Casey Brown - You Are Probably Under-pricing Your Product (F1817)

It's true that some things change as we get older, but if you're a woman over 40 and you're dealing with insomnia, brain fog, moodiness, and weight gain, you don't have to accept it as just another part of aging. And with Miti Health, you can get help and stop pushing through it alone. The experts at Mitty understand that all these symptoms can be connected to the hormonal changes that happen around menopause, and Mitie can help you feel more like yourself again. Many healthcare providers aren't trained to treat or even recognize menopause symptoms. MIDI clinicians are menopause experts. They're dedicated to providing safe, effective, FDA approved solutions for dozens of hormonal symptoms, not just hot flashes. Most Importantly, they're covered by insurance. 91% of MIDI patients get relief from symptoms within just two months. You deserve to feel great. Book your virtual visit today at joinmidi.com. That's join MIDI.com. Welcome to the Exit Coach radio show, the show for baby boomer business owners who are looking for cutting edge information as they plan their 3 to 10 year business succession and exit. Every week we interview top professional advisors for their best tips, strategies, and precautions, so you. Can be well planned and don't miss our one minute exit coach tip of the day on exitcoachradio.com. And now here's your host, the exit coach Bill Black. Welcome everyone. Thanks so much for listening today. My next guest is Casey Brown with Precision Pricing. Remember that old show The Price Is Right? Well, we're going to talk to Casey about whether your price is right. She is in the business of helping companies substantially increase profits through better pricing. And she's going to talk about value-based pricing and some other key pricing best strategies. So Casey, thanks very much for joining us. Welcome to the show. Thanks, Phil. Happy to be here. Casey, tell us a little bit about precision pricing and how it got its start and a little bit about your background. Sure, so my background is actually engineering. Started my career at GE as an engineer in R&D and manufacturing. Moved into 6 Sigma, which is a quality initiative for making data-driven decisions. And as a 6 Sigma black belt, I did a rotation in pricing and really fell in love with it, went on to be a pricing manager within GE and then at other large corporations before starting this firm 3 years ago. And now I help companies improve profits through better pricing. And you ask how it got its start. I mentioned that I fell in love with the discipline of pricing and when done well, it is a discipline. It's data driven and strategic. What I find is that most companies really don't invest enough in their pricing strategy and execution. They might try to price somewhere in the neighborhood of their competition or they try to ensure their margins are adequate, and they call that pricing strategy, but effective pricing really is so much more than that, and the gap between these two really leads to chronic underpricing in most businesses, and that really can cost companies 10%, 20%, or more of their net profit. So most companies are chronically underpricing. That's what I find. Wow, OK. And so a lot of companies out there, I know that are in competitive industries would say that they really don't have any pricing power per se, that, you know, they're competing on price with each other. So what would you say to these companies based on your findings? Sure, I hear that a lot. A lot of companies say, hey, the market sets the price, you know, it's set out there. I just have to do the best I can in here. In the face of that constraint, what I find is that really is the reality that most companies have two main areas of pricing power set another way. Many companies are underpricing in two key areas. You mentioned the price is right, and that's interesting because I play that game in my workshops. Bill, can I ask you a question? Sure. What's the price of regular unleaded gasoline where you live? Uh, roughly 3:40. OK. And what's the price of 6 ounces of Texas Pete's hot sauce, 6 ounces of Texas Pete's hot sauce, 6 ounces, boy. Uh, let's say 279. OK, it's 88 cents or something very close to that, but you're probably within a nickel or a dime on the price of gas, maybe even within a penny. Why do you know the price of gasoline? You buy it all the time, makes up a reasonable percentage of your household budget. It's very visible. You haven't bought hot sauce in 4 years, you know, you don't, it makes up 0% of your household budget. It's literally beneath your notice. You don't know or care. Most companies have gasoline and hot sauce in their portfolio of products and services, but many companies are treating everything like gasoline. They think if they raise their prices, their customers will leave them, but it's only true on the gasoline. It's not true on the hot sauce. So what I say to companies is, where's your hot sauce? So that's one area even in very price sensitive industries where some companies are under pricing in the areas where people just aren't paying as much attention. The second area is where you're really underpriced relative to the value you deliver. You have an exceptional product or service. You're better than your competition, but you're really struggling to be paid for your excellence. Many companies feel they must be price competitive. I say all the time to my clients, you don't have to be the lowest price. You have to be the best value. And if we focus relentlessly on being the best value to our customers, we can be their choice. Even at a price premium, if we solve their problem better than anyone else or serve their needs better than anyone else, price fades to the background as a secondary consideration. And when you're great at what you do, you have pricing power, period. I, I, I hear what you're saying. I know a lot of business owners who have come out of 2008, let's say in the, the services business, construction and and contracting. And they found themselves where they were at the top of their game and they were charging premium prices and getting, getting it before 2008. After 2008, they found themselves back in a bidding room. Now they're starting to find themselves get back into a place where even if people chose the lowest bidder and they weren't them, they got poor value. So now they're coming back. What kind of a game does the economy play in pricing, I guess is my question here. Well, it does play a role, and so From the perspective that when the pie shrinks, things get more competitive and the competition plays a bigger role in pricing when the whole pie shrinks and so industry is very affected by the economy, such as the construction market that you mentioned. Competition gets sharper and sharper and so it does affect things. One thing that I see interestingly from the psychological side of things is that people wear the battle scars of the economy long after they should leave them behind. And so, you know, I try to build the confidence of clients. I say, guys, it's time to leave the recession behind you. It's over. And I'm not saying there that our customers don't have price sensitivity or that we don't have to take a look at where our competition is, that that's not a factor. But there are places and ways we can take a look at where we're premium to our competition. In terms of our performance or we have pricing power, but a lot of folks are still having a real issue with confidence based on what happened, you know, 5 and 6 years ago with the economy. That's a good point, and it has actually forced a lot of people to become innovative and create new marketplaces, and that has actually helped a lot of companies because their core. Business has changed maybe to a more effective model now with the new ways also, yeah, exactly, exactly and then their core business when that came back, it just added, it just came back and now they have a much bigger business in a lot of cases. So in an average selling conversation, who's more focused on price, the buyer or the seller, Casey? A, it's a seller who's obsessing about price, and sellers think the buyer is also thinking about price too, but they aren't. The buyer's concern is really value. We all think of examples in our personal lives where we spend a premium on something. I do some exercises in my workshops where we talk about this. When if you spend a premium on something and you were very happy to spend it, and we, we work on that. We say we're, we think about value when we buy, but somehow when we're selling, we're so worried about price and we think that buyers do, they're not. They're thinking they're thinking about value. And so the same is true for the customer. They will pay more for something if it's the best value. And if we walk into the selling conversation focused on price, we'll underprice. If we walk into this selling conversation focused on value, we're speaking their language. We're solving their problems, helping them serve their customers, reducing their risk, etc. such that price fades to the background as a secondary consideration. It's still a consideration. It's just not the most important one. When you sell on value, you win business at premium. Prices. OK, so, what do you say to companies that are setting prices based on what's called a cost plus model and maybe describe what that is briefly before we get into that. Sure. So sometimes companies say costs drive prices, you know, our costs are what really sets the price that our customers are willing to pay, and our, you know, so they'll build up the cost of the project or the product or the service, and then they'll tack a margin on top, and they say that's what drives their customers, their customers' price sensitivity. And I say our customers don't care about our cost. Costs don't drive pricing. Value the customers drive pricing. And so sometimes clients really argue that point with me because they're just used to doing it this way they've been doing it this way for years. I asked them the following question, you know, for example, if you're a manufacturer, I say if you make a mistake on the production line and you have to scrap an entire run of product and have to make that over again, are you able to charge, charge the customer? You know, of course you're not able to do that. Why? Because you know your costs are double. You told me costs directly drive price. Well, they don't. Costs don't drive prices. Customer value drives price. So if you solve a problem for them, the solution has the value, the value drives the price. And so I, I think you just have to shift people off there thinking there's certain industries in particular where this is a really common way to think about about problems if you're in an industry where there's a Custom solution every single time. Construction is one of these, or custom engineering, every project is different, so you build up what the cost of the solution's going to be and you tack a margin on top. And so sometimes there's industries where this is, you know, sort of the way you have to start, but one of the bad habits in those kinds of industries is to just apply a flat margin percent on top of the cost of those products or services. They cost a job or a project or a product and apply the same flat on it just like they do every other job no matter who the customer is or what the opportunity is or how price sensitive it is. An example I use in my workshop is two cars made by Toyota. You have the Yaris and the Lexus. Toyota isn't making the same margin percent on both cars. They aren't applying a flat cost plus model. Toyota knows that Yaris buyers are very price conscious, and Lexus buyers are much less so. Yet a lot of companies are doing the equivalent of making Yaris margins on their Lexuses. So I say, you know, don't do that. Good point is. There a science or methodology to building a value proposition or a value demonstration? In other words, what comes to mind is there are a certain number of optimum features that you start to lose a customer, let's say after 5 features, and would you build those best and highest use features first so they catch those first or last? Is there a science or psychology to that? I think that the answer to that is it really depends. It depends on how complex what you're selling is, how highly specialized it is and differentiated it is. If it's something very simple to understand and clear, it can be a very simple story. If you're selling a, you know, $5 million jet engine, you know, that's a very different, a different solution. So it's really very industry to industry. customer to customer, product to product. I think ultimately the key to a successful value proposition is it must be in the language of the customer. Something I say is don't confuse feature selling with value selling. Sometimes feature selling is in the language of the seller and value selling is in the language of the buyer. What's the problems they have? What are their issues? What are their, you know, so if I'm selling some widget and I About how great my widget is, but the thing that the widget solves for the buyer is that it eliminates downtime in their production facility, and that downtime is very costly. Talk about that, right? So the answer to your question is it depends, but the key is always talk about what the customer cares about most. Talk about where their pain points are and how you solve that. Keep it in the language of the customer. OK, that makes a lot of sense. I was just thinking like, for instance, um, looking around where I am, uh, a printer and walk into an office supply store and there's two different models or makes of printers side by side. Do they know that there's gonna be a standard way that they demonstrate their features so you look at one and it's and you're gonna be comparing apples to apples like number of dots per inch, uh, how fast it is, that kind of thing and and they standardize that against each other. Um, I think to some degree, I think if for any given industry, you know, the top key issues that people care about. One thing that I like to caution folks against though, and I think this is important, is in any industry, you say what are the what are the features or or considerations people care about in your industry? You say, well, my customers care about speed, reliability, quality, price, value, blah blah blah, and and you you look those things. And the customer and you'd say, do any of your customers not care about these things? No, no, they all care about them, and that is true. The key important thing to consider is if you took that list to all of your customers and said put this in order, not all customers care about that list in the same order. There's some customers for whom reliability is far and away number one. Other customers for whom product customer service is number one. Other customers' prices is is. Really much more important. So understanding that customers care about things differently is really key to helping to target your value selling message. It's not as simple as here is our value proposition singular. It's value propositions plural to understand how to target your message to the people that are buying it such that you're really able to solve their problem uniquely, and that's the way to make the most profit with your different segments of customers. Very, very interesting. Now Casey, you're gonna be doing a TED talk coming up on May 28th I understand in Columbus, Ohio about pricing, right? That's correct. That's fascinating. And do you speak to groups or how else do people find out about you out there? Yeah, I do a lot of speaking around the country on the topic of strategic pricing and value-based pricing. Frankly, I say, oh, I'm a pricing consultant, and people say, what is that? You know, no one goes in Google's pricing consulting or pricing help. One of the reasons is the problem I described earlier. People think the market sets the price and they don't have any power, so. They don't, they don't really go looking for pricing help. So one key way that I grow my business and meet clients is through speaking. And so I speak at trade shows and networking groups and conferences and so forth. And yes, as you mentioned, I'm doing my first TED Talk later next month in Columbus on the topic of pricing and pricing relative to your value. One of the key messages for that for that talk is that customers will never pay you what you're worth. They'll only ever pay you what they think you're worth, and you must control that thinking. Very good, very good, very interesting. We all deal with pricing. Everybody who's a business owner, it's a universal need. And again, as Casey Brown has told us, you're probably under pricing because you're thinking wrongly about it. So. They can go to your website that's probably better, right? Precision pricing LLC.com, right? Correct, and find out more about you and give you a call. Can they give you a call if they're, if they have some questions and wanna talk about it before uh figuring out, OK, OK. And I, yeah, so, so an email address is K C A S E Y at precision pricing LLC.com. That's the, the fastest and best way to schedule schedule time. Um, but a phone number is 614-679-7999. There's also a contact form on my website as well. Excellent. Well, I wish you well on your TED Talk, and I thank you very much for joining us with great information about about pricing, and I think that, you know, maybe at some point in the future we'd love to have you back on and talk more deeply about the psychology of pricing and what goes into this for some of our listeners so they can get a little bit more in depth information but of course. If they have questions immediately, they should give you a call, get on your website at precision Pricing LLC or get in touch with you at your email by at Ky@precisionpricing LLC.com. So thanks so much again for joining us, been a real pleasure. Terrific, Bill. Thank you very much. Have a great day. All right, thank you. We're going to take a short break. We'll be right back after this, so please stay with us. Just thinking about what will happen to your business if you're gone keep you awake at night? Will you get the price you need from your business to carry you through retirement? The BEI Network of Exit Planning Professions is the world's leading advisor network with the power to help business owners transition out of business on their own timeline and terms. Ask your most trusted advisor to create a BEI plan for you, or visit us at exitplanning.com. That's exitplanning.com. You're listening to Exit Coachradio.com, the information station for age 50 plus business owners, where we're interviewing top advisors for their best tips, ideas, and precautions so you can be well planned. We upload new one minute tips every day. Exitcoachradio.com. Come listen for a minute. Thank you for listening to Exit Coach Radio. It's true that some things change as we get older, but if you're a woman over 40 and you're dealing with insomnia, brain fog, moodiness, and weight gain, you don't have to accept it as just another part of aging. And with Miti Health, you can get help and stop pushing through it alone. The experts at Mitty understand that all these symptoms can be connected to the hormonal changes that happen around menopause, and Mittie can help you feel more like yourself again. Many healthcare providers aren't trained to treat or even recognize menopause symptoms. MIDI clinicians are menopause experts. They're dedicated to providing safe, effective, FDA approved solutions for dozens of hormonal symptoms, not just hot flashes. Most Importantly, they're covered by insurance. 91% of MIDI patients get relief from symptoms within just two months. You deserve to feel great. Book your virtual visit today at joinmidi.com. That's join MIDI.com.