She sent me a text in the middle of the night saying “HELP: I am to close a major deal tomorrow, but What Do I Put As My Service, Business or Product Price Tag?”.
She’s a mentee and an alumni of our class and member of our HexavianBusinessClub. The meeting was with a few billionaires. So I did her a bank transfer, to move the meeting from Tantalisers to the last floor of Eko Hotel and Suites. The truth is, in a negotiation table, people won’t attempt to give you any money they think you have not seen before. You’ve got to act the sale you want. Then I told her, ” I’ll call you in the morning to discuss how you’d price”.
How To Create Price Tags.
People have always asked me this. From Esau and Jacob to Ronald Wayne and Steve Jobs in the early days of Apple, I’ve seen people price themselves away.
From selling off a business to selling a product or your knowledge and experience (in rare cases like consulting), you may be stuck with how to fix your pricing 1. Absolute (for regulated industries (like the price of petrol or telecoms), or 2.Relative (which almost all other businesses are, based on others and perception). I hope this helps.
Take for example, When Gillette was acquired by Procter and Gamble in 2005, how did they even do the calculation?. Well, it was sold for 57 billon dollars. But in reality only $6b of the $57b purchase price was for its tangible (touchable) assets, the vast majority of the value being in its BRAND equity and trusted CUSTOMER EXPERIENCE. At some point in pricing, it’s not what you’re selling, but how it’s sold (branding). Hexavian Law 4 (branding) states that, “In Business and branding, the only thing more important than what you’re selling is what you make the buyer believe that he is buying”. This is very applicable to value based pricing though.
Businesses have methods by which to price their products and services. Two common methods are cost-based pricing and value-based pricing. When a company uses cost-based pricing, the company sets a price at a percentage above the cost it incurs to manufacture the product or to provide the service. Value-based pricing takes a different approach, considering the potential value the product or service will bring to its customers.
Consultants and luxury brands use more of value based pricing. In general, irrespective of your industry or niche as your brand equity increases, value based pricing increases. At Hexavia, this fact is what we build our brand strategy on for our clients, so from our clients like Slot to NewAge to Ruff-N-Tumble to St Nicholas Hospital, you see how their price connects with their brands. So, if you don’t consider building a brand for 1.Unqueness, 2. Consistency, 3.Identity, then please be a brand for the sake of pricing.
Costing and Pricing involves a lot of calculations which I won’t bore you with because of the context of this discussion. However, my advice in general as a management consultant is, do your maths right and juggle between absolute and relative methods as well as cost and value based pricing in relation to your niche. And never ever ever, put your good product in a bad container (imagine champagne in a Zobo nylon, or Zobo, in a champagne bottle, would any of these affect pricing?, definitely yes.) When you package and brand right, the right target customers will pay you. And one more thing, never ever let your customers pay you from their pocket, but from their heart. It means, create an extra value alongside an emotional connection. Create your life and business model around it.
Remember, this year, will require a deeper breakthrough. When an egg is broken from the outside, life ends. But when it is broken from the inside, life begins.
Begin the break from the inside. Invest in your mind and the organisation you are in. Talk to us.
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About Eizu Uwaoma
Eizu Uwaoma is the founder & lead strategist of Hexavia, a business, brand, training & management consulting firm. Through his weekly features nationwide on radio, he connects with more than 5 million professionals, personally interacting with over 500 top executives & has intervened in over 50 businesses. He has a proficient gift, skill and experience in enterprise development. He is an authority in start ups, corporate restructuring, brand, human capital and business training as well as project consultancy.
He runs the Decoded, a quarterly hangout for professionals in all major Nigerian cities facilitates at the Hexavian Masterclass and is the founder of the Hexavian Business Club.