Needless Markup: What to Do When Customers Object to Your Pricing

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“Why are your prices so high? Why do you charge so much? Here’s how to answer those questions, without fumbling the conversation.

It’s all about value, who sees it, and whether you’re positioned to sell that value to that customer.

There’s a famous department store based in Dallas that the locals sometimes refer to as “Needless Markup.” What they’re saying is that the store charges more than they’d expect to pay for what you’d normally find in a department store — and they don’t see convincing reasons for the markup.

And yet the brand is very, very successful with a certain other kind of customer.

Turns out, price in isolation isn’t the problem. High prices when you haven’t established value with the right prospective client — that’s the problem.

Here’s what you can do:

1. Find out who your customers really are

Are they working moms? Busy executives who travel? Hardcore athletes, or hour-a-week folks who are just happy to make it to the gym? High-society types with serious disposable income who want the best of everything?

2. Find out what’s valuable to them

If your prospect wants to feel special, they may not be balking at price. They may want simply to reassure themselves that they’re getting a one-of-a-kind experience for the price. After all, what wouldn’t you give up for one of only 6 slots available to train with an Olympic athlete! Who doesn’t want to do an open water swim clinic with Diana Nyad, who swam from Cuba to Florida?

On the other hand, Planet Fitness garners a fair deal of business catering to a budget-minded, just-let-me-work-out-and-go-home crowd. They don’t have a pool. they don’t have huge weight racks. They don’t have row upon row of protein shakes and performance-enhancing supplements lining the shelves. In fact, they make fun of that in their ads.

Different customers want different things.

3. Make sure those prospects can see value

Half the job is just acknowledging that your business is not a $100 bill and not everyone will like it.

Once you’ve zeroed in on who you’re really targeting and what they want, those prospects don’t have to actually understand the value of your programs as much as the possibility that they might be worth what you’re asking. It’s enough to get past their “ignore this” filter and keep them listening.

Then continue to target the message to them, establishing deeper and deeper value in their minds while moving farther and farther away from people who weren’t going to buy from you anyway.

For instance, if your weight loss product is intended to be part of a spa-like experience available only to the blessed few who have ample disposable income and the ability to travel to your location for several weeks to detox and rebalance their nutrition, then it’s worth thousands — to that customer.

If, on the other hand, your product is sold in a brown paper bag to people in an economically depressed town, it had better be stripped down and budget priced. BOTH scenarios demonstrate the possibility of value even before people know the whole picture. The first example is “exclusive”, and the second one is “affordable, practical, no-nonsense.”

If your prospect is “spa lady”, stop talking about how affordable your exclusive products and services are. It undercuts your value.

4. Explain value — not cost

Nobody really cares if the reason your lemon pepper cleanse is so expensive is because you have to pay shipping from India, where the peppers are grown. That’s just your cost of doing business. On the other hand, it’s easier to tell customers that the organic, fair-trade ghost peppers are flown in fresh each week, sun-dried, chopped and infused into the lemon mixture by a trained chef who carefully balances and tests the Scoville ratings of the mixture, then come up with a plausible dollar value for “fresh”, “organic”, “sun-dried”, and “trained chef.”

If it costs you $800 per person to deliver a program you’re charging $2400 for, you’re going to have to come up with something pretty exclusive to justify the $2400 price, and it can’t be the fact that it cost you $800. If you can’t reduce costs, then learn to enumerate and highlight all the things your prospects care about.

TIP: You can’t do this step without doing step 1 and 2 (Find out who your customers really are, find out what’s valuable to them) first!

5. Invite comparisons with competition

If your price is reasonable and justifiable, there should be no reason to fear putting it out on the table for your prospect to compare with any similar offering. Your job is to justify the difference in price by demonstrating difference in value.

Once you and your prospective customer see what you competition is offering (presumably at a lower cost), you can point out that for just a few dollars more they can get more of what they value. Or that you DO have a bottom-tier offering that’s compatible with what your competition offers, but most folks who start on a fitness program like yours want to graduate to something a little fancier, more advanced, or more challenging after about 3 months. Perhaps you offer a much greater range of services or better hours for nearly the same price.

If your price is double that of the competition, your offering should be at least twice as valuable in your customer’s eyes –perhaps more.

There are any number of gyms in the Dallas area. I go to one that’s a little more expensive because I swim a lot. My gym has both an indoor and outdoor pool and lots of available lanes in both winter and summer, plus it’s open 24 hours a day except holidays. If I didn’t care about swimming and didn’t mind adjusting my workout schedule to when the gym was open, I’d likely have picked a cheaper one. Except my backup gym is now closed because of flooding and had a bromine pool, anyway — and I’m allergic to bromine.

Sure, a few folks will find your competition a better deal. But based on their needs they weren’t going to be your likeliest customers anyway.

6. The price is OK, but…

If you find that folks agree your pricing’s reasonable but balk at signing up, it may be that your marketing and advertising is attracting one kind of customer but your club’s core membership is another type.  Your Ironman athletes could get tired of your “10 week fat burner” come-ons and your “get off the couch” initiatives. Your ordinary-Joe, ordinary-Jane customers may be intimidated by the strongman trainers and Atlas stones you brought in, just when they were getting used to the place.

You’ve got pricing agreement, but a “value disconnect.” In other words, no one’s questioning that your no-frills gym is cheaper than the Lake Luellen Country Club. But if you’ve pitched it as a family friendly active fun kind of place, it should not be something else when prospects tour your facility.

Sure, things change, trends come and go, and sooner or later you’re going to have to replace equipment. Just make sure that when you do, you’re not changing something fundamental that changes the value equation; or if you do, remember to adjust your prices.

It never hurts to tap the pulse of your clients with surveys, feedback forms (offer an incentive for useful feedback!), suggestion boxes, and simple one-on-one hallway conversations.

7. Don’t buy business you can get some other way

Should you buy a failed competitor’s mailing list? Depends. How closely do their customers resemble your ideal customer? Let’s say you decide to pay $1200 for 400-600 names only to find out that just 20% of their customers match the profile of your ideal prospect. OK, that means you paid $10 a lead. That’s fairly expensive, so those leads better be worth every penny.

Otherwise, you’re likely to waste time and money on prospects who LOVE your wellness business — but their eyes say “country club” while their wallet says “work out at home.” Those prospects aren’t real, so don’t keep dropping your prices, extending introductory membership periods, or handing out day passes like candy to keep them coming. By chasing leads that are both expensive AND not your type of customer anyway, you’re taking time and attention away from somebody else who could be using your facilities, loving them, and paying for it.

8. Offer extras that maintain value

OK, so you cost more than the other guys. Instead of dropping your price, add in extras that are highly visible, valuable to customers, and require little cost or involvement by you.

For instance, consider “pick your date” billing date, or prorating billing for fractional use of facilities. How about a guarantee? How about more liberal “bring a friend” policies? Or special free events that only members get access to?

You don’t HAVE to do these things, especially if doing them will be a headache and a nightmare to manage. But if you have enough customers and prospects who want them, it doesn’t usually require much sacrifice on your part and might be the “easy to do business with” edge you need to acquire and keep those members.

9. Be willing to walk away

Sometimes the pricing that makes sense for your wellness business just doesn’t make sense for your prospective customers.

Is $600 the right price for a week long summer soccer camp for 7-10 year olds? Only your potential customers know for certain.

It might be a perfectly reasonable price for one market and unsustainable in another. Or the price might be right for the market, but only for a smaller number of truly qualified leads who see the real value and not just price. Maybe you could charge $4000 for a camp dedicated to club and travel soccer kids, but only $150 for a “fun” camp.

You’re going to have to experiment. if you’re marketing to the right group of folks, they see the potential value, and they’re not that tempted by competitors, then you’re on track. If their response is a failure to see why you’re worth it, then you have two choices: 1) go back to the drawing board and figure out what the right price should be, or 2) get better at targeting the customer who will appreciate what you’re offering.

Then ask yourself: can we maintain cash flow waiting for Mr. RightCustomer to pay what we say our programs are worth? Can we alter our message or refine our pricing to increase demand and enrollment in an identifiable and addressable target market?

If there’s no way you can answer “yes” all of these questions, then it’s time to re-examine your assumptions.