Imagine being in business where you can set your price and your competitors feel compelled to match it, rather than trying to undercut you. Being a price leader is an excellent position to be in, as I discovered when co-creating the operatic phenomenon ‘The Three Waiters’. Winning three consecutive American entertainment awards, ‘The Three Waiters’ became the most-booked corporate entertainment act in the world – and we were able to attract a high-end market and price tag to the brand.
To do so, I had to learn about the benefits of price leadership. Corporate entertainment in the US was an unknown to us and – perhaps foolishly – we went into the market at a low price. Initially we struggled to get substantial bookings. Why? Our price made us look like a ‘cheap’ act and bookers weren’t convinced of our value.
One of the secrets to our resulting US success lay in effective pricing.It maximised our profitability, focused clients on the value we delivered, enabled us to have healthy cashflow and also helped build our competitive differentiation. When I later established my own entertainment company here in Australia I tried to apply the same principle with my new acts, always mindful to clearly differentiate them with my competitors.
We also tested our price elasticity – simply, the extent the market would accept changes in pricing. Most business owners don’t understand or appreciate just how elastic prices are in their markets. Most customers of small businesses will absorb a five to 15 per cent increase in prices with indifference. That sort of increase has a direct, positive impact on your bottomline.
It’s relatively simple to experiment with your pricing. Start testing a contained, low-risk segment of yourcustomer base to limit any negative implications if you get it wrong. Then simply start to increase your prices in small but measurable increments. Perhaps you put your prices up by 5 per cent and see the reaction. Then increase by 10 per cent and monitor the reaction. You will know when you hit your upper limit because people will start to hesitate to purchase.
You cannot grow through price alone
Experimenting with different pricing methods and testing for price elasticity can help you set prices more effectively. Yet whatever price point your choose, it can only be delivered and sustained through effective marketing.
With our premier act, The Leading Men, our market clearly understoodour value proposition and benefits. Your marketing must communicate it clearly. If customers do not understand your value proposition, customers will not pay for your goods and services – no matter the price you charge.
Being the price leader is an excellent position to be in, but there can only be one price leader in an industry. You must either have the largest market share or the strongest customer base due to the quality of goods or services you offer. If you can’t take the price leadership position, find a market niche you can defend with adequate product differentiation or high service levels.
An Australian Event Awards ‘Entertainer of the Year’, a music theatre star and co-founder of the world’s most booked corporate entertainment act ‘The Three Waiters’, Darryl’s keynote presentation ‘Hitting the High Notes’ is a compelling story withwalk-the-talk key take-home messages and is a ‘must see’ for conference attendees worldwide. He is a unique combination of entrepreneur, speaker and showman – a mesmerising blend of business smarts, engaging storytelling and live opera! It is a combination that has made Darryl one of Australia’s most in demand business and resilience speakers, headlining many Top 500 company conferences including the famed ‘Million Dollar Round Table’ in the USA.