How To Sell High-Priced Products: 7 Effective Techniques ⭐
Selling a high-priced product can be challenging to most businesses, especially when there are cheaper counterparts around. Thus, oftentimes, when a business wants to sell expensive products, one of the questions they ask is, how to sell high-priced products?
The answer is: negotiate the price that you want for your products.
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Quoting an author, Dr. Chester Karass said, “In business, you don’t get what you deserve, you get what you negotiate.”
We all know that high-priced items are judged by their looks, value, quality… And when customers are making decisions, there are a lot of things going through their heads. What’s more, customers have different motivations too.
At the end, when people don’t buy a product, they blame the price tag. However, such a reason would only mean that you need to rethink your selling tactics.
To sell high-priced products, focus on value instead of price. Price your products based on their value. No need to offer unnecessary discounts so that your customers don’t object to the price.
However, there are no quick tricks when it comes to selling high-end goods. Thus, in this article, we will discuss the right strategies that could dramatically improve your sales. We will share with you 7 top tips on how to sell high-priced products. Additionally, we will provide you with the challenges of selling expensive products, and of course, some ways on how to overcome them.
We believe that, if your product is priced correctly for what you offer, you don’t have to lower your price. Implementing the right approach to pricing is key to increasing your conversions for expensive products.
Table of Contents:
I. 7 Effective Tactics on How to Sell High-Priced Products
II. How to Price a Product to Sell Without Losing Volume?
7 Effective Tactics on How to Sell High-Priced Products
Price might be the first thing you investigate if your product is not doing well on the market. Usually, though, it’s not the main reason why your goods don’t get off the store shelves.
Here are some clever ways to sell high-priced products to market without giving up on the price:
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Be open-minded about your potential customers
Don’t assume that prospects are not going to buy expensive products. Remember, even the thriftiest people treat themselves every now and then.
Use the right approach and see how you can turn any potential customer into a profitable sale.
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Provide the Benefits/Value of Your Product
People usually buy things that give them the most value. Therefore, list all of the benefits or value that your product offers. So that customers will know what they will get when they buy your product.
Make your customers aware of how much time, effort, and resources went into creating the item. The product becomes more than just an item when you tell your customers what makes it valuable.
Customers really don’t want to pay a high price; however, they also don’t want to give up the value even more.
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Do not offer discounts
If you’re selling premium products, steer clear from discounts. Why? You’re offering a high-priced product, so that price tag is there for some reason. Take note, products on sale usually have a cheaper vibe, even the high-stake ones.
Certainly, it’s inevitable to have low-cost competitors. For that reason, sales and discounts are some good ways to entice new customers and make the old ones happy. However, when a potential customer you just began negotiating with requests for a discount just because your rival did, do resist the temptation! You provide high-quality goods and the price tag justifies the worth of the product. Offering discounts just because your competition did undermines the quality of your high-priced product.
Nevertheless, if you still want to find some ways to make your customers happy, go ahead and give them a discount. Offer them, for example, free shipping. That’s just one way how to sell a high-priced product without decreasing its price tag. If there is no reason other than competition, provide a good reason then let your customers know about it.
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Use product positioning strategy
Oftentimes, it’s hard to imagine how customers will receive your high-priced product once it’s out in the market. A product positioning strategy is planning for how people or your customers in the market will think of your product.
Take note that your product has a life of its own. The only product positioning that counts is the customer’s understanding of the product. Therefore, your high-priced product doesn’t get that position if a customer isn’t even thinking about it.
Using a product positioning strategy will help you understand two things: “where your product is today” and “where it would be ideally”. Meaning, a product positioning strategy will get your product position from A (where your product is today) to B (where it would be ideally).
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Avoid odd pricing
Avoid odd pricing, use round prices instead. Odd pricing or using prices that end in 9 or 5, like, $4.99 instead of $5 make products seem cheaper. Though odd pricing is effective for some products, you might want to avoid it when it comes to selling high-priced products.
Rounded prices provide a feeling of luxury while prices ending with .99 give a sense of a cheaper deal. Notice luxury brands like Burberry, Prada, and Balenciaga, they stick to round pricing.
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List products from the costliest to the least expensive (price anchoring)
The most effective strategy is listing your products in order — from the most expensive to the least expensive items. The reason is that when a customer sees the costliest item first, the next less expensive price options would not seem so bad to the customer. However, if you begin with the low-priced items and gradually show high-priced products, the customer will feel like your prices are very expensive by the time they reach the last price.
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Offer upsells or add-on options
You can increase the total sale if you offer upsells or a number of add-on options (even when selling medium-range products).
Accessories, for example, are a no-brainer. Related products can yield additional profits.
The challenges of selling high-priced products (and how to overcome them)
For businesses that sell high-priced items worth hundreds of dollars or products priced at a daunting four figures, companies have several obstacles to overcome before they can convince customers to buy an expensive item.
Brands face three major dilemmas when selling a high-priced product. Let’s discuss the three main challenges and some solutions that will make selling high-end products easier:
The dismay of a high price (sticker shock)
Most of the time, customers back away when they see a price that is beyond their normal comfort zone. For some shoppers, it is easy to let go of a product based on price alone. Most people will tell themselves upon seeing an expensive item: “I can’t afford it” or “It’s too expensive… it’s way beyond my budget.”
You’ll quickly lose customers’ interest and attention if you don’t have a strong, compelling offer. Therefore, brands should use selective and strategic discounting. Companies should not reduce prices in a manner that harms the integrity of their brand.
Customer acquisition costs are high
Many assume that more expensive products have higher margins that lead to better marketing budgets. Regretfully, competition in the luxury goods market is fierce and your competitors are well-prepared and will gladly spend more on direct marketing in order to get a larger market share.
What should you do? Well, invest a significant portion of your budget in building an engaged and viable audience. Doing so, it will bring out compounding results, compared to one-off transactions.
Smart techniques for cultivating a constantly growing audience involve content and email marketing. For example, Burberry (a luxury brand) leveraged user-generated content to turn frequent customers into active and vocal advocates. In the long-term, with real voices talking about your product, it will generate more ROI compared to the humble profit from a quick straight response conversion.
An unknown brand name
You need to over-communicate your product’s benefits, the unique advantages you offer and the business’ values in order to help customers justify the high price tag.
For some customers, seeing is believing (literally). The reason why videos of products work perfectly for e-commerce sites. For some, social proof may help boost your brand’s image. Thus, good customer reviews and feedback make appreciating your high-priced product a lot easier.
Finally, customers feel good when you offer guarantees for your products. For example, the availability of full refunds is based on customer satisfaction. Also, total care product warranties provide customers peace of mind, as they are aware that they won’t be stuck with a faulty product and a hefty bill.
Implications
Selling high-priced products is all about trying what works and what doesn’t. Observe what other luxury brands are doing – for instance, how they price and use visuals in product descriptions. Maybe you’ll find something useful that you can also utilise in your product marketing.
Remember – selling and pricing techniques that work for a business that sells perfumes may not work for a business that sells home appliances. Same with the target market at play. The bottom line is to know who your customers are.
Prioritise on focusing on value, brand second. Some businesses think that the reputation of their brand merits a higher price tag. While it’s true that the reputation of your brand may hold power; however, when it comes to negotiations on price, the value that your brand offers to meet the explicit and implicit needs of your customer holds more power. When possible, ask potential customers the value they got from your product or are expecting to get from your product versus your rivals.
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Conclusion
One of the most common questions we are asked is how to sell high-priced products when it looks like the only thing that matters to your competition is a low price. However, your company’s success is based on your ability to prove to your counterpart that the value you provide to your product is worth the higher price.
Always have your customer in mind, therefore, experimenting is important. You’re launching expensive products and you do not know yet how your customers will react to them. Maybe they’ll love them – maybe they won’t. Maybe they will need a little bit of convincing to appreciate your products.
Selling is a cooperative endeavour where you help customers find the solution that will solve their problems/needs and make them happy.
Being more costly always helps, even if you’re just 2-3 per cent more expensive than your rival, it provides you with the upper hand. Thus, in some way, always make your products more expensive, even by a little bit.
How to Price a Product to Sell Without Losing Volume? 🧁
Effective pricing can help your business maximise profits, at the same time, maintain a good relationship with your customers. Pricing your products or services properly can also prevent severe financial problems from surfacing especially if your prices are too high or too low. So, the question most businesses ask is, “How to price a product to sell without losing volume?”
Pricing your products or services should not be a tough process. Just remember that you are in business because your customers value you. And that comprehensive research and analysis of customer value will help you to set the right price without losing hard-earned volume, revenue and margin.
But what is the right price? The right price should generate value for your customers and of course, for your business.
Customers are willing to pay for products and services that help them achieve their targets and outcomes (i.e., cost reductions, revenue increase, takes away risk, etc); and your company can adequately cover costs and safely increase profitability without the risk of underselling the offer or overcharging customers.
Your pricing is a determining element in everything your business does – from your available funds to your revenue margins, to which expenses you can pay for. Pricing a product/service is one of the key decisions that a business will make because it will affect almost all aspects of the business.
In this article, we will focus on the topic of how to price a product to sell without losing volume. We will discuss how to effectively price your products or services. We will share some thoughts on raising and lowering prices so you’ll gain insights on how to maintain healthy margins and volume. In addition, we will provide you with steps on how to evaluate competitors’ prices and set your own price to sell more and at more profitable price points.
Taylor Wells believes that when it comes to pricing, the most essential thing is that your pricing helps you and your customers achieve sustainable growth and key business outcomes. In essence, so long as your price makes up for your expenses and generates some margin, then you can always make more revenue and margin by testing and modifying prices as you go. As long, of course, as you don’t set initial price points too high or too low.
Pricing Your Product or Service
The price you set for your product/service is one of the most significant business decisions you make. Charging a very high price or a very low price will restrict the growth of your business. The worst part is how it could create a major setback for your cash flow and sales.
Therefore, consider your pricing strategy carefully before starting a business. For established businesses, you can increase profitability by doing frequent pricing reviews.
Also, set the price and sales levels that will allow your business to be profitable. It is also vital to take note of the position of your product or service compared with your competition.
How to Price a Product to Sell: Should You Increase or Lower Prices?
There will come a time when you need to adjust your prices. However, before doing so, you should evaluate how the proposed price change will affect your profitability.
Moreover, you have to answer two key questions:
- What is the impact of the price change to sales volume?
- How will it affect the profit per sale?
Raising prices can boost your profitability even though your sales volume may decrease. However, you have to provide a justifiable reason for your customers about why you are increasing your prices. Take the price change as an opportunity to highlight the value you provide your customers, including the benefits and outcomes your offers provide to the customer.
Take note, a good explanation can make your relationship with your customers stronger. You’ll elevate your position to that of a partner offering commercial solutions.
Below, we listed some of the more ‘tactical’ ways businesses go about passing off a price rise:
- launch new, more expensive products or services and make older and cheaper products obsolete
- decrease the costs and specifications but keep the same price
- Use rising commodity costs as the main reason for price increases
However, changing mix and reducing prices is not strategic. Surely, this is not the image that you want to create for your brand.
Focus, instead on how you are making more money or adding more value to your customer’s business when you explain price rises. In most cases, customers buy from you because of the value or the benefits you offer, together with your price. Customers rarely decide based on the price alone.
FYI – Evaluate competitors’ prices before you make a price increase or set prices for new products
Before explaining a price rise to customers, make sure you’ve done your planning first. It’s recommended that you check your final price relative to your competitors’ prices. Especially for commodity products or highly generalised products where there is a lot of competition.
When you analyse your competitors’ prices, it’s significant to know the position of their offer in terms of not just price but value. What is the price and value differential between you and your competitors? Whose distribution and operations deliver the most value to customers?
If you have a better supply chain than your competitors and you get products to your customers that they need on time, then yes, this is a legitimate justification for a price increase.
There are different price and brand positions for different price levels. Therefore, it’s better to analyse positioning and pricing together when assessing the marketplace. Know your competitors’ prices and their value offerings before settling on a price. By doing so, it impacts the power of your pricing.
But how do you deliver value to the market? Here are three primary value propositions:
- Operating efficiency – Deliver your goods at a lesser cost than your rivals. Make your product fit for the category. It may not be the best, but it’s not the worst either.
- Product dominance – Focus on innovation such as new technologies and superior products. Having new, different and unique products, your prices are expected to be higher than your competitors.
- Customer relationship – Solve the problems of your customers with a large portfolio of personalised products or services.
The concept of value proposition has been in the marketplace for quite a long time. Some marketers regard “value proposition” as a differentiator or a key selling point used to convince. However, for businesses, the term “value proposition” denotes the approach used to deliver value to the market.
After analysing your competitors’ prices, it’s time to determine your own price. You need to examine the high, low and average price tags and profits. Consider your minimum revenue goal and your price with that specific goal. Then revisit the pricing strategy that you used before and consider the two questions below:
- What type of pricing strategy did you implement before?
- Looking at the numbers that you were able to formulate, what judgment can you make from it? For instance, can you achieve your margin goal if your price doesn’t fall within the proposed range?
At this stage, you have to examine your competitors closely. How’s the positioning of your product compared to your rivals and what does it mean for your pricing tactic? Then check the competitors that provide the same value proposition as your company. Do you think it’s more significant for you to price against one or two of your competitors as opposed to the group as a whole? And if so, what does it mean for your pricing strategy?
Effective Guide on How to Price a Product to Sell
As mentioned, pricing your products/services right helps you maximise profits and also keep a good relationship with your customers. Effective pricing can help your business avoid the pitfalls of pricing incorrectly. The biggest pitfall being excessive volume loss.
Here’s a guide on how to price a product to sell that will help you set a fair price, consequently maximising your margins at the same time remaining attractive to your customers:
1. Identify the market. Determine how much customers will pay for your product and how much competitors sell for a similar product. From there, you can decide how much you’re going to price your item for — i.e, elasticity modelling, regression analysis, value mapping.
2. Select the right pricing strategy. Choose a pricing strategy that will work best for your product before setting up your price — i.e., cost-based vs. value-based, fixed vs. dynamic, tender vs. subscription.
3. Calculate profitability for each price point. Work out how much margin you will make or lose on a range of price points before committing to a final price point. This includes coming up with a unit break-even figure and attaching a profit model to the price elasticity formula.
4. Use value-based pricing. To set a value-based price, however, you have to know your market very well. For instance, the cost to market a toaster is $150 but you might be able to sell it for $350 if this is the market value. Get creative as this is where you really need to turn fundamentally qualitative information on customer value into economic values.
Consider mapping out your existing price ladder and then redesigning your price ladder with a view to each customer group or segment you serve.
5. Consider other factors. Know the impact of discounting or promotional activity on profitability — i.e., how discounting impacts your pocket price. Understanding SKU level profitability may require you to set different prices for different price and customer groups, markets, sales or territories you make online.
Ultimately, to understand profitability for each SKU you need to understand promotional activity and discounting as it flows from the end consumer or customer.
For an FMCG business, for instance, this would require an analysis of your entire price waterfall as it flows from the consumers to the retailer to the manufacturer. Putting your customers at the centre of your pricing strategy will help you re-assess the effectiveness of your go-to-market strategy, product strategy, brand strategy and channel strategy.
6. Monitor prices regularly. Prices are not fixed; they are always changing. Observe and check what’s going on in the market to make sure your prices stay optimal. Price product optimisation is an on-going process. This is why you need a dedicated pricing team on board to ensure the optimisation is on track and safely generating the EBIT you’re expecting.
Price Your Product Right
Does your product contribute to your goal of generating profit every month?
Monitoring your prices continuously and your underlying profitability on a monthly basis is another major element to pricing your product right. It’s not just enough to look at the overall profitability of your business each month. You have to concentrate on the profitability (or lack thereof) of every product that you’re selling. Make sure you know the extent to which every product you’re selling is contributing to your target of earning money each month.
To help you further in pricing your product right, you have to listen to your customers. Do it on a regular basis by asking for feedback from your customers about your pricing. At the same time, don’t forget to keep an eye on your competitors.
You owe it to yourself and of course to your business to be persistent in knowing the proper way how to price a product to sell. Remember, how you price your products could be the difference between a favourable outcome or fatal volume loss.
Implications
- There is no fool-proof way of deciding your product’s price. But, there are several strategies that you can utilise scientifically. If you work smartly by observing the market, you will establish a good foundation for your company. Thus, it’s important that you know how to price a product to sell.
- Pricing products/services can be challenging, particularly when you’re just starting out. But it shouldn’t be, as long as you begin with competitor research, make your prices captivating to customers. Then there’s no reason that sales would not come pouring in.
- Price your products right. Not too low that you lose positioning in the market and leave margin on the table. And not too high that you risk demand and get accused of price gouging.
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Conclusion
Make sure price levels are optimised to maximise margins and revenue. The bottom line is if you are consistently selling below cost to drive volume, then, over time you’ll lose hard-earned margin, revenue and even risk going out of business.
The market of your chosen industry will influence your pricing and the rest of the businesses you’re sharing that area with. Also, keep your prices competitive and current.
Pricing is different for every business. What works for one business won’t work for another. Thus, it’s important to ensure that your pricing technique is right for your business. But it ensures your pricing process is scientific so that you can safely implement and what’s more, learn from what you do.
For a comprehensive view on integrating a high-performing pricing team in your company,
Download a complimentary whitepaper on How To Improve Your Pricing Team’s Capability.
Are you a business in need of help to align your pricing strategy, people and operations to deliver an immediate impact on profit?
If so, please call (+61) 2 9000 1115.
You can also email us at team@taylorwells.com.au if you have any further questions.
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