In sales and business planning Price is one of the single biggest elements in your sales process, economic engine and health of your business. How do you determine the pricing for your products and services? Obviously, some manufacturers help in this process by establishing MAP, UMAP or MSRP pricing guidelines for you. However, you still must decide which products to sell and how much to charge for installing those products. The product offering and price position will also have a significant role in (further) establishing your brand identity to your audience.
Early in my CI career, I had a great opportunity to work for one of the premier Integration Companies in my state. I was very excited to sell the “really cool gear” and join this great team. I had been working in the CI industry for roughly 3 years at that point and still had a lot to learn. I did not have the confidence and swagger that many of my older competitors had, but I was hungry.
As I submitted my first proposal to my boss for pre-approval, before sharing it with the client, I was told to add an additional line item in the proposal to account for small parts costs. The amount was not an enormous amount, maybe 3% of the total proposal. It covered legitimate costs: Wire, Emitters, Speaker Back Boxes, Pre-construction boxes for volume controls (this was 20 years ago😉), etc. Years later when I had my own Integration company and had to write the checks for these items, I came to understand how quickly they add up.
The problem was, none of my competitors charged for any of these items. Potential clients would look at my proposal and compare it to my competitors and always ask about my charge for wire and materials. Granted many of the other companies may have built this into their “labor” costs, but our labor costs were also higher. We had extremely talented and experienced technicians: most had previously worked for Price as stage hands or sound engineers.
I worked for this company for ten years and became very successful working for the company selling systems that were expertly installed by the talented craftsmen who worked at the company. I learned very early on from my time at this company, that it is not all about price. It is about value! We had some of the most talented technicians in the state working at that company and if the client wanted exceptional service, support and craftsmanship we were the company who could deliver this to them. We would not however discount our prices or the quality of the service we provided.
I believe a few steps can be taken to establish pricing that is a good value for the customer and ensure some financial health for the business. The following are a few suggestions I have found to be helpful in my businesses over the years:
1) Identify your target customer
Your target customer may not be the same as your competitor next door. Equally important; your customer may not be everyone in need of a product or service you are offering. If you are a car dealer specializing in European imports, not everyone purchasing a new car will want or need your 12 cylinder hot rod, and that’s OK.
2) What benefit(s) are you delivering to your target customer
Take time to clearly understand the benefits that your brand delivers to your customer. Some of the benefits that my previous integration company delivered were as follows: 20 years of experience to deliver expert craftsmanship on every project, lifetime warranty on the wire and workmanship, commitment to delivering an “easy” to use system – our tagline was “we make entertainment easy”. Once you establish these benefits, it should become part of every sales presentation and marketing activity.
3) Establish your value
Carefully evaluate and identify the value you have to offer your customer: experience, team, service/support, etc.
4) Commit to your brand value
Once you have established the value you have to offer your customers, be proud of it and defend it! Don’t be willing to stick a “sale” sticker on your forehead in the next meeting you have with a potential client.
5) Be proud of the value you offer your clients and be prepared to defend it:
Once you understand the benefits you have to offer your clients and the value of your brand benefits, you are better prepared to establish a price for your services. Benefits + Value = Price. Once the pricing has been established, be prepared to defend your price position and back it up with the value and benefits offered by your company.