a go.
Summing up
If there is a face-to-face element of your selling, then one of the things that affects your prices is often confidence. Doing your homework before the meeting will make a difference. The more you practise something the better you will be. It’s not an overnight thing, but the more you practice the ideas and tips the better you get.
Make sure you know what they value, believe in your value, know what you want and what you can afford. And then practise. You may still have nerves going into the meeting. There is nothing unusual about that. However, now you can have the confidence of having prepared.
In our next article we will be giving you 5 top tips for pricing confidence in the meeting itself.
What next?
If you would like to talk about your pricing or if you are stuck on a pricing issue and not making the profit you should, then join one of our personalised Pricing Power Hours. They help you to get unstuck fast and get your business moving again to get the sales and profits that your product deserves.
If you are feeling stuck, confused, frustrated, or just need someone to talk through the bigger picture or help you gain focus, a Pricing Power Hour can help you gain the clarity and direction you need. Sign up here
Pricing Learning hub
Improve your pricing strategies, tactics and profits, gain confidence and reduce the stress of price setting, price increases and discounting. Join our Pricing Learning Hub and get exclusive access to a range of tools, articles, podcasts and videos by experts with 15+ years in top FMCGs. Join today for only £1.
