I was doing some research on Click Funnels and Traffic, partly to keep my own skills up to date and partly to see whether I should implement the strategy into Business Growth Mentors.
One of things I actively encourage my Clients to do is to get inside the head of their Customers, look at the Customers challenge from their perspective, this will allow you to present solutions that the Customer actually values.
One question that I am often asked or that I regularly consider is “What will a Customer pay for that service or product?”
During the research I came across a series of slides that I thought would be interesting to consider to help us understand possible answers to the question
- What is the Size of the Problem?
- How Complex is the Problem?
- Length of the time that the person has been in pain
- The certainty that you can resolve the issue
- How quickly you can we resolve the issue
It sounds fairly obvious, that the size of the problem determines how much someone is prepared to pay to address it. Let’s say that I have a grass cutting business. If our business serves residential Customers, the average lawn sizes are fairly small so we need lots of Customers to give the business sufficient work to give the business revenue. If we serve Commercial Customers or Council Services cutting parks, football pitches or public areas then we can do a lower number of jobs and turn over the same revenue.
The next thing is the complexity of the issue. If we continue on with the theme of cutting grass. The average household can cut their own grass. If we want to get someone in to cut the grass then the list of people who can cut the grass is a long list as the skills required are fairly low. If however, we say that we want to landscape the garden then the number of people who have the skills or experience to be able to take the project on becomes greatly reduced. The specialist knowledge of plants increases the amount of money the person can charge.
So, we have a choice. we can operate in the low skill market place and find that we are restricted on what we can charge. Or we can improve our knowledge, become Specialists in a niche market and then differentiate ourselves from the competition allowing us to charge more.
The next one “Length of Time that the Customer has been in pain” will accelerate the speed of sale and offer an opportunity for a premium on your charging. If your Customer has been suffering for a long time, they have been looking for a solution but have not found one yet, imagine how they are going to feel when you offer the one thing that has been an issue. My Dad was deaf in one ear and hard of hearing in the other from childhood. He was not able to use a conventional in-ear hearing aid so he suffered for many years. When I was about 8 I remember going to Edinburgh as my Dad was being fitted with an innovative new to the market hearing aid. The hearing aid consisted of a vibrating pad that sat behind his ear, built into the leg of a pair of glasses. Imagine the confusion when my Dad would say to people, “sorry I cannot hear you let me get my glasses”. The difference in price between the in-ear and the innovative solution for my Dad was massive perhaps 20 times more expensive but given that he had been suffering for 40 years at that point then price was no object. Interestingly he had to turn it off within the hour as he found the world to be very noisy.
The next factor in how much we can charge is the certainty that the Customer feels that you will be able to address their issue. Have you ever had Contractors come to your house to quote for work? One person turns up, takes no measurements, gives you a vague back of a fag packet estimate for the completion of the work. The Second person turns up with a questionnaire form, asks you quality questions, shows you previous examples of work, goes away, and gives you a comprehensive well-structured quote on headed paper.
Once you have had your Contractors visit you compare the quotes, the 2nd one is more expensive but you feel compelled to go with them because of the confidence that they have instilled during the sales process. You are confident that they can address the issue and you will be happy to pay a premium.
Finally and this is an interesting one for me. If I had to choose between two companies to come and decorate my house, one Company is free next week but the other I would need to wait three week for because they are popular and busy. There is no massive difference in price. If there is nothing requiring me to have it done I might choose to wait.
In this instance however where we are considering price and a premium a major factor in my decision could be the time that it takes to resolve the issue. If I am without my laptop it is very difficult for my business to operate so when I am choosing someone to repair it essentially the service is exactly the same the speed becomes the determining factor. One Company says I can repair that 24hrs the other say we can do it in 3 days. I will choose to pay a premium as the inconvenience of not having my laptop for 3 days is too much.
So when we are designing our services, if we want to charge a premium, speed of service, confidence that we can resolve it, being a specialist in a niche dealing with complex issues are all factors that we should design into our products or services.
If you need help to work out how this applies to your Company feel free to drop me a question or give me a call and we get you on the right path.