The Pricing Apocalypse?
The harsh reality…
Let’s start by considering what I mean by “The Pricing Apocalypse”, because with a label like that I am clearly suggesting it is a major issue. So in order to do justice to the incredible threat it poses to your business I’m sure you will agree it makes sense that I do not pull my punches…
To demonstrate the danger I’ll use an example from an industry that is rife with the problem with many business owners balancing precariously on the edge of the abyss. The industry in question is internet marketing …but like I said, this threat is looming in the shadows for ANY business!
In recent years the internet marketing industry has become very popular with people keen to ‘cash in’ on the huge boom in online sales. Some have added internet sales to existing businesses, others have moved entire businesses online and many have created new ‘businesses’ to supplement their personal income…
…with the ambition for many being to drop the day-job and work online fulltime.
(I have deliberately put ‘businesses’ in quote marks when referring to the latter scenario as there is a percentage of people in that situation who don’t necessarily call what they do ‘a business’ …however, that is of course what it is. Money is being swapped for goods or services, therefore it is a business and normal business rules apply).
Now whether by virtue of their consumer knowledge that ‘online shopping equals savings’ or simply through learned-behaviour where everyone is acting in the same way (because that is how everyone has seemingly always done it), many internet marketers feel the urge to slash prices. In fact ‘slaughter’ may be more an appropriate word!
Huge packages of training, powerful software tools and in-depth eBooks are being sold at rock bottom prices …and that is before paying out commissions to affiliates who have promoted those products or services. Some internet marketers go even further than this and give away all of the income to their affiliates just so they can “get a list”, the idea being they can then market other people’s products to that list.
But of course, if other internet marketers are just doing the same as they are then the products they are promoting are also at rock bottom prices, so their overall income is… PEANUTS!
Ironically, and like I mentioned earlier, the dream of many an internet marketer is a better life and an escape from the rat-race of a traditional job. So when you consider that many work exceptional hours for a very small return you have to wonder why they continue…
…I’ll save that question for another time!
But internet marketers are not alone, many businesspeople find themselves in the same situation where they have given in to perceived market pressures and arrived at the belief that low pricing is the only way forward. After all, there’s something very satisfying about making a sale, so who cares if the price was low, at least they got a sale or two!
Admittedly, there is a time and a place where low pricing and discounts can be appropriate, but it shouldn’t be considered the norm. After all, on the rare occasion I too have reduced my pricing …but it has always been to a definite aim in the full knowledge of what the low price actually means for my business.
So what’s with the ‘apocalypse’?
Well, let’s keep the scenario running…
Prices are being slashed in a bid to make sales, profits are low and still there are ongoing costs for the business. So if you are of the belief that changing your pricing is not an option, and you have no other strategies up your sleeve, the only way to make more money is to do either one or both of the following:
- Work harder and create even more products and services
- Find ever more customers to buy from you
And this is where we hit the greatest hidden cost in any business – including internet marketing – this being ‘time’.
Now before we go any further, and for those reading who are online marketers and have not yet realised this, let’s quickly bust a classic myth within the industry. Internet marketing is NOT a ‘minimal cost business’ …because you always have to factor in time. Yes, there may be fewer overheads like premises, business rates and staffing costs – but unless you have managed to create an entirely automated business you will still need to put in the hours.
(As a quick aside, I happen to know many an internet marketer who is guilty of burning the midnight oil in pursuit of riches. As someone once said when referencing Tim Ferris’s book ‘The 4 Hour Work Week’, “many internet marketers are doing 80 hour weeks in pursuit of that goal!”)
Time is running out …and your profits are following close behind!
Product creation, service creation and selling, all take time. So if your time is spent creating products or services, you will have less time to do the selling …and arguably this could mean fewer sales.
Similarly, if you focus on selling you will have less time to create quality products and services.
But naturally standard business practice applies, which means if your business model relies on getting ever more customers, you must remember that your sales efforts will never give you a 100% return, because obviously not every prospect will convert. For many businesses this results in an even greater need to rush products to market, because the sales, or more particularly your income, have to come from somewhere.
We then have the other problem of selling an ever-increasing number of new products…
Even if your low pricing succeeds in attracting business, your mounting volume of products will mean you will likely spend more and more hours servicing customers of those products (e.g. customer emails, calls, account problems, etc).
…with even less ‘income hours’, the panic-fuelled rush to market is even greater.
So bringing this altogether we have a very clear problem: You are going to run out of time, specifically time which directly earns you money. But worse, the problem is perpetual because that growing ‘need’ to ‘rush to market’ means you never have the opportunity to spend enough time on crafting a superior product that could easily command a higher price.
Essentially you have created the hamster wheel from hell and you can’t step off because you must keep it spinning to keep your business alive. And no matter what you try, the problem just keeps getting worse…
- Maybe you cut back on product quality in a bid to find more selling time …but in doing so you generate even more customer service enquiries/complaints
- Maybe you slash time spent on service …only to create negative word-of-mouth that in turn affects ongoing sales
- Maybe you attempt to add even more hours into your working week …and end up a sad lonely wretch with no friends or family!
As the daily struggle gets worse your business goals and ambitions plummet into the dark abyss of The Pricing Apocalypse™ and your business fades to nothing …leaving a burnt-out shell of a business owner.
There is a solution…
You need to truly understand pricing; the numbers, the psychology, the REAL effect on your business.
So on the 12th December 2012 (yep, 12.12.12!) Rise of the Warrior is launched as part of a series of products called 3SG™ – and within its pages are the many secrets to pricing success and more importantly the exact steps needed to avoid The Pricing Apocalypse™.
For more details visit www.threestepgrowth.com
…oh and if you’re reading this before 12.12.12 then I definitely suggest you get on the early bird list! 😉