Increase your prices - be 'Reassuringly Expensive'

Pricing policy has both an immediate and long-term impact on a creative business and has an impact not only on the economics of the enterprise but also on the perception of its products and/or services.
... For more on this subject, see the 'Reassuringly Expensive' article on the Creative Choices website in The Creative Business blog series.

In many cases, increasing prices actually increases sales, because customers' perception changes and makes the product or service even more desirable.

What do you think?

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Permalink Reply by David Parrish on June 25, 2010 at 10:11

Thanks to Leslie Burns for highlighting this article in the MIT Sloan Management Review about pricing.

All of the issues it raises about pricing strategies and pricing mistakes are relevant to the creative industries, whether you are selling products or services, even though the examples are from big manufacturing firms.

The article underlines and expands on various advice published in the book 'T-Shirts and Suits: A Guide to the Business of Creativity', connects with some posts on this blog, and links in with discussions on the T-Shirts and Suits Creative Enterprise Network.

I think some of the most important points are:

1. Look at your offerings from the customers' point of view and understand how they see value in your products and services. This new perspective may allow you to increase prices.
(See also: 'What are you selling, really?')

2. Set prices according to what the customer gets out of it, not what you put into it.
(See also: 'Art is not what you see...'.)

3. Instead of competing on price with lots of competitors who do much the same as you, focus on what you can do that they can't. In other words, focus on the areas of the marketplace where you have a competitive advantage. This will lead you to particular types of customers who need and value the things that you excel at in relation to competitors. These customers are more likely to pay higher prices because they recognise you are the best in your field.

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Permalink Reply by Ken Church on August 11, 2010 at 9:42

I have three different tales about pricing. You can draw your own lessons from them!

A below-the-line client of mine who's main line agency had failed to come up with a short term idea to keep the client's 48 sheet posters fresh until the next big campaign rolled out asked me to present some ideas. I was able to come up with an acceptable idea and duly put in my bill. The client was furious! Not because the bill was too high but not high enough. He was used to paying very high agency fees and in his own words "This will get me fired. How do I explain the bills from the agency against yours?" Without too much arm twisting I doubled my bill!

I had made some AV presentations for the Government and pitched for a further contract. My contact was brutally honest. "There is a recession on and budgets have been slashed," he said, "so I have to spend wisely." His version of wise was to go to the leading (and most expensive) company so that he could justify his position by "using the best".

The final story is more current. I am retired now and run a small art gallery in Spain, more of a hobby than a business. My biggest sale to date is 2,000€ for an abstract painting that, quite frankly, I thought I would never sell! That's what happens when you don't have a clue about the business you are in! Sorry, I am straying from the point. I was stopped by a well-meaning local to warn me that I had a reputation for being expensive. My response was to say 'I do not sell tomatoes, I sell original one-off pieces of art. If I sold tomatoes then you can compare me to other tomato sellers. If you want to buy a piece of art but can't afford it then that's a problem with your finances, not my price. What price do you put on something that you cannot buy anywhere else?" I don't think they were convinced!