Price is a Signal of Value

When I advised a client to double her rates for her services, she thought I was crazy. I asked her, “what signal is your price sending?”

But her marketing materials all said how she was better than her competitors. Yet, her price was the same as these average competitors.

Price is a signal. It tells someone an important marketing message about the value and about the promise your brand is making.Whether it is a bottle of wine or a copy writing service, the price is the frame that begins the journey of defining value. If something is more expensive, the initial response is that it must be better if they charge a higher price, even if I don’t know why.

Wine is a wonderful example of this phenomenon. And study after study shows how consumers perceive a $15 wine to be better than a $5 bottle – even if it is the identical label, producer or wine.

Several months later, I heard back from my client about her experiment in raising rates.

She found an unusual thing occur. By doubling her hourly rate from $50 to $100 per hour, she started to attract the type of clients she wanted to her business. Her new clients wanted a higher quality service and were willing to pay. They weren’t shopping for a bargain basement writer but someone who could elevate their brand.

People who wanted cheap or average stopped calling her for quotes. Now people who wanted quality were more interested in working with her because her price list on her site reflected the value she was communicating everywhere on her marketing. Price was the new signal to reinforce that she provided a superior product.

Are you sending a mixed message?

Hey, I’m better than average but charge average prices? It is doubtful that you’ll attract the type of customer you really want to entice.

When BMW entered the U.S. market initially about 40 years ago, they were failing. The price of their cars didn’t reflect what they said was this extraordinary German engineering. As their raised prices, they started to drive success because the price reflected the value.

Are you charging the right price to attract the customers you want? Here is a link to some strategies to help you negotiate price with clients. 

Interested in growing your business? I can help you increase profitable revenue with marketing insights. To learn more, click this link.

 

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