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Can you really charge a premium and get more customers? It seems counter-intuitive, doesn’t it. Surely, charging more must mean less business not more. Right?
Not necessarily.
Backup company BUMI was losing customers. They did some analysis and realized that their problem was their pricing. They were charging $50 a month and their clients were leaving because it cost too much. They also realized that it was costing them nearly $50 a month to support those customers.
The usual response might be to start a price war, or lower prices and try to “make it up on volume.” But, that’s not what BUMI decided to do.
Rather than lower their prices, they tripled them.
Charge a premium and get more clients
Instead of trying to compete on price, or compete against hundreds of other moderately priced backup companies, they repositioned themselves as a top of the line backup solution with a special focus on financial services and other firms with special security needs.
BUMI now had a premium service, and could charge more for it because they were offering added value and services to a specialized audience.
Their new customers were more IT savvy too, needed less basic help and instruction, and were willing to pay for peace of mind and security.
Yes, they did lose more customers initially, but their revenue and profits rose! In fact, they did so well, the CEO took the entire company to Disneyworld.
Ignore the cheap competition
Rather than trying to compete against hundreds or thousands of low-cost “providers,” position yourself as the top of the line instead. Turn away the low-cost jobs and refer them to other people.
As a friend said recently, “I found that it was easier to get businesses to pay me $1,000 a month than it was to get them to pay $400.” The higher price equals a higher perceived value. You’ll attract better clients, who understand that what your higher prices will pay off for them in improved revenue, better appeal to their clients, and even save them money and headaches on solutions that don’t really fit their needs.
Do something that makes you stand out in their minds because you offer a better service and more remarkable experience that’s worth paying extra.
This is the third in a series of posts about competing against outsourcing. The remaining posts are: