Marketer, do you price for positioning… or for profit?
Samantha Stone suggests—during tough economic times—you price for profit.
But doesn’t that approach risk cutting your company out of deals?
Not if you change up your offer, says Samantha, Founder & CMOFounder & CMO of The Marketing Advisory Network.
Get Samantha’s money-making marketing insights from her B2B Forum 2023 session in the clip or transcript below.
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We need to price for profit.
Now, we always want to make money. So somebody said to me, “Samantha, that is a very dumb recommendation. Don’t you always price for profit?”
The truth is, we mostly don’t. We think we are, but we mostly don’t actually price for [profit].
We price for growth. We might price for going after a new penetration of a market. We put loss leaders in the market to try and get a foot in the door to make money.
All reasonable business strategies.
But here’s the thing, if we are in difficult economic times, we’re not going to make it with long-term revenue strategies.
We actually have to pay the bills. We have to make money or we don’t get to play the long game.
And so we have to take a moment, take a pause, look at your products, look at your services, and think about, “how am I going to price these products to make money?”
Think about how we package things in intelligent ways that might go together. How do we put things together in a way that buyers are going to want?
Now, I’m an Adobe customer. I buy their Adobe full-use version. I’m not a designer. I use almost nothing of all the big suite. I don’t. It’s just not what I do. I occasionally want to edit a PDF, so I’m willing to pay to do that.
Well, at one point, some salespeople got me at a weak point and I bought the full suite, right? I didn’t use any of it, right? It was a really wasted experience.
They didn’t do anything wrong. I was the wrong customer for all of that.
And so think about your customers and segmentation and how we package those things.
Inventory. Look, some of you don’t sell a physical product, so this may be less relevant to you.
But if you sell a physical product or you even have contract services that you resell for something, you need to focus on the products that make you money.
A lot of times—in our software—marketers don’t even know where the profit margin is. We develop a software product and we send it out to market, and we’re not given the insight into what it costs us every time we sell.
But sometimes, we’re OEM things in there that actually cost quite a bit of money.
Sometimes it’s not really even our software. It’s just a front end that we’ve included.
We have to understand where we make money, and that might mean spending more time with product management than you normally do.
But it’s important for us to prioritize marketing the things that are going to do that. That are going to bring in money. That are going to bring in cash management.
If we’re a services company, there’s a lot of things that we can do to sell our services. And there are a lot of things that we get paid six months, nine months, a year down the road when we complete something.
That’s fine… when we have a good normal flow of business and everything is going great.
It’s not so good when clients start to extend their payment terms. How many of you have had clients, “hey, they’ve usually paid ’em 30 days and now they’re starting to slow pay.” Right?
I see some hands, some heads shaking.
Because their accounting departments are behind the scenes doing that on purpose. It’s not a mistake. They didn’t all of a sudden forget us, right?
Just plan for it. Understand that.
Pick things that are going to make you money now.
And think about bundling things that make sense.
Where can I get things in? Where can I get rid of, maybe, inventory that I’ve got sitting there that I need to just unload. It’s just taking up storage space. So if I put that in with something, who cares about that and how do I package that in interesting ways?
Think about these things.
This is actually a good example of cash and profit management for my own business.
I am a consulting practice. I generally sell highly-customized consulting services to work with different organizations. That’s how my business is. There’s not a lot of cookie cutter in what I do. It’s just how I’ve built my business.
But as marketers’ budgets got cut, and projects started to get pulled or delayed, thinking about, “what can I do to realize the things that I was talking about?”
And one of the things that I do is, I teach a lot of workshops and classes. So can I create a digital version of that course? Because it’s pure profit once it’s developed. I have a small hosting fee that I pay to teachable.com. But it’s so tiny as to not really matter.
So, even for my own business, which you wouldn’t think that a complex consulting service could have an entry level offering that is pure profit… I do.
But I did that because I saw what was happening in the shifts in marketing budget and I didn’t want to get left in the dark.
We have to all do that for our businesses.
Think about the places that we can make those changes.
And one of the ways we can do that is to increase entry level offerings.
Offerings that make it easy for a customer to try us, who’s never worked with us before.
Or make it easy for someone who’s done business for us for a lot of years, “but the budget,” they just got told, “you got to cut your budget.”
But they love us, and they don’t want to completely go away.
So what are things that you can do to create offerings that are a little bit easier?
Hey, look, we might not make as much revenue on them.
They may not look as good on that chart that all the salespeople want to have, that shows that growth.
But it is the reality of how we build long-term relationships.
Long-term clients come from solid relationships.
And who better to maintain these relationships than you, the marketer?
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