Tuesday, 23 February 2021

Premium pricing as commercial muscle-flexing.



Charge more. That's the most un-sexy but best business advice you can give to almost anyone. Price is to a business, what altitude is to an aeroplane - the higher it goes, the safer you are. A plane at 30,000 feet has many more options than one at 500 feet. 

The higher your price goes, the more the rest falls into place (pun intended). Selling your offerings for more forces every part of the business to perform better. Suddenly quality must be higher, products more innovative, sharper service delivery, staff more motivated and sales less driven by those easy deals. Charging more is the ultimate performance metric for a business. It's a raw measure of strength. 

Investors often prefer companies with strong brands, but this is not because of the brands themselves, but what they allow the business to do - charge more. Brands command premiums which lead to profits which in turn fuels the business. Money creates money, and suddenly everything starts to make sense. 


Pricing is the equivalent of commercial muscles, and premium pricing is commercial muscle-flexing.

But charging more is insanely difficult. The mere mention of raising fees is enough to stir panic in a business - I've seen this often. "What? We are already expensive, and now you want to charge even more?". You see, by pushing prices higher, you are raising the bar for everyone in your company - they all have to lift their game to make it happen. It also means the company needs to engage seriously with a tool essential in making higher prices possible: marketing.

When a business starts, each function quickly falls into place, apart from marketing. Manufacturing and operations happen from day one; HR exists because everyone needs a payslip and a contract. Without the finance function, you can't track your money. Having a sales function is also obviously necessary. All these roles establish themselves, but none can give you that ultimate weapon to raise prices. To raise prices, you need to take seriously that function that often does not formally exist in small/medium companies (because it is seen as an unnecessary luxury) - marketing.

The biggest reason you should invest in marketing is to, ultimately, charge more for what you sell. Marketing allows you to raise demand disproportionately, making it possible to push pricing up. That's why "marketing" has the word "market" in it - it allows the business to start dictating terms in the market instead of merely taking orders from it.


The combination of better products and services and clearly communicated value definitions to specific target audiences offer a roadmap for asking more.


Pricing is the equivalent of commercial muscles, and premium pricing is commercial muscle-flexing. If you can start to sell despite your high price, you are truly doing something special. But how does marketing help you to raise prices? 

Firstly, marketing forces you to focus on the customer instead of your business. By focusing outwards, not inwards, you can better understand customers and incorporate their needs into what you offer - making it possible to charge more. It's a fair deal that customers understand: "you give me more of what I want, and I'll pay you more". That's why the first step in marketing is market research. 

Secondly, you can translate your customer knowledge into potent value propositions and communicate it effectively through marketing strategy and planning. The combination of better products and services and clearly communicated value definitions to specific target audiences offer a roadmap for asking more. 

Indeed, investing in marketing is not an essential business function, but it is the most crucial of tasks if you hope to make more money. Very few companies do it right because they miss the wood for the trees and treat marketing as an unfortunate expense instead of a powerful investment that can turn the business's commercial destiny into a bright future. 

Lately, there is an obsession with "data-driven marketing", which inevitably results in the monitoring of website traffic and social media likes. However, I'd argue that the most important data point is "price vs the next best alternative" - it tells you almost everything you need to know about a company.

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