In last weeks' email you will remember me talking about the new accountancy client we have just taken on and the challenges over pricing and more importantly having regular price increases.
Well this got me thinking, and I recorded a TikTok video a few weeks ago that I think is relevant here.
You may have seen it if you are following us on TikTok?
However, for those of you not doing that - here is the simple gist of it.
In business, there are really three numbers that matter when you are dealing with your products or services and your customers.
- Cost - Simple. This is the charge to you for the thing you do. You can control this.
- Price- Again, quite simple. This is the amount the customer pays. You also control this.
- Value - Ah. The thing you can't control.
You see, value is perceived and viewed from the eyes of the customer.
This is out of your hands.
But it is important to acknowledge.
The customer will have a view based on the value that the product or service gives them in relation to the price they pay (they won't care about cost to you or your margins!)
These three numbers are interconnected as they form the pathway from "building the thing" through "selling the thing" and into "using the thing."
But we need to break the connection between price and value - and ask those who are buying from us to give us feedback on their value perception post-use.
Late 2023 we took on a new restaurant client, Sam, who had been looking at investing in our services for around eighteen months before he jumped on board.
He was nervous about paying the "price" for our involvement to help him scale the business, however after six months working with us, his business had improved dramatically - both operationally and financially - and he called me outside of his normal support calls to give me some unprompted feedback.
I'm paraphrasing this now, but he said that he "thought the price was reasonable when he first invested, but the value he has seen has shown him that we are underpriced (!) and that we should at least treble our prices!!"
Now we won't as we are happy to charge the level we do for the support we give (we have done the numbers!) but we are clear that we know the costs, have established the charge we invoice our clients monthly, but cannot confirm the value they get.
We have disconnected these numbers.
Our goal is to get feedback like that from Sam that says that the value received far exceeds the price that he has paid.
Have a think about this in your business.
Speak soon!
James