3 Techniques to raise prices sky high without losing customers

by Peter Shallard

How to raise prices without losing customers

You should raise your prices.

It’s a business cliche. Those five words of advice are so frequently dished out by successful entrepreneurs, it hurts. If you’re on the receiving end, it’s the most frustrating tip imaginable.

Because you can’t just put up your rates. You’ll lose customers. There will be riots. It’s okay for some, but not for your business. This is what struggling business owners keep telling themselves.

Yet you keep hearing (and repeating) the same advice. You should raise your prices. Yes, you should.

This article breaks down the three specific strategies you need to rocket your rates into the stratosphere. Without losing business because of it. 

There’s no future in being cheap. There’s certainly zero hope in being the cheapest. Unless you’re running a global empire, your entrepreneurial success hinges on your ability to sell high margin products and services to those who value them.

Hence: You should raise your prices. This post isn’t intended to dispute that – it’s a given.

Here’s how to do it.

Technique 1 – Be a Pundit

This is like being famous, but with a twist. It’s like being an “authority” only more so. A pundit is someone who has an opinion. About everything. An opinion that you’re simultaneously respected and maybe even vilified for.

When Seth Godin talks about Intravenous Permission in his book Permission Marketing, he describes the amazing level of trust that exists when we allow a doctor to fill our IV bag with whatever drug she wants. She then bills us for those drugs. We pay without question.

The doctor is a trusted expert. That’s just the first level.

Doctor Oz is a expert and a pundit. A famous expert, whose opinion matters even on subjects he’s not explicitly trained in. Someone like Doctor Oz wouldn’t just be trusted to fill someone’s IV – he’d be paid twenty times the normal rate to give his opinion on their situation.

Pundits don’t have to be household names to be effective though. No one has heard of Garret Murray. Unless you have.

Garret Murray is a pundit. He runs a iOS development shop serving clients like Conde Nast. He has built an enormous following as an amateur photographer, gadget-freak and all round digital cool kid. People care about what he thinks. His opinions (and predictions) matter. His expertise, I’m guessing, is rarely questioned.

He’s a iOS developer. But he gets business via his blog Maniacal Rage – his platform as a pundit.

When you become a pundit, you become the ultimate authority. You’re not just a deep thinker in your own field – you’re recognized as someone who connects dots across multiple industries. Peter Shankman, Gary Vaynerchuk and Robert Scoble. All pundits. With big big prices.

It doesn’t matter if you’re selling widgets, advice or anything else. If you want to market something ultra-high end (and price it accordingly), you need notoriety.

Be a pundit. Get paid like one. 

Technique 2 – Be an Artist 

Here’s the thing about art. When it’s recognized as “good”, no one questions the price tag. Fifty thousand dollars for some splotches of paint on canvas? Your kid might have done it, but if the name of a recognized artisté is attached, it’s worth it. To someone, somewhere.

The scary part is misunderstood. You don’t have to become Andy Warhol for this to work. You don’t have to be dead.

Why? Because artists are recognized within niches too.

Donna Von Bruening is a high end wedding photographer who gets this. She started as an entrepreneur but has worked hard to establish herself as an artist. She’s thrown gallery parties. Produced fine art prints. Been featured in the media. You’ve probably never heard of her.

Donna is killing it, because she doesn’t have to compete with other wedding photographers. If you want a good price and some good photos, don’t hire her. If you want to make your once-in-a-lifetime day an expression of art? Call Donna and close your eyes while you write the check.

When you become an artist, you cut the connection between price and any notion of “what things are worth”. It’s art. The same rules do not apply.

Paul Rand did it. John T Unger does it. Steve Jobs still does it. When a little art is injected into a commercial product, it becomes indescribably special. No one can quite put their finger on why, because it’s art. It’s just better.

When you sell art, you sidestep logic. You appeal to your customer’s spirt. They pay accordingly. 

Technique 3 – Make it Shiny 

The two strategies above rely on connecting with a sufficiently affluent customer demographic. Finding them isn’t hard. A 2007 Economic Intelligence report by Barclays Wealth estimated that there are 16,600,000 millionaires in the USA alone. There are 185,800 people in the world with a net worth of more than $30 million.

However, when you start playing in the financial big leagues, you also start playing with very picky customers.

The affluent expect the finer things and the little details to be perfect. They expect to:

  • Be picked up
  • Be dropped off
  • Have it delivered
  • Get custom fitted
  • Be assisted, with white gloves
  • Go to the front of the line
  • Have it personalized
  • Be remembered
  • Not have to be asked
  • Get drinks/food included
  • Be treated like they’re special

They’ll pay for it, too. 

The wealthy have no problem paying for things that save them time or make them feel good. That’s why smart entrepreneurs create premium products and services with all the little touches included.

Private jet companies include limo transfers. Donald Trump’s hotel staff inquire about the purpose of your visit, then decorate the room accordingly. Virgin installed a spa, pool table and full blown (free) restaurant in their first class lounge at Heathrow.

If you want to pump up your prices, it’s worth including (and making room in your margin for) a bunch of luxury touches. Beautiful packaging. Same day shipping. 5 Star. Custom.  Fitted. Concierge.

The wealthy are desperate for a high quality, end-to-end experience where they’re taken care of. Offer just that and you’ll start attracting customers to whom price is irrelevant.

Be a Pundit. Be an Artist. Make it shiny. Charge triple and get it every time.

{ 21 comments… read them below or add one }

Jeanie Witcraft March 28, 2012 at 12:56 pm

It’s a crazy leap mentally for me, the former welfare therapist.

I understand differentiation, marketing, white glove service, wide range of products and services–but not in a therapeutic capacity. It seems that…American ethical codes for therapists WANT to squelch out creativity in providing mental health to its populace. You only get paid more if you have many years of experience…or prescribe pills. This seems wrong, but true.

Guess it’s back to the drawing board to figure out premium, non corporate shrinkage. :)

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Peter Shallard March 28, 2012 at 1:59 pm

Hi Jeanie,

I get where you’re coming from. That said, there are therapists who are doing exactly this. Mostly, you’ll find them operating outside of mainstream public and/or insurance subsidized models. They’re also typically located in the zip codes like 10022 and 90210 :)

It makes sense for those with experience to command high fees, but there are exceptions to that rule too. And, there are plenty of therapists who don’t prescribe pills.

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James Chartrand - Men with Pens March 28, 2012 at 2:30 pm

Actually, let me throw a spin on this for you.

I’m Canadian. Free health care. Gov’t subsidized therapy. Prescriptions we don’t need to pay for.

And I happily, willingly PAY people outside the mainstream public hundreds of dollars. For pundit, for ‘artistry’ and for luxury status.

I’ll say it again: I don’t NEED to pay Doc Cory of Unorthodoc.com for medical advice… but I do. I don’t NEED to pay Peter Shallard for consultations… but I do.

Because they go beyond basic health and mental care and tap right into that pundit, artistic, luxury service I definitely want on my side.

(Without the pills. No pills involved.)

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Jeanie Witcraft March 28, 2012 at 2:53 pm

My guess is now that I need to feel confident enough in my expertise to be a pundit/artist/luxury therapist. Especially since I’m pushing the edge of “legal” by offering online services AND focusing on nutrition w/o formal training in nutrition.
Pushing edges of what’s accepted by your regulatory bodies AND leaping into charging for services is…a bit much at the same time.

It kind of goes back to this: Good, fast, and cheap. Pick two. Maybe I need to add ethical to that as well.

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Peter Shallard March 28, 2012 at 2:54 pm

Wait… so are you not charging for your services at the moment? (just checking)

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James Chartrand - Men with Pens March 28, 2012 at 2:17 pm

Hmmm… this is all very well and good, and I agree with you 100%. At Men with Pens (my web design and copywriting company), we’ve done pundit, artists and luxuries…

… and it didn’t work.

In fact, we became the elite of the elite, raised our rates, walked the talk and demand fell to the point that we found more success by severely *dropping* our rates. We maintained the pundit, the artist and the silver-platter service… and people couldn’t get enough of us.

Here’s the other problem: as rates raised, as we became more elite, internal costs went up. It’s normal for staff to say, “Hey, I want a piece of that,” and decide they want more money for less work. The problem that brought is that overhead rose to the point that the business was *losing* money… because at some point, the market won’t support exorbitant rates, and everyone loses.

But the experience of high rates and low rates for the SAME elite services taught me one important thing: that running a business that focused on *my* personal beliefs and values… is always better than raising rates just because you can.

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Mark Silver March 28, 2012 at 2:32 pm

It’s a big question, isn’t it? Peter’s right that it can work, but it takes a lot to pull it off. Often the jump to the premium is a half-jump. If you (not you, James, but you, as in “you people”) haven’t dabbled in premium pricing/market before, it would be easy to be tripped up. But most often what people think of as “premium pricing” is really just a little bit higher than normal- double normal rates, maybe. And if you had the reaction “What, double normal rates is just a ‘bit’ higher,” then I would say that perhaps you haven’t truly gotten the kind of pricing jump Peter is talking about.

First class air tickets aren’t double normal ticket prices- they can be four times or more the price of a coach ticket.

Just doubling your prices doesn’t begin to cover the overhead you mentioned, James.

It takes a different sales process, a different market, and a really entirely different pricing structure. It’s a different business, really.

I’m sorry to hear about what happened, James, and I’m not surprised.

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Peter Shallard March 28, 2012 at 2:40 pm

James,

Mark is right on. What I’m describing does require a total shift in the demographic you’re marketing too. My first thought, reading your comment, was that you added the silver-service with a minor price increase (relative to examples like Mark’s first class plane tickets)…. but kept pimping it to the same folks who used to buy cheaper.

You’ve put your finger on something significant: You have to have the right personality to feel good about selling to ultra-affulent demographics. If it doesn’t feel right, it ain’t worth doing. And I suspect Men with Pens is a champion of the little guy, deep down :)

It’s also worth mentioning that a “global empire” allows entrepreneurs a reach that can get them customers at all sorts of price points (including cheaper ones). You have that empire going on, a little bit, with Men with Pens. So rock it.

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James Chartrand - Men with Pens March 28, 2012 at 3:04 pm

Yeah, for sure. It’s a touchy subject for me because I’d begun that work to change everything and play a bigger game – overhauling the business process, the marketing message, shifting target markets and building a new online image…

… and I “learned a lot”. (Sigh.)

With that behind me now, though, it’s been fantastic to take the experience and learn FROM it so that I personally connected with exactly who my customers really are. (It’s worth mentioning that they’re still in the top 1% globally… even if they don’t define themselves as jet-set billionaires!)

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Peter Shallard March 28, 2012 at 4:00 pm

word.

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Ainslie March 28, 2012 at 4:21 pm

My husband and I known for being very frugal during the week – we eat home cooked meals, don’t spend too much money on clothes. We watch our money.

We do that so we can spend big on the products and services we want. If I think of all the big purchases we have made over the last year they were definately from a pundit, an artist and an airline who made our business class experience one to remember.

Each one of those products and services were purchased from people and companies who have built their brand and exclusive price up over time. And that I think is the key. You can’t pick the price then build the backstory around it. It just doesn’t work that way.

Ainslie

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Peter Shallard March 28, 2012 at 5:26 pm

Hey Ainslie,

I totally agree that having the kind of brand credibility that is built up over a long period works great. It’s what a lot of very prestigious brands (Rolls Royce etc) have done.

That said, there are businesses that emerge “outa nowhere” with high price points who have “build the story” around it recently. Case in point: Eclipse Aviation – formed in 1998 (no prestigious history) and the beginning price point for their product (light jets) is well above seven figures.

I get that “trusted” is a significant value for you. But, “new” and “cutting-edge” are just as compelling values for some people… and can combine just as big or bigger price points.

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Michael Martine March 28, 2012 at 5:48 pm

Love the pundit idea! I often deal with clients who just putting together their online businesses and who are learning that a successful blog has deep roots in other aspects of the business, such as product (as a generic catchall term for whatever you’re selling). I love your phrase “make it shiny.” Overall, packaging can be a huge differentiator. Charging by the hour just like all other mediocre freelancers out there? Yawn. Package that shit up into an appealing “box” and make it shiny!

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Tommy Walker April 2, 2012 at 6:22 pm

You’re right, people will pay their doctors higher prices and trust them implicitly. But Why?

Is it because they have the degree? Maybe? Is it because they had stellar marketing? Not likely. Is it because their friend referred them after their Doctor prescribed a treatment that worked better than expected… Definitely.

The idea of Pundit is good, but I think the part that’s missing in the argument for raising your prices and going after a different market is that a pundit has to have a track record of proven results.

And not just any results, but results that are the best, and the fastest.

People, and especially the people who can make significant investments want the maximum result in the shortest amount of time. Beyond that, they don’t want to have to do a bunch of “extra” to get there.

SO if you can say something like “You will quit smoking in two weeks, WITHOUT having to do patches, suffer withdrawals, or go on medicine that will give you crazy dreams.” you then put yourself in the position where your prospect is no longer questioning cost, but rather how much it’s costing them Not to fix the problem.

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Amanda April 5, 2012 at 2:23 pm

Only problem with guaranteeing results in the field of healthcare is, you can’t. It is illegal. You are allowed to dance around the claim to a certain extent,, but at the end of the day any claim about results will lead to an FDA audit and potentially very large fines.

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Tommy Walker April 6, 2012 at 8:12 pm

You make a very good point, and while I used a doctor and quit smoking, the above statement isn’t really meant specifically for the healthcare field but rather as anyone who is using Pundit positioning as their justification for higher prices.

Anything like this of course comes with the disclaimer that talks about a person’s dedication to [desired outcome] is what will really be the thing that influences change. (you see this all the time with diet pills and the like)

And of course, this part of the pitch is always in the fine print, because if every professional healthcare or otherwise said “You have to learn more, change your habits, and do a bunch of hard work” very few people would actually be in business…

Let’s bring it back to the point of referral though… when someone refers you to a product or service, they’re likely doing it because of the results they’ve seen. At that point, you’re not making the claim, and with Pundit positioning, that’s the point you need to work towards to justify higher prices.

That’s all I was saying.

(p.s to your point about FDA audits… The FTC has also recently come out with new regulations for income claims for the infomarketing/bizopp community that need to be included with every sales page.

I mention this here because I know a lot of online marketing types are here, and there are some things you really need to look at before putting your next sales page together.

http://business.ftc.gov/documents/bus79-selling-work-home-or-other-business-opportunity )

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Amanda April 6, 2012 at 10:57 pm

Argh!!!! More audits.

Thanks for the info.

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Tazeem Jamal April 2, 2012 at 7:35 pm

Genius!! Love your logic, strange as it might be for so many people, it makes so much sense to me!!! Thanks Peter…lets create more artistic, shiny PUNDITS!!!!

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curtis carpenter April 29, 2012 at 1:39 pm

how can i raise prices for consulatation higher what pricing stratergies are their?

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Terry Bahat July 29, 2012 at 7:29 am

Thanks, guys, for all these enlightening aspects. Assuming we wish to step away from charging an hourly rate for our services but for Value, how do you put a value on health and…how much ?? I’m a Wellness Coach and a Fitness Instructor ……. am eager to read your thoughts…

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G.E. December 4, 2012 at 9:13 pm

I happen to be like Donna… I was a commercial illustrator and became a wedding photographer. And handle my camera like it’ my brush. I may command a decent fee for my work, having been published in magazines and with a resume photographing weddings for magazine editors, fashion designers and others in arts & media, but I still have to deal with people who don’t get it. In that respect, you could say I do compete with other wedding photographers. So I’m not sure I’m understanding what you mean by that.

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