There are two ways to achieve that – sell more at a small margins or sell less at big margins. Both are workable strategies. Evian sells bottled water at a premium. Wal-Mart’s strategy was and still is lower pricing than the competition. Both have made formidable businesses.
Best situation is to sell more with big margins – this can be long-term goal of a business. Start with selling less with big margins and then work on increasing the units sold or clients acquired.
Benefits of selling at a premium
Perceived high value: Stuff or services with premium pricing have perceived high value. If you can match that perceived value with good quality, great ownership or user experience; you are in with a winner.
Less pressure and more happiness: With premium pricing, you can sell less and still make good profits. Selling at a premium may mean a longer sales cycle; but even small number of sales will make your business steady. Better margins help you turn profits on small revenue base. It is a happy situation to work at higher margins than the competition. Remember there is always room at the top – means less competition and clutter.
Get more with fewer resources: Start-ups are mostly driven by a Single Person Enterprise (SPE) or a small team. By charging premium you can run a healthy business with small team.
Makes outsourcing possible: With high margins you can afford to outsource a part of your business. This in turn can help you scale fast.
How to sell at a premium?
First deserve then desire
If you want to charge more than competition; you got to deliver more. It can be better quality, better user experience or giving a cult-like experience to owners of your products or users of your services.
Voodoo PC, the luxury computer maker, was started by Rahul Sood in 1991. In 2006 HP acquired it. Voodoo Omen gaming desktop launched in 2008 was priced in $6500-$20,000 range. How is that for premium pricing? But to charge this price Voodoo offers its consumers unmatched performance; design, high quality material and a feeling of belonging to a select group.
Savor this – to taste the original Anaarkali butter chicken from India you need to make a contribution of approx. $2000. Its USP is a butter chicken preparation with less than 500 calories per serving and entire contribution goes to charity.
Be among the first to create a product or service
In the market of toys or corporate gifts; one who brings out a new design gets good margins for that product unless the market copies the product or makes a better one.
Imagine being a website designer or developer in late 90s. Compare the rates of basic 5 page website design then and now – sea change. Now it is a commodity then it was a specialty. Website developers still can charge and are paid special prices; but this is for those who create extraordinary work.
Small to big
Aim to become big and charge premium eventually. There is hope for you – even if you are currently a freelancer working on small margins. Most of the businesses start small and take shape as they move forward. It starts with competing on price. It is an ordinary way of getting a foothold in the market and establishing a presence.
If you are looking to establish a profitable and growing business then make sure that you are able to charge a premium over competition. This will help you grow fast and with less pain. Create your funnel so as to move customers from the lower pricing zones to higher pricing. Start small but aim for big.
Deliver something that competition is not delivering
It is mostly not about the product but about the experience. The ownership experience or the looks and aesthetics of it for a product whether it is a unique product or a unique quality of delivery. Quality is a differentiator and always will. Competition may be delivering projects in time, creating reports and offering quality work. You may provide all this with a human touch. In the online world with less value tied to human touch – this can be a differentiator.
Your website as a sales person
Think of you web presence as your sole sales person – at least the core sales person. Create a website that has case studies, content so rich and valuable that people bookmark it the very moment they arrive. If you do the research and read what the best is for consumers and then share it with your audience then chances are that people will trust you and some of them will give you their money – means they will buy your stuff. By updating it regularly you make sure that it reaches a large audience. It is possible for one individual to create a top web destination and using it as a launch pad for a successful business. Joel Spolsky’s Joel on Software put him and his company on the map of those who mattered. Joel stopped blogging sometime back but only after achieving his objective.
Piggyback on another brand
That is workable when your new offering is in line with the current offerings of the existing brand. If you want fast success and premium pricing for a new product then owning or tie-up with an established premium brand already can help.
If you are an entrepreneur making bed sheets then you can tie-up with a mattress manufacturer selling premium mattress. A small digital agency can tie-up with a large advertising agency which does not have a digital offering of its own. A professional trainer can tie-up with a people outsourcing company.
The existing brand can be your personal brand. For example if you have a high traffic and widely read blog then it can help you launch a new product and reach the right audiences fast without much expenditure.
Be seen in the right places
Why wait for others to talk about your brand? Let the leader go out and talk about the brand. You as a business leader can write a book, speak at seminars, write a blog and work at making it popular. This will make sure that brand is visible in right places.
There are two benefits – assuming that what you write or speak is useful and different. It establishes you as a thought leader and your business will also be seen in the same light due to the rub-off effect.
Find Blue Oceans
Go out and look out. Look for blue oceans, tier-2 cities and countries where similar services or products find better price. Get in exports if the need be. Product businesses are at an overall advantage while scaling but services are easier to export than a product so it balances out. Training programs, content related businesses can and should take advantage of a global audience.
From the ideas above, pick the ones that you think will work for you. Chances are that you will make healthy profits and consistent growth.
What is your strategy – price wars or charging premium?