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How To Find Clients Willing To Pay Premium Prices
Being able to charge premium prices for your products and services is a huge advantage. Especially for smaller businesses and individuals where you don't have the scale to make money from a low cost position.
But premium pricing is often easier said than done. One big reason is that many businesses go about it the wrong way. They try to take an existing market or client base and persuade it that their products and services are worth paying a premium for.
That’s possible, but it’s hard work. A better strategy can be to find a segment or sub-segment of the market that’s inherently more willing to pay premium prices and to focus your products and services and your marketing on what that segment wants and needs, rather than what the general market wants and needs.
How do you find those premium segments?
Watch this week's video to find out…
What are your thoughts and experiences with premium pricing? Please do share them in the comments section below the transcript.
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Hi it's Ian here, welcome to another five minute marketing tip. This weeks tip is about how to find people willing, in fact happy to pay for premium pricing. I'll show you a method for analysing your market, and figuring that out after this break.
Hi welcome back, got an email from Anna this week replying to an email I sent out talking about premium pricing, and how when you're looking for premium pricing usually the best thing to do is not to try to appeal to the whole market and persuade them that they should be paying premium prices for your products and services, it's to identify a sub segment of the market that is willing to pay premium prices and gear up your products and your services and your marketing for them rather than gearing it up for the whole wider market who inevitably isn't, most of them aren't willing to pay premium prices. Anna wrote back and said, “That sounds great in theory, but how would you go about doing that?”
Really it's a two step method for doing that, the first is to brainstorm various different segments and sub segments, so what are the segments there. The second step is to analyze those segments and sub segments and to figure out which ones are the premium priced ones.
In terms of brainstorming there are sub segments within every market, you just have to go through an exercise of kind of thinking they are.
If you do presentation skills training for example, that's a reasonable market, lots of people operate in that market. Most people in that market tend to do presentation skills training for pretty much anyone. You could segment that market down, you can do presentation skills for training for me, or for women. You can do presentation skills training for all the people who maybe want to get their experience across, or younger people who maybe have a credibility issue when presenting. You can do presentation skills training for business people who want to do training seminars and things, you can do it for senior executives who have to present to their investors, you could present, do presentation skills training for students who have to present as part of, you know, presenting a project or a case they've worked on.
You can do presentation skills training for people who have to present very technical material, or people who want to present emotionally to really motivate and move people with their presentations. You can do presentation skills training for people who want to speak on big stages, or people who want to speak at kind of small events and seminars. Or you can do presentation skills training for people who want to present on video, or on webinars, kind of a merging trends these days. There are all sorts of different sub segments that you could focus on.
The question is, which one of those is going to be … which ones of those are going to be premium segments? That's where the second step of the analysis comes in.
Now I'm assuming here that two things are true. One is that whatever sub segments you identify you have a particular skill, or expertise, or experience that makes your services valuable to that sub segment. If you're thinking of presentation skills for executives presenting to investors, if you've got no experience of delivering that service at all then clearly that's not a sub segment you can go into without a lot of preparation, maybe doing some Pro Bono work to get the experience, et cetera.
Assuming you've got the experience and the skills to do it, and I'm also assuming that you're interested in it, that you have a passion and energy about that particular segment otherwise you'll get bored and move on. Assuming that's the case a couple of questions to ask yourself about that sort of segment.
First of all, is it big enough and can I reach it with my marketing? That's a kind of viability question. Most of those types of segments I've talked about so far easily big enough in any market, but if you look at something like the one about presentation skills for senior executives presenting to investors, it's typically only very large companies that do that. That is a limited market, it's big enough in most countries and if you're doing face to face presentation skills training in most big cities it would probably be big enough. You know if you do live somewhere obscure and it's difficult to travel to a big city, that might not be viable for you because it's just not, you know you just can't reach enough of those potential clients.
That aside, and that usually shouldn't be an issue for most sub segments. The big questions about whether the segment is going to be a premium segment, or as follows.
Firstly you have to think does this segment, this sub segment, get tremendous value? Which ones get the most value from my services, from what it is I deliver. I'm not talking in a relative sense, I'm talking in an absolute sense here. You have to be a bit ruthless. For example, students presenting the results of a project they've been working on, that's value to them to get those presentation skills, but students are not a very lucrative segment, they're not kind of flushed with money, as it were. Where as senior executives who have to present to investors, they get a tremendous amount of value from that because you know, it's worth a fortune to them and their businesses for investors in their company to have a good impression of the business. That's a very lucrative segment because it's worth a lot of money to the people who get that training under the assumption it works, and therefore they would be prepared to pay a decent amount of money for it.
The second question to ask yourself is, is it a growing market segment? I like growing segments because although you can make money in pretty much any segment, even if it's kind of flat or in relatively you know, slight decline. In a growing segment there's usually a lot of money sloshing around, usually people are short of times so they want to hire outside help, and usually suppliers who can work with that segment are kind of in short supply because the segment is growing, you need more and more people able to supply it, and that means you can charge premium prices because there simply are less of you able to meet that demand. Is it a growing segment. For example, presentation skills for people needing to present on video or webinar, that's a growing segment because that's an increasing trend. That might be something you would look at if that was your area.
Next question is, is this area close to the jugular? What I mean by that is, is an area of strategic importance to the business or individual. It might be high value financially you think, but most businesses, most people have a few areas of their lives or their business that they really prioritise, and they really invest in the areas I call being close to the jugular. If you're a pharmaceutical company for example, you tend to care most about R&D and sales and marketing. All of the stuff about HR and distribution et cetera, yeah you need to do something there, but your real investments tend to be made in R&D and marketing. If you're doing presentation skills training, presenting RND results, that might be a good one. Or presentation skills for sales people presenting complex technical material to doctors, that would be high value because those are the two areas that are close to the jugular for pharmaceutical companies. Similarly with any business or any individual there are a couple of areas that are really important to them strategically, those will be the ones they'd be willing to invest in.
Finally, do the clients in that particular sub segment recognise that they have a need. Sometimes it's easy for us to think that it's obvious that they need this particular service from us, but do they recognise it themselves? Are they calling out for help in this area. If they're not it's going to be difficult to charge premium pricing because they just don't realise how important the issue is to them. Thought the methodology, brainstorm the difference sub segments, that's relatively easy, just let your brain run a bit free on that, use some of the examples that I gave earlier for inspiration. Then secondly, analyse those segments, make sure it's big enough, make sure probably the most important question, does that sub segment get a tremendous amount of value? Is there a kind of no brainer return of investment from them, for them, in terms of investing your services. Is it a growing sub segment, that's ideal. Is it close to the jugular, is it strategically important to them, and do they recognise that they have a need.
If you get a positive answer to most of those questions then it should be a premium priced segment, and it's well worth going for. See you next week.
What are your thoughts and experiences with premium pricing? Please do share them in the comments section below.