While meeting with one of my business coaching clients last week, our topic of the day was focused on a record number of prospective clients in the pipeline, ready to sign big checks and give him a lot of money. The immediate challenge was being unable to take on that much new business without compromising his ability to consistently deliver on the promise of an awesome customer experience. How many of you would like to have this kind of problem?
Looking ahead, what would you do when facing this situation? Refer this potential new business to peers? Try to absorb significant growth by hiring a bunch of new employees and hope that things work out? Turn off all new business development efforts for a while and focus on slow but steady growth?
One simple idea to consider goes back to Economics 101. When demand for a product or service exceeds its supply, then it is time to consider raising prices to level off the demand. In this particular instance, a long term strategy of delivering demonstrable value in a niche market created strong demand for this company’s service. For all new business, I suggested split-testing price increases with his pipeline, to determine at what level a price increase changed buying behavior. What would you do?
When you deliver great value with a product or service that people demand, price increases do not appreciably change buying behavior. If you want a real life example, look at how prices keep going up at Starbucks. I remember literally choking the first time after paying $4 for a latte. Now $4 seems like a bargain after recently paying over $5 for a Pumpkin Spice Latte. I recently saw a study that 2% of people attempt to reduce their Starbucks consumption while 98% look for additional change under their car seats. Price doesn’t matter to people who have a Starbucks addiction. The folks at Starbucks know this!
Giving generic advice is not wise for any given specific situation so please don’t make any business decisions based on this blog post. Having said that, if your business faces a situation like what was described above and you are not putting price increases at the top of the decision making list, contact me and let’s chat about what’s holding you back. If your product or service delivers great value that is appreciably noticeable, you may find that it is easy to make more money with less effort, especially if you take the right approach…
2 Comments
Jeff Hora
September 22, 2014This goes along with much that Alan Weiss says about pricing….especially in the world of consulting. Whatever motivates one to keep prices lower than they might be, too much great business, as you note, has the probable outcome of degrading the customer experience, thereby lowering the likelihood that these customers will either come back or refer you.
A great problem to have, and a reasonable avenue of consideration for dealing with it, Earl. Thanks.
Earl Bell
September 22, 2014Hi Jeff,
Thanks for your comments. Great chatting with you last week on the phone. Think big and be bold in pursuit of your goals!
Earl