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The problem with 'Priced to sell'

December 31, 2013 by Dale Furtwengler — President, Furtwengler & Associates, P.C.

Priced to Sell, an article that appeared in Bdaily Business News, touts the use of auctions to "achieve maximum value" from sales. According to the author, auctions allow "sellers to have the ultimate reassurance that they are reaching the widest possible markets and getting the best price, while buyers have an opportunity to contribute and pay what they believe something is truly worth."

WHAT A CROCK!

#1 - "Reaching the widest possible markets" means that your devoting scarce resources to producing goods/services for people who really don't value them. That's not good for your company or the economy as a whole. Everyone is dealing with limited resources so why devote them to people who don't really value what you offer.

#2 - "Buyers...pay what they believe something is truly worth." Wrong! Buyers will pay as little as possible given that option. Unless you're willing to place a quantifiable, demonstrable value on what you offer and hold firm to that price, you're not going to realize full value from your offerings.

Case in point. I have a hard-to-fit foot. Indeed, only one brand of shoe fits comfortably and affords the style I desire. These shoes typically retail for $185 to $190 a pair. I would pay that because I don't have an option except that twice a year a retailer puts them on sale for $100. Care to guess when I buy new shoes?

You CANNOT maximize value by selling to people who don't value what you offer. I don't know the source of this inane logic or why it is so easily perpetuated, but it's flat out wrong.

We have very visible contradictions to this logic in the success of Apple, Panera Bread, Kraft Foods, Nordstrom's and a plethora of companies that consistently charge high prices and enjoy solid growth year in and year out. Yet we choose to believe the folly of theories like "priced to sell."

Isn't it time that we stopped wishing for a magic bullet that will solve all of our pricing problems and deal with the following realities?

• The market for your offerings is much smaller than you'd like it to be, which is why it is so important to be compensated fairly for the value you provide.
• When you're 'competitive' in your pricing, you make your offerings a commodity in the eyes of the buyer.
• When you discount your offerings, you're basically telling the buying public that it's not really worth what you were asking.
• Buyers (customers) don't know how to quantify value, consequently they're looking to you to help them define that value.
• Unless we're willing to hold firm on our pricing we confuse the market, customers have no way of knowing what the value is.

Now that I've completed my rant, I implore you to avoid the latest, greatest pricing "strategies" and stick with the basics:

1. Have a clear brand promise so that customers know what to expect from your company.
2. Combine that brand promise with a psychographic profile of your ideal customer to create marketing messages that will attract people who value what you offer enough to pay a premium to get it.
3. Develop sales scripts that lead the prospective customer through a calculation of value so that they can get a dollars & cents understanding of the value you provide. Yes, this can be done in retail as well.
4. Create bundles of offerings and pricing that reflects the value of each bundle. This provides your customers with choices and an array of budget options. Keep it simple, no more than three options. 
5. Hold firm on your pricing.

Follow these simple steps and you'll enjoy the kind of success that Apple, Panera and the others are. Continue to follow the latest, greatest "strategies" and you'll feel like the proverbial dog chasing its tail — working hard, but never quite getting there.

About Dale Furtwengler

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