E303 - Gain pricing power through pricing strategy methods | with Per Sjöfors - Jeff Mendelson | Digital Marketing for Humans

E303 – Gain pricing power through pricing strategy methods | with Per Sjöfors

Per Sjöfors is the founder and CEO of Sjöfors & Partners, a thought leader in everything pricing, driving growth, sales volume, and profits. His team of pricing consultants has profound knowledge of pricing strategies validated by powerful AI software to produce the pricing strategy services you most definitely need. They work with globally recognized brands on ways to gain pricing power through comprehensive analysis and pricing strategy methods. Forming marketing and sales strategies with tactics to transform companies to their next best level. 

Per is a sought-after speaker for various conferences, part of the Forbes Business Council and The C-Suite, appears regularly on podcasts and radio shows, and gets routinely quoted in the financial and business press. His new book “The Price Whisperer – A Holistic Approach to Pricing Power” is an Amazon best seller.  

When Per started experimenting with pricing, some of those experiments were very successful, pushing revenues up 25%, but they didn’t understand why these experiments worked. 15 years ago, he set up his own shop and decided to develop a process that would make every pricing experiment a success. Creating a holistic view of how to price correctly, driving higher revenue, sales volume, and higher profits.

Pricing is an art, combining process and science. Most people try to simplify the pricing model, thinking about the cost of the goods. But you actually need to price above your cost. The problem is that the costs have nothing to do with the value that you deliver, whether that is a service or a product. The willingness to pay means that you can measure how much people are willing to pay for the value you deliver. When you price accordingly. Your sales volume will increase, your revenues will increase and your shareholder value and profitability will increase all at the same time. 

The way we work as humans is that we cannot compare numbers. If you think about how many websites set up prices, they start with a low price, and then as you read left to right prices go up. That is wrong. What you want to do is start with a high price, which is called price anchoring. As you read left to right and top to bottom that’s going to be the first price you see, which makes what appears after that more affordable. This will lead to higher sales volume, as opposed to doing it the traditional way, where you have an anchor, which is lower than the rest of the prices, leading to a lower willingness to pay and a lower sales volume.

Create a value stack, starting with 10,000 where customers see that first, then 6000, then the 4000, which will increase sales of both the 4000 and the 6000. What you really want to do is have a mega-large package for 30,000, which nobody will buy. Just there as an anchor point. One of the most successful anchor points was when Apple introduced ‘the watch’ a few years back. The normal Apple watch was 349 bucks which had exactly the same electronics as the limited edition in a gold case for 17,000. But it wasn’t there to be sold. It was there as an anchor point. 

To do this properly, have pricing as a centerpiece in your business strategy. Within an organization, the company’s profit comes from only three variables, the total cost, the total sales volume, and the price of what you sell. Of the three, the price has the highest leverage that impacts profit the most. If the organization, from a managerial and executive point of view, knows how small price changes will change the profitability of the company, you will take your company to the next level.

In this episode:

[01:23] Per, “the Price Whisperer” explains why he has this title

  • He developed a process that would make every pricing experiment a success
  • The holistic view of how to price correctly

[05:13] How Pricing is an art

  • You actually need to price above your cost
  • Having a captive audience that has a higher willingness to pay

[07:56] A thorough explanation of Price Anchoring 

  • You can measure how much people are willing to pay for the value you deliver
  • How to present the price for your product or service

[10:30] The best way to value stack your products or services

  • Increasing sales with a mega-large package as an anchor point
  • Example of when Apple introduced their limited edition watch

[17:24] Pricing should be the centerpiece of your business strategy  

  • The three variables: Total cost, total sales volume, and the price of what you’re selling
  • The holistic view on pricing power

Watch the Interview:

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