September 25, 2023 • 26 mins
Imagine unlocking the secret to pricing your products just right – that sweet spot where your profits soar and your customers feel they're getting an incredible deal. That's precisely what we're helping you achieve in our enlightening discussion with the Price Whisperer.
We cover why it's paramount to offer different pricing for various customer segments and the pitfalls you need to dodge while setting prices. Get to grips with the art of ensuring enough profitability while growing your business and how to hit that perfect balance between competitive pricing and optimal profit.
But we don't stop there! We plunge into the heart of pricing strategies and the crucial role of knowing your customer base. The Price Whisperer hands out some precious tips for finding potential customers in places you wouldn't usually think of – your neighborhood Starbucks, perhaps, or LinkedIn if you're into B2B services. And what about competing with big, well-established brands? It's a daunting prospect, but we've got you covered. Learn how to set yourself apart with premium pricing and carve a unique niche for yourself in a crowded marketplace. No matter your industry, this episode is a must-listen-to boost your pricing proficiency and profitability!
This episode is NOT sponsored. Some product links are affiliate links, meaning we'll receive a small commission if you buy something.
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Episode Transcript
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Speaker 1 (00:00):
Welcome to the Elevate Media Podcast with your
host, Chris Anderson.
In this show, Chris and hisguests will share their
knowledge and experience on howto go from zero to successful
entrepreneur.
They have built theirbusinesses from scratch and are
now ready to give back to thosewho are just starting.
Let's get ready to learn, growand elevate our businesses.
And now your host, ChrisAnderson.
Speaker 2 (00:25):
Alright, welcome back to another recording of the
Elevate Media Podcast.
I am Chris Anderson, your host,and today we're going to be
diving into a topic that reallyanyone can benefit from, but
especially if you're early on orstarting out on your journey,
that might come up in yourthoughts or conversation is how
do I price my thing and how do Iprice it correctly, and so we
brought on the price whisperertoday on the show.
(00:49):
He's going to break that downfor us, help us get some actual
tips on how to price our productservices better to make more
profit.
So we have, let me say this,right hair chauffeurs on the
show today.
Pear, welcome to the ElevateMedia Podcast.
Speaker 3 (01:03):
Well, thank you so much.
It's a pleasure to be here.
Speaker 2 (01:07):
Absolutely.
We're looking forward to this.
So the price whisperer?
Where did that nickname comefrom?
Speaker 3 (01:14):
Well, it really came from.
I was bought up in networkinggroup here in Los Angeles where
I live, and one guy I used to becalled the pricing guy, right,
(01:34):
and because everybody knew whatI was doing, and it's something
that is very unusual, and allthe folks that I've ever met
almost all the folks that I'veever met says that how did you
get into this?
And I've never heard aboutsomebody that's an expert in
pricing and so forth.
So, anyway, in that networkinggroup there's another guy that
(02:00):
called himself the pitchwhisperer right, so he helps
companies and entrepreneurs toreally refine their pitch.
And he came up with the pricewhisperer and since then I was
the price whisperer in thatgroup and because I got this
(02:20):
wacky name that nobody can say,really, although you did it very
well, thank you, and certainlypeople can't spell to it.
It makes perfect sense in mynative Sweden, but that's not
where we are.
So I decided to adopt it, right?
(02:43):
And you do a Google search forthe price whisperer and you get
a million hits.
Speaker 2 (02:50):
So with that, so out of everything, out of all the
possible topics within businessand helping entrepreneurs, why
pricing?
Speaker 3 (02:59):
The background is that I ran companies a couple of
companies in Europe, and thenI've been running several
companies here in the States too, and in all of those we did
experiments with pricing onlybecause it was an interest area.
And some experiments workedreally very well, like next
quarter revenues are up 25% orso.
(03:20):
Others were complete duds, andwhat I had learned in business
school about pricing was soacademic and theoretical that it
was really useless information.
So eventually I decided I wastoo old and too opinionated to
be a hard gun and I developed aprocess that makes every pricing
(03:41):
experiment a success.
Speaker 2 (03:44):
So with that?
So when people are looking toprice their products or their
coaching, you hear both sides ofthe camp low ticket offer and
just scale it up to a lot ofpeople high ticket offer, so you
have to have less coming in.
Where do you sit with that?
Is there another route?
Or how do people figure thatout, that decision?
Speaker 3 (04:04):
Well, the right answer is that you need both.
Whether you sell a product or aservice, you do want to have
sort of a good, better, bestoffering to your clients,
because that means that you cancapture volume with a good
(04:27):
product and you can captureprofits with the best product.
That's a mistake that manyentrepreneurs do, that they have
this is my offering and that'sit.
(04:48):
They only have one product orone service.
And another mistake that manyentrepreneurs do is try to look
at a competitor and set the sameprice.
And that's often the first stepinto the commoditization death
(05:10):
spiral.
And because you set the pricethe same and then suddenly you
have the same features or youpromote the same features, you
have the same value statementand so forth, and suddenly
you're a commodity and acommodity is sold on price only,
(05:34):
meaning that the low price willget the business.
And the low price means thatyou eventually have no profits.
Speaker 2 (05:48):
Yeah, but so how do you go about doing that?
How do you make sure that youare pricing competitively to
make a profit, like, how do youkind of find that sweet spot?
Speaker 3 (06:01):
Well, first of all, you need to decide who are your
customers right and figure outwhich of the various customer
categories out there or callthem personas, or call them
avatars, whatever but which ofthese customer segments would
(06:25):
support higher prices and moreprofitable prices than others,
and then understand what wouldmake them buy right.
Because this is also anotherone of these very odd mistakes
that a lot of companies do, evenlarge companies and
(06:47):
well-established companies.
They look at revenue, not atprofit, and without profits,
eventually your company will dieright, and this is such a.
Any executive knows this right.
(07:08):
And then they say, yeah,profits are good.
And then in the next 15 minutesthey go and say slash our
prices and start the price war.
And if you look at some of these, some companies can be
(07:33):
unprofitable for a very longtime because they have investors
that support them for a longtime, but most companies cannot.
I mean, you look at Amazon.
They were unprofitable forwhatever 15 years, same with
Uber, for example.
But look at Amazon today.
They have a profit margin ofwhat being?
(07:57):
1% roughly.
They turn over a lot of cash,but they don't make a lot of
profits.
Speaker 2 (08:06):
Why is it important to make sure you have enough
profit when you're growing yourbusiness for those listening?
Speaker 3 (08:12):
Well, because profit is something that you put back
in the company, certainly whenyou're in the growth phase, and
what that means is that you candevelop more products, where you
can develop more versions ofthe products, simply because you
have the resource, you candefine more services, you can
(08:41):
spend more money on yourmarketing and your whole market
development, marketing and salesand so forth.
You can even hire better peoplebecause they are often more
expensive, and so that's whyprofits are so important.
And if you look at it, anycompany has a resulting profits
(09:11):
that comes from only threevariables it is the cost total
cost of the operation, it is thesales volume, or whatever you
sell, and it is the price ofwhatever you sell.
And of these three, pricing hasthe highest leverage on
(09:32):
profitability.
Why is that?
Because it affects the top line, right.
And in fact, for the averagecompany, pricing is three times
as effective in drivingincreases in profits than sales
(09:57):
volume would be, and it's twiceas effective in driving
profitability compared to costreduction, right.
And once you know that and infact for the average company, I
do something I call the 1%challenge and imagine that you
(10:24):
can change one of these threevariables 1% right For the
average company and obviouslythere's no average company but
for the average company a 1%increase in price or a 1%
decrease in discounting becausethat's the same thing leads to
(10:46):
an 11.3% increase in profits.
You know Now, when you havethat in mind, suddenly the
salespeople if you sell throughsalespeople are not allowed to
discount 25% anymore.
Suddenly, suddenly they have toclose the deal with only 10%
(11:10):
discount.
And in some cases you send outcoupons right.
Suddenly the coupon is 10%discount, not 20% discount,
right and so forth.
And when you start looking atyour organizations through that
(11:31):
1%, everything is changing right.
And why I'm calling this the 1%challenge is simply because
have you ever failed to changeanything 1%?
Speaker 2 (11:46):
No, yeah, that's not much.
Speaker 3 (11:49):
No, you know.
Speaker 2 (11:51):
Yeah.
Speaker 3 (11:52):
So, and that's why companies who focus their
operations on profitability andfocus their operations on
looking at the companies througha lens of profit, and so forth,
typically end up as the marketleaders.
Yeah, for the reason that theyhave more resources than
(12:17):
competitors.
Speaker 2 (12:18):
Yeah, yeah.
So when we're looking at that,when we're looking at our
business, our numbers, you knowwhat's a good percentage for
profit margins from yourperspective for businesses.
Speaker 3 (12:34):
Oh the there's no silver bullet.
Yeah, I mean, more is betterright, right For sure.
Speaker 2 (12:42):
And I guess what's a safe, what's a safe percentage,
would you say A company's youknow doing well if they have
this percentage of profit?
Speaker 3 (12:49):
The average company, the average, when we're back
into average, the averagecompany has a resulting pre-tax
profit of about 10%, okay, andbut I mean I just mentioned
Amazon with the profits of 1%,roughly Right, and imagine if
(13:13):
they could increase their priceswith 1%.
They suddenly have profits of2%, and I mean we're talking
billions of dollars, right, andimagine then what they could put
into even more marketdevelopment and so forth.
I mean we have Walmart that isactually coming up as a strong
(13:34):
competitor to Amazon, right,yeah, so so.
Speaker 2 (13:41):
But if you're a smaller company you know that 1%
I guess it still could make animpact over time.
Absolutely.
Speaker 3 (13:50):
I mean, you mentioned coaching here, yeah, and I mean
, imagine that you well, reallyimagine that if you're a one-man
band kind of consultant orcoach, maybe you have revenues
(14:12):
of I don't know pick a number15,000 months, right, and you
don't want to do 1%, right, youwant to do 10%, right, right,
and suddenly you make another1500 bucks.
Now, what do you do with the1500 bucks?
Maybe, maybe put more ads out,Maybe you do more SEO stuff, you
(14:38):
spend it on Google ads, right?
Yeah, so it's.
And maybe you take the time andthe effort to really understand
who the particular customercategory is that do support
(15:01):
higher prices and understandwhat they specifically are
looking for in terms of messagesand so forth, and then maybe
you can increase another 10% andsuddenly you make 3 grand more
than you did, right.
Speaker 2 (15:17):
Yeah, so when people are look, is there a Cadence to
how often these?
You know, maybe soliparners orsmall businesses should look at
their prices and change you know, increase those prices.
Is there a good cadence forthat, or?
Speaker 3 (15:38):
It depends on what business you're in, and because
every market, every market,evolves right, right, and
there's new competitors comingin, there may be technology
coming in, there may becompanies that disappears, you
know, and so forth, and becauseof that it really depends on how
(16:01):
quickly that marketplace that acompany is in is evolving right
, and you know, and sometimescompanies do things that sounds
(16:23):
very odd, you know, like at aconversation with a new
restaurant chain the other dayand actually not a restaurant
but a burger chain, right, andthey had this wonderfully smart
(16:45):
idea of putting their very firstburger restaurant in between a
Chipotle's and a McDonald's, youknow why, not a couple of
blocks away, and this, of course, was a spectacular failure
right.
(17:05):
And so sometimes you know,common sense is not always
common right, which actually wassomething that this was coined
by Voltaire back in 1642, Ithink Common sense is not so
common, but you're great, ofcourse.
Speaker 2 (17:24):
Yes.
So if you're to start you knowall over and build a business
you know one what business wouldyou focus on and kind of where
would you put your prices Then?
Today's my life, if you'restarting right now, if you had
the you know, the want, the needto do that, where would you
(17:44):
start and kind of where wouldyou lay your prices, do you
think?
Speaker 3 (17:47):
Well, oddly enough, a couple of well, maybe 10 years
ago, I did start anotherbusiness on the side and it's a,
and it was a failure, right,but that was in the high end
audio industry and it'ssomething that I personally love
(18:15):
because it's music and it'shigh tech, right, there is no
business there, which is theproblem, right?
Well, there's a very smallbusiness and what we found was
that this is a.
This is very odd.
This is a business where thebuyers of this high end audio
(18:38):
gear don't really care aboutbusiness, right, sorry, don't
really care about music.
They're just buying.
To compare A with B, you know,and with C, you know, and, and,
and.
And.
I mean you had these, theseguys, we were exhibiting, you
know, they had these guys comingbecause it's almost totally a
(19:01):
male dominated industry.
We have these guys coming inand listening and say, oh, this
sounds so natural.
Well, maybe it did, but they'venever actually heard a live
audience or they never heard alive performance, and live
meaning unamplified, right, okay, yep, or if they did, it was 40
(19:29):
years ago, right, how could?
What?
Where's the anyway?
So it was a failure because wedidn't have enough money to
build a brand, because what wefound was that these folks, they
, they, you know, in thatparticular industry, the, the,
(19:50):
the differences betweendifferent products and different
speakers and amplifiers are sosmall that that you really you
cannot.
You cannot hear it, to behonest.
Right, they think you can hearit, but it actually comes from
the brand value.
Yeah, you know.
Speaker 2 (20:09):
Yeah.
So like, how do you competewith if you're in an industry
that is like full of biggerbrands, well-known brands, is
there a way to still compete andprice well?
Or should you maybe look inless saturated or not saturated,
but less markets with branded?
Speaker 3 (20:27):
It's all about differentiation.
It's all about.
It's all about understandingcustomers and understanding the
customer category that that willsupport more profitable prices
than than other customercategories.
Understanding the, the, thesort of go-to-market strategy
(20:51):
that that particular, thatparticular customer category
cares most about.
Right, and this is whatmarketing channels they like,
what marketing message they like, how they want to learn about
products in this category andwhat sales methodologies and
(21:15):
channels and so forth.
And when you know all that youcan serve, that you know that
constituency better thancompetitors, even if they're big
companies, right, yeah, andbecause of that it supports
higher prices.
Speaker 2 (21:37):
Okay, yeah.
So starting out, you know whatwould, or they're early on and
they're really trying to figureout their pricing.
What would the top three thingsyou would tell them to do?
And one might be know yourcustomer avatar, right?
You mentioned that multipletimes.
Are there any others that you'dreally have them focus on?
Speaker 3 (21:57):
Well, there is a methodology new companies can do
, or struggling companies can,and that is that you want to
find, or this company.
You want to find, 25 potentialbuyers, at least 25 potential
buyers.
(22:17):
You know, more is better right.
Speaker 2 (22:19):
Yeah.
Speaker 3 (22:20):
Now, these are not your current prospects.
They are certainly not friendsand family, right, but people
that could buy the product orservice if they knew you existed
, right, yeah.
And then you approach thesepeople and you know if this is a
(22:42):
consumer goods kind of thing,how do you do?
Well, maybe you go down to yourlocal Starbucks and you ask can
I ask you a couple of questionsand I buy you a coffee, right,
yeah.
And if it's B2B it's a littlebit more involved, but you can
use LinkedIn and stuff like that, right.
And then you ask them.
(23:04):
First you describe your productand you confirm that they
understand the description,right, right, and you do that by
asking them to describe it backto you, right?
And then you ask them twoquestions.
The first question is now thatyou understand my product or my
(23:26):
service, mr Customer, what isthe price that is so low?
You think that this is notgoing to be any good, that we
are overpromised and going tounderdeliver, and because of
that you are not going to buy it, right, yeah?
(23:48):
And then you say and the phraseyou hear is very important
because it needs to be what is aprice that, essentially, is so
low that it sets an expectationof inferior quality.
You are spending, and then youask the customer another
(24:11):
question, right, and that is.
And now let's look at the flipside.
Let's look at if my product ormy service is better than you
can ever imagine, that we areunderpromising and overdelivery.
What is the price that is sohigh that you still wouldn't buy
it?
(24:32):
Okay, now, then you take theaverage of these two.
You have the too low and thetoo high.
You take the average and youhave the span of where your
prices should be.
Okay, now, if you continue todo this and you do it, obviously
, if somebody says pricing thatis completely out of whack, like
(24:58):
this pen, a million bucks,right, those do you ignore,
right, but if you can continueand do this to another 25, or
another 25, so eventually youget up to maybe a hundred people
and this could be done overseveral months, right, maybe
(25:23):
even a year, depends on yourbusiness Then you can start
seeing if certain customercategories have a span that is
higher or lower than othercustomer categories.
Speaker 2 (25:43):
That's a very interesting space.
I like that.
That's a good thing.
I never thought about going andasking like, what price would
basically you not purchasebecause it seems too low and I'm
not going to get value for it,and then the opposite.
That's a very.
I really like those questionsof a murrower.
Yeah, Having those.
Speaker 3 (26:02):
We've all been there, we've held something in our
hands, and either physically ormetaphysically, and we say to
ourselves, I kind of want to buythis, but at this price no.
Speaker 2 (26:16):
Right, yeah, it's going to be bad quality, it's
not going to last, or like ifnot worth that price kind of
thing from those perspectives.
Speaker 3 (26:25):
Exactly, and we also have been in the same situation
that I really want to buy this,but it's just over my budget.
If I can't afford it.
Speaker 2 (26:32):
Right.
Speaker 3 (26:33):
Let me give you an example.
This looks like a pretty normalsmart watch.
Right, it's not.
It's a smart watch, but it alsochecks my blood sugar, my what
(26:55):
do you call it blood pressure,my blood oxygen and all that
stuff.
Right, yeah, 62 bucks, wow, youknow, these guys are leaving.
I would say about $440 on thetable.
Yeah, you know, right, I mean,imagine if you're diabetic and
(27:19):
you have to prick your fingerall the time.
Right, and not only that, thesetesting strips and stuff like
that I think is like $30, $40 amonth, right, right.
And this watch do it all, wow.
And so here's the company thatsays we got to be cheap.
We have to be cheap because,first of all, they're Chinese
(27:44):
and the mindset in China isthose questions that I mentioned
doesn't work in China.
Speaker 2 (27:50):
Really.
Speaker 3 (27:51):
Yeah, there is no conception that something can be
too cheap.
Wow, yeah, yeah, it's acultural thing, yeah, and so
these guys are.
They're shooting themselves inthe foot.
Speaker 2 (28:11):
Hmm, that's crazy, yeah, yeah.
So I think that, but Iappreciate all this that you've
given so far.
I think these are very valuablethings that even myself can
start wondering and askingpotential people just for our
stuff, just to see our range.
And yeah, that's very, a veryinteresting perspective of
(28:34):
asking just individuals withinyour market, like what's the
lowest and what's the highestkind of thing.
So you know, pear I, this hasbeen awesome.
I think people can get a lot ofvalue on their pricing and
start really thinking about youknow where they can land to be
profitable, to be moreprofitable, and so you know,
kind of rounding things out withthat kind of a different random
(28:59):
question, just not necessarilyabout pricing, but you know,
with everything you're doing,you know with the books, helping
people with this topic as theprice whisper, you know, 10, 20
years from now, what do you hopeyour impact or legacy is?
Speaker 3 (29:18):
Yeah, that's.
I mean.
Obviously, most companies arethere to deliver value to their
clients, to their clients and totheir customers, and a unique
value, right, and if you focuson profitability, you can
(29:45):
develop more value and give morevalue to your customers.
Ongoing right, right, andthere's, you know, there's some
companies who doesn't have thatview, right, and it's all about.
(30:05):
For them, it's all about takingthose profits and put it back
into shareholders' pockets only,right, right, and with less
concern for what value they candeliver to their clients.
(30:29):
But those are very few, right,and most companies, and
certainly small to mid-sizedcompanies, they are always,
almost always, looking at theincreased value they can deliver
, because, in the end.
(30:52):
So what I'm hoping is and I'msort of in my latest book, the
Price Whisper the book is aboutone thing and it's about
understanding how everythingmatters in your company.
Everything you do in thecompany affects how you can sell
(31:15):
, affects how you can price, andthe overall thing, the overall
theme, is that if you can pricefor profit, you have more
resource to grow your companyand deliver more value to more
people.
Right, yeah, because if we havea company that doesn't deliver
(31:40):
any value, then there's no point, right?
Speaker 2 (31:46):
So that's awesome.
So again, pair, appreciate youand your time today sharing
these insights on how to pricebetter, how to increase profits
through pricing.
Where can people connect withyou?
Obviously, your books out thereso they can read that.
Where can people connect withyou to learn more?
Speaker 3 (32:04):
Well, the easiest is just do a Google search for the
Price Whisper.
There you go Right and you'llfind not only the books.
You'll find.
I have a YouTube channel and aTikTok channel and lots of
articles out there, and, ofcourse, you'll find my company
as well, and there's amasterclass in pricing on our
(32:27):
website.
So, but there's lots and lotsyou can read up, right, yeah, so
yeah, guys, search him, getconnected, see what he's doing
Again.
Speaker 2 (32:38):
pair, thanks so much for being on the show today.
Speaker 1 (32:41):
All right, thank you so much Thank you for listening
to the Elevate Media Podcast.
Don't forget to subscribe andleave a review.
See you in the next episode.
Welcome to the Elevate Media Podcast with your
host, Chris Anderson.
In this show, Chris and hisguests will share their
knowledge and experience on howto go from zero to successful
entrepreneur.
They have built theirbusinesses from scratch and are
now ready to give back to thosewho are just starting.
Let's get ready to learn, growand elevate our businesses.
And now your host, ChrisAnderson.
Speaker 2 (00:25):
Alright, welcome back to another recording of the
Elevate Media Podcast.
I am Chris Anderson, your host,and today we're going to be
diving into a topic that reallyanyone can benefit from, but
especially if you're early on orstarting out on your journey,
that might come up in yourthoughts or conversation is how
do I price my thing and how do Iprice it correctly, and so we
brought on the price whisperertoday on the show.
(00:49):
He's going to break that downfor us, help us get some actual
tips on how to price our productservices better to make more
profit.
So we have, let me say this,right hair chauffeurs on the
show today.
Pear, welcome to the ElevateMedia Podcast.
Speaker 3 (01:03):
Well, thank you so much.
It's a pleasure to be here.
Speaker 2 (01:07):
Absolutely.
We're looking forward to this.
So the price whisperer?
Where did that nickname comefrom?
Speaker 3 (01:14):
Well, it really came from.
I was bought up in networkinggroup here in Los Angeles where
I live, and one guy I used to becalled the pricing guy, right,
(01:34):
and because everybody knew whatI was doing, and it's something
that is very unusual, and allthe folks that I've ever met
almost all the folks that I'veever met says that how did you
get into this?
And I've never heard aboutsomebody that's an expert in
pricing and so forth.
So, anyway, in that networkinggroup there's another guy that
(02:00):
called himself the pitchwhisperer right, so he helps
companies and entrepreneurs toreally refine their pitch.
And he came up with the pricewhisperer and since then I was
the price whisperer in thatgroup and because I got this
(02:20):
wacky name that nobody can say,really, although you did it very
well, thank you, and certainlypeople can't spell to it.
It makes perfect sense in mynative Sweden, but that's not
where we are.
So I decided to adopt it, right?
(02:43):
And you do a Google search forthe price whisperer and you get
a million hits.
Speaker 2 (02:50):
So with that, so out of everything, out of all the
possible topics within businessand helping entrepreneurs, why
pricing?
Speaker 3 (02:59):
The background is that I ran companies a couple of
companies in Europe, and thenI've been running several
companies here in the States too, and in all of those we did
experiments with pricing onlybecause it was an interest area.
And some experiments workedreally very well, like next
quarter revenues are up 25% orso.
(03:20):
Others were complete duds, andwhat I had learned in business
school about pricing was soacademic and theoretical that it
was really useless information.
So eventually I decided I wastoo old and too opinionated to
be a hard gun and I developed aprocess that makes every pricing
(03:41):
experiment a success.
Speaker 2 (03:44):
So with that?
So when people are looking toprice their products or their
coaching, you hear both sides ofthe camp low ticket offer and
just scale it up to a lot ofpeople high ticket offer, so you
have to have less coming in.
Where do you sit with that?
Is there another route?
Or how do people figure thatout, that decision?
Speaker 3 (04:04):
Well, the right answer is that you need both.
Whether you sell a product or aservice, you do want to have
sort of a good, better, bestoffering to your clients,
because that means that you cancapture volume with a good
(04:27):
product and you can captureprofits with the best product.
That's a mistake that manyentrepreneurs do, that they have
this is my offering and that'sit.
(04:48):
They only have one product orone service.
And another mistake that manyentrepreneurs do is try to look
at a competitor and set the sameprice.
And that's often the first stepinto the commoditization death
(05:10):
spiral.
And because you set the pricethe same and then suddenly you
have the same features or youpromote the same features, you
have the same value statementand so forth, and suddenly
you're a commodity and acommodity is sold on price only,
(05:34):
meaning that the low price willget the business.
And the low price means thatyou eventually have no profits.
Speaker 2 (05:48):
Yeah, but so how do you go about doing that?
How do you make sure that youare pricing competitively to
make a profit, like, how do youkind of find that sweet spot?
Speaker 3 (06:01):
Well, first of all, you need to decide who are your
customers right and figure outwhich of the various customer
categories out there or callthem personas, or call them
avatars, whatever but which ofthese customer segments would
(06:25):
support higher prices and moreprofitable prices than others,
and then understand what wouldmake them buy right.
Because this is also anotherone of these very odd mistakes
that a lot of companies do, evenlarge companies and
(06:47):
well-established companies.
They look at revenue, not atprofit, and without profits,
eventually your company will dieright, and this is such a.
Any executive knows this right.
(07:08):
And then they say, yeah,profits are good.
And then in the next 15 minutesthey go and say slash our
prices and start the price war.
And if you look at some of these, some companies can be
(07:33):
unprofitable for a very longtime because they have investors
that support them for a longtime, but most companies cannot.
I mean, you look at Amazon.
They were unprofitable forwhatever 15 years, same with
Uber, for example.
But look at Amazon today.
They have a profit margin ofwhat being?
(07:57):
1% roughly.
They turn over a lot of cash,but they don't make a lot of
profits.
Speaker 2 (08:06):
Why is it important to make sure you have enough
profit when you're growing yourbusiness for those listening?
Speaker 3 (08:12):
Well, because profit is something that you put back
in the company, certainly whenyou're in the growth phase, and
what that means is that you candevelop more products, where you
can develop more versions ofthe products, simply because you
have the resource, you candefine more services, you can
(08:41):
spend more money on yourmarketing and your whole market
development, marketing and salesand so forth.
You can even hire better peoplebecause they are often more
expensive, and so that's whyprofits are so important.
And if you look at it, anycompany has a resulting profits
(09:11):
that comes from only threevariables it is the cost total
cost of the operation, it is thesales volume, or whatever you
sell, and it is the price ofwhatever you sell.
And of these three, pricing hasthe highest leverage on
(09:32):
profitability.
Why is that?
Because it affects the top line, right.
And in fact, for the averagecompany, pricing is three times
as effective in drivingincreases in profits than sales
(09:57):
volume would be, and it's twiceas effective in driving
profitability compared to costreduction, right.
And once you know that and infact for the average company, I
do something I call the 1%challenge and imagine that you
(10:24):
can change one of these threevariables 1% right For the
average company and obviouslythere's no average company but
for the average company a 1%increase in price or a 1%
decrease in discounting becausethat's the same thing leads to
(10:46):
an 11.3% increase in profits.
You know Now, when you havethat in mind, suddenly the
salespeople if you sell throughsalespeople are not allowed to
discount 25% anymore.
Suddenly, suddenly they have toclose the deal with only 10%
(11:10):
discount.
And in some cases you send outcoupons right.
Suddenly the coupon is 10%discount, not 20% discount,
right and so forth.
And when you start looking atyour organizations through that
(11:31):
1%, everything is changing right.
And why I'm calling this the 1%challenge is simply because
have you ever failed to changeanything 1%?
Speaker 2 (11:46):
No, yeah, that's not much.
Speaker 3 (11:49):
No, you know.
Speaker 2 (11:51):
Yeah.
Speaker 3 (11:52):
So, and that's why companies who focus their
operations on profitability andfocus their operations on
looking at the companies througha lens of profit, and so forth,
typically end up as the marketleaders.
Yeah, for the reason that theyhave more resources than
(12:17):
competitors.
Speaker 2 (12:18):
Yeah, yeah.
So when we're looking at that,when we're looking at our
business, our numbers, you knowwhat's a good percentage for
profit margins from yourperspective for businesses.
Speaker 3 (12:34):
Oh the there's no silver bullet.
Yeah, I mean, more is betterright, right For sure.
Speaker 2 (12:42):
And I guess what's a safe, what's a safe percentage,
would you say A company's youknow doing well if they have
this percentage of profit?
Speaker 3 (12:49):
The average company, the average, when we're back
into average, the averagecompany has a resulting pre-tax
profit of about 10%, okay, andbut I mean I just mentioned
Amazon with the profits of 1%,roughly Right, and imagine if
(13:13):
they could increase their priceswith 1%.
They suddenly have profits of2%, and I mean we're talking
billions of dollars, right, andimagine then what they could put
into even more marketdevelopment and so forth.
I mean we have Walmart that isactually coming up as a strong
(13:34):
competitor to Amazon, right,yeah, so so.
Speaker 2 (13:41):
But if you're a smaller company you know that 1%
I guess it still could make animpact over time.
Absolutely.
Speaker 3 (13:50):
I mean, you mentioned coaching here, yeah, and I mean
, imagine that you well, reallyimagine that if you're a one-man
band kind of consultant orcoach, maybe you have revenues
(14:12):
of I don't know pick a number15,000 months, right, and you
don't want to do 1%, right, youwant to do 10%, right, right,
and suddenly you make another1500 bucks.
Now, what do you do with the1500 bucks?
Maybe, maybe put more ads out,Maybe you do more SEO stuff, you
(14:38):
spend it on Google ads, right?
Yeah, so it's.
And maybe you take the time andthe effort to really understand
who the particular customercategory is that do support
(15:01):
higher prices and understandwhat they specifically are
looking for in terms of messagesand so forth, and then maybe
you can increase another 10% andsuddenly you make 3 grand more
than you did, right.
Speaker 2 (15:17):
Yeah, so when people are look, is there a Cadence to
how often these?
You know, maybe soliparners orsmall businesses should look at
their prices and change you know, increase those prices.
Is there a good cadence forthat, or?
Speaker 3 (15:38):
It depends on what business you're in, and because
every market, every market,evolves right, right, and
there's new competitors comingin, there may be technology
coming in, there may becompanies that disappears, you
know, and so forth, and becauseof that it really depends on how
(16:01):
quickly that marketplace that acompany is in is evolving right
, and you know, and sometimescompanies do things that sounds
(16:23):
very odd, you know, like at aconversation with a new
restaurant chain the other dayand actually not a restaurant
but a burger chain, right, andthey had this wonderfully smart
(16:45):
idea of putting their very firstburger restaurant in between a
Chipotle's and a McDonald's, youknow why, not a couple of
blocks away, and this, of course, was a spectacular failure
right.
(17:05):
And so sometimes you know,common sense is not always
common right, which actually wassomething that this was coined
by Voltaire back in 1642, Ithink Common sense is not so
common, but you're great, ofcourse.
Speaker 2 (17:24):
Yes.
So if you're to start you knowall over and build a business
you know one what business wouldyou focus on and kind of where
would you put your prices Then?
Today's my life, if you'restarting right now, if you had
the you know, the want, the needto do that, where would you
(17:44):
start and kind of where wouldyou lay your prices, do you
think?
Speaker 3 (17:47):
Well, oddly enough, a couple of well, maybe 10 years
ago, I did start anotherbusiness on the side and it's a,
and it was a failure, right,but that was in the high end
audio industry and it'ssomething that I personally love
(18:15):
because it's music and it'shigh tech, right, there is no
business there, which is theproblem, right?
Well, there's a very smallbusiness and what we found was
that this is a.
This is very odd.
This is a business where thebuyers of this high end audio
(18:38):
gear don't really care aboutbusiness, right, sorry, don't
really care about music.
They're just buying.
To compare A with B, you know,and with C, you know, and, and,
and.
And.
I mean you had these, theseguys, we were exhibiting, you
know, they had these guys comingbecause it's almost totally a
(19:01):
male dominated industry.
We have these guys coming inand listening and say, oh, this
sounds so natural.
Well, maybe it did, but they'venever actually heard a live
audience or they never heard alive performance, and live
meaning unamplified, right, okay, yep, or if they did, it was 40
(19:29):
years ago, right, how could?
What?
Where's the anyway?
So it was a failure because wedidn't have enough money to
build a brand, because what wefound was that these folks, they
, they, you know, in thatparticular industry, the, the,
(19:50):
the differences betweendifferent products and different
speakers and amplifiers are sosmall that that you really you
cannot.
You cannot hear it, to behonest.
Right, they think you can hearit, but it actually comes from
the brand value.
Yeah, you know.
Speaker 2 (20:09):
Yeah.
So like, how do you competewith if you're in an industry
that is like full of biggerbrands, well-known brands, is
there a way to still compete andprice well?
Or should you maybe look inless saturated or not saturated,
but less markets with branded?
Speaker 3 (20:27):
It's all about differentiation.
It's all about.
It's all about understandingcustomers and understanding the
customer category that that willsupport more profitable prices
than than other customercategories.
Understanding the, the, thesort of go-to-market strategy
(20:51):
that that particular, thatparticular customer category
cares most about.
Right, and this is whatmarketing channels they like,
what marketing message they like, how they want to learn about
products in this category andwhat sales methodologies and
(21:15):
channels and so forth.
And when you know all that youcan serve, that you know that
constituency better thancompetitors, even if they're big
companies, right, yeah, andbecause of that it supports
higher prices.
Speaker 2 (21:37):
Okay, yeah.
So starting out, you know whatwould, or they're early on and
they're really trying to figureout their pricing.
What would the top three thingsyou would tell them to do?
And one might be know yourcustomer avatar, right?
You mentioned that multipletimes.
Are there any others that you'dreally have them focus on?
Speaker 3 (21:57):
Well, there is a methodology new companies can do
, or struggling companies can,and that is that you want to
find, or this company.
You want to find, 25 potentialbuyers, at least 25 potential
buyers.
(22:17):
You know, more is better right.
Speaker 2 (22:19):
Yeah.
Speaker 3 (22:20):
Now, these are not your current prospects.
They are certainly not friendsand family, right, but people
that could buy the product orservice if they knew you existed
, right, yeah.
And then you approach thesepeople and you know if this is a
(22:42):
consumer goods kind of thing,how do you do?
Well, maybe you go down to yourlocal Starbucks and you ask can
I ask you a couple of questionsand I buy you a coffee, right,
yeah.
And if it's B2B it's a littlebit more involved, but you can
use LinkedIn and stuff like that, right.
And then you ask them.
(23:04):
First you describe your productand you confirm that they
understand the description,right, right, and you do that by
asking them to describe it backto you, right?
And then you ask them twoquestions.
The first question is now thatyou understand my product or my
(23:26):
service, mr Customer, what isthe price that is so low?
You think that this is notgoing to be any good, that we
are overpromised and going tounderdeliver, and because of
that you are not going to buy it, right, yeah?
(23:48):
And then you say and the phraseyou hear is very important
because it needs to be what is aprice that, essentially, is so
low that it sets an expectationof inferior quality.
You are spending, and then youask the customer another
(24:11):
question, right, and that is.
And now let's look at the flipside.
Let's look at if my product ormy service is better than you
can ever imagine, that we areunderpromising and overdelivery.
What is the price that is sohigh that you still wouldn't buy
it?
(24:32):
Okay, now, then you take theaverage of these two.
You have the too low and thetoo high.
You take the average and youhave the span of where your
prices should be.
Okay, now, if you continue todo this and you do it, obviously
, if somebody says pricing thatis completely out of whack, like
(24:58):
this pen, a million bucks,right, those do you ignore,
right, but if you can continueand do this to another 25, or
another 25, so eventually youget up to maybe a hundred people
and this could be done overseveral months, right, maybe
(25:23):
even a year, depends on yourbusiness Then you can start
seeing if certain customercategories have a span that is
higher or lower than othercustomer categories.
Speaker 2 (25:43):
That's a very interesting space.
I like that.
That's a good thing.
I never thought about going andasking like, what price would
basically you not purchasebecause it seems too low and I'm
not going to get value for it,and then the opposite.
That's a very.
I really like those questionsof a murrower.
Yeah, Having those.
Speaker 3 (26:02):
We've all been there, we've held something in our
hands, and either physically ormetaphysically, and we say to
ourselves, I kind of want to buythis, but at this price no.
Speaker 2 (26:16):
Right, yeah, it's going to be bad quality, it's
not going to last, or like ifnot worth that price kind of
thing from those perspectives.
Speaker 3 (26:25):
Exactly, and we also have been in the same situation
that I really want to buy this,but it's just over my budget.
If I can't afford it.
Speaker 2 (26:32):
Right.
Speaker 3 (26:33):
Let me give you an example.
This looks like a pretty normalsmart watch.
Right, it's not.
It's a smart watch, but it alsochecks my blood sugar, my what
(26:55):
do you call it blood pressure,my blood oxygen and all that
stuff.
Right, yeah, 62 bucks, wow, youknow, these guys are leaving.
I would say about $440 on thetable.
Yeah, you know, right, I mean,imagine if you're diabetic and
(27:19):
you have to prick your fingerall the time.
Right, and not only that, thesetesting strips and stuff like
that I think is like $30, $40 amonth, right, right.
And this watch do it all, wow.
And so here's the company thatsays we got to be cheap.
We have to be cheap because,first of all, they're Chinese
(27:44):
and the mindset in China isthose questions that I mentioned
doesn't work in China.
Speaker 2 (27:50):
Really.
Speaker 3 (27:51):
Yeah, there is no conception that something can be
too cheap.
Wow, yeah, yeah, it's acultural thing, yeah, and so
these guys are.
They're shooting themselves inthe foot.
Speaker 2 (28:11):
Hmm, that's crazy, yeah, yeah.
So I think that, but Iappreciate all this that you've
given so far.
I think these are very valuablethings that even myself can
start wondering and askingpotential people just for our
stuff, just to see our range.
And yeah, that's very, a veryinteresting perspective of
(28:34):
asking just individuals withinyour market, like what's the
lowest and what's the highestkind of thing.
So you know, pear I, this hasbeen awesome.
I think people can get a lot ofvalue on their pricing and
start really thinking about youknow where they can land to be
profitable, to be moreprofitable, and so you know,
kind of rounding things out withthat kind of a different random
(28:59):
question, just not necessarilyabout pricing, but you know,
with everything you're doing,you know with the books, helping
people with this topic as theprice whisper, you know, 10, 20
years from now, what do you hopeyour impact or legacy is?
Speaker 3 (29:18):
Yeah, that's.
I mean.
Obviously, most companies arethere to deliver value to their
clients, to their clients and totheir customers, and a unique
value, right, and if you focuson profitability, you can
(29:45):
develop more value and give morevalue to your customers.
Ongoing right, right, andthere's, you know, there's some
companies who doesn't have thatview, right, and it's all about.
(30:05):
For them, it's all about takingthose profits and put it back
into shareholders' pockets only,right, right, and with less
concern for what value they candeliver to their clients.
(30:29):
But those are very few, right,and most companies, and
certainly small to mid-sizedcompanies, they are always,
almost always, looking at theincreased value they can deliver
, because, in the end.
(30:52):
So what I'm hoping is and I'msort of in my latest book, the
Price Whisper the book is aboutone thing and it's about
understanding how everythingmatters in your company.
Everything you do in thecompany affects how you can sell
(31:15):
, affects how you can price, andthe overall thing, the overall
theme, is that if you can pricefor profit, you have more
resource to grow your companyand deliver more value to more
people.
Right, yeah, because if we havea company that doesn't deliver
(31:40):
any value, then there's no point, right?
Speaker 2 (31:46):
So that's awesome.
So again, pair, appreciate youand your time today sharing
these insights on how to pricebetter, how to increase profits
through pricing.
Where can people connect withyou?
Obviously, your books out thereso they can read that.
Where can people connect withyou to learn more?
Speaker 3 (32:04):
Well, the easiest is just do a Google search for the
Price Whisper.
There you go Right and you'llfind not only the books.
You'll find.
I have a YouTube channel and aTikTok channel and lots of
articles out there, and, ofcourse, you'll find my company
as well, and there's amasterclass in pricing on our
(32:27):
website.
So, but there's lots and lotsyou can read up, right, yeah, so
yeah, guys, search him, getconnected, see what he's doing
Again.
Speaker 2 (32:38):
pair, thanks so much for being on the show today.
Speaker 1 (32:41):
All right, thank you so much Thank you for listening
to the Elevate Media Podcast.
Don't forget to subscribe andleave a review.
See you in the next episode.
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