Value Pricing & Business Models for Creative Entrepreneurs

Lesson 9/33 - Marketing is Bigger Than You Think


Value Pricing & Business Models for Creative Entrepreneurs


Lesson Info

Marketing is Bigger Than You Think

We are talking about how the market is bigger than you think. And we're gonna talk all about the information that you need, remember that's the goal, that's the theme for the day - gathering the information that we need to price with more confidence. And if you remember back to the very beginning of today, I talked about the micro-business earning plateau. And that's what happens when all those fast winds you get at the beginning of the business, all of that excitement and energy and hustle starts to, instead of go this direction, it just goes this direction. And if you're not there yet, it's coming, I'm sorry. It's something we all experience. I have experienced it. All my friends have experienced it. And my goal is to get you out of that plateau as quickly as possible and get you back up moving towards your super high revenue goals, 'cause I know you guys have them. And to do that, you need to have the information that will help you price with confidence. You need to know what you ne...

ed to earn to live the live you wanna live. You need to know what your customers expect to pay for your products, and you need to know how your customers value your products. So speaking of expectations, that's what this last segment is all about. It's about understanding the vastness of the market, all of the different things that people expect to pay for what you do, whether you know it or not. That's what I've been so surprised about over the last few years is just the huge range, every time I think I've found a new high end or a new low end on something, I find something new. So this is information that you can use to feel more confident about pricing, to tell a better story with your prices for your customers so that you can attract more of the right customers for you and get the sales you really want to get. So we're gonna start off with a very simple definition of markets. This is something I love to talk about. You may remember it from The Art of Selling What you Make if you were watching that as well, or from any number of different things. I think I mention this pretty much every time I talk. But when we're talking about a market, when I say the market is bigger than you think, what I really mean to say are markets are conversations. The conversation is bigger than you think. So what does this mean, markets are conversations. In today's web world, in today's social media world, in this social era of commerce, people are talking. People are talking like never before about their frustrations, about their problems, about their questions, about the desires, and all the things they are doing to ease those frustrations, solve those problems, and achieve those desires. So any time there's a particular topic of conversation, maybe it's personal growth, maybe it's fashion, maybe it's business building, maybe it's copy writing, branding. Each of those conversations, and the full depth and breadth of those conversations, that's the market. So when you think of yourself as, or when you think of your business as in a particular market, start thinking of your business as in a particular conversation. What are people talking about that relates to your business? What conversation is your business participating in? There might be multiple conversations. Robin's participating in the business building conversation and in the jewelry conversation. You can probably also say there's a wholesale conversation. There's a PR conversation that your business is participating in as well. And so there's lots of different things people are talking about, there's lots of different ways you can examine your market, and obviously your market is much bigger than you may think as well. But conversations, they're vast, they're varied, they're diverse, they happen with all different kinds of customers, with all different sorts of value sets. There are lots of different questions, problems, frustrations, desires, that happen in any given conversation and it's our job to understand as best we can what the full depth and breadth of that conversation is so we can choose where to situate ourselves in that conversation. I don't want to have conversation about X, Y, or Z topic, I want to have a conversation about A, B, or C topic. That's a choice you can make as a business owner. So, at the risk of sounding like a broken record, if you don't know the full range of the market, you can't intentionally choose to position your business within it. Whether that relates to your pricing, whether it relates to differentiating yourself from your competition, whether that relates to your branding, your story, the way you photograph your items, the way you package your services, if you don't know the full range of the market, you can't make more intentional choices. You can't make more intentional choices. So as promised, let's talk about coffee. Let's talk about coffee. Shawna and I were talking before we came back from break about the coworking space that I've opened in Astoria, Oregon, and I happened to have the best coworking space in the entire world because it is next to the most awesome coffee shop in the entire world as far as I'm concerned. This sort of blurry background picture is from Street 14 Coffee in Astoria, Oregon, yo guys! And they are awesome. So, in accordance with their awesomeness, Street 14 has raised their prices dramatically in the last year since new owners took over. They had fine prices before, they were pretty comparable with the rest of town, we've got a lot of coffee shops, it's the Pacific Northwest. But they took a look at the business, they took a look at how they wanted their customers to perceive them, they took a look at the kind of materials that they were using, the beans that they were gonna use. They took a look at how much training they had and how much training they wanted to give to their staff, and they decided, we can charge more for this! So they did. They raised their prices fairly dramatically, a few times over the last year. They've raised prices on food, they've raised prices on brewed coffee, on lattes, various espresso drinks, and they're busier than they've ever been. Like wow. Like wow, they're busier than they've ever been. In fact, we joke, the owner can do projections. She can say, well I think it's gonna be this, or I think it's gonna be that. But what we've realized is, there is really no accounting for how much volume this coffee shop can do now. And their prices are higher than they've ever been before. And I would say it's not just because higher prices attract more customers. No, it's not that simple, but they are telling a very particular story with every single choice that they've made. We're gonna talk about what some of those choices are, but those choices are attracting a whole new market, and at the same time that they're attracting a market, from Portland, from down the coast, from up the coast, they are also attracting and maintaining relationships with locals who are used to paying less, because those locals like to be part of a story that is more. That has more experience, more service, more quality. And so they've put together this perfect storm of things, that all comes down in the end to price. So I like to ask the question when I'm talking about positioning and pricing and all that jazz. What should a cup of coffee cost? What do you expect to pay for a cup of coffee? Earlier I mentioned that I expect to pay at least five dollars for whatever I'm drinking. If you don't know, I run on iced lattes. (laughs) My website is powered by iced lattes. So I'm a pretty good connoisseur of coffee cost, and I also know that what I drink is expensive. I expect to pay over five dollars a drink. You could easily say to somebody else, what do you expect to pay for coffee, and they would say 99 cents, please. And that's fine. That's how vast the market is for coffee. What do you expect to pay? What does that depend on? What are the different factors that go into what you expect to pay? Here's the other thing. I'm not stupid. I don't expect to pay five dollars for an iced latte at Wawa, at the gas station. I expect to pay 2.50, three dollars for an iced latte at the gas station. I don't expect, similarly, I don't expect to pay 69 cents for brewed coffee at Street 14. Because there's all these factors that very naturally tell me what I can expect to pay for coffee. If I'm at a gas station, I expect, because the coffee's been sitting there for a while, they don't use awesome beans, they don't train their staff really, and that's fine. I expect to pay between 69 and 99 cents. But if I go into someplace else, like some of these fantastic coffee establishments in San Francisco, I expect to pay way more than that. And I will come right back to that. The other thing that happens here is what do other products, or how do other products relate to the price that I'm willing to pay? So in other words, what else is the coffee shop selling that affects the price that I expect to pay for coffee? Is it pastries, is it bagels, is it lunch, is it soup, is it salad? And how do those prices affect what I expect to pay for coffee? How does that value relate? So as I mentioned, at the gas station you can expect to pay about 99 cents, alright? You expect the coffee's been sitting there for a while, you expect to have to do all the fixing yourself, you expect it to be in a cheap paper cup with a cheap sleeve, if you get a sleeve. You expect to get a certain kind of coffee lid, you expect a certain kind of checkout experience. And, you go there for different reasons. Why do you drink gas station coffee? Because you must have the caffeine, right? You must have it. It's 4 AM, nowhere else is open, and gosh darn it, if you are not going to get some caffeine into your blood. That's why you go to the gas station for coffee. That's why you get the Big Gulp coffee, and you still only pay 99 cents for it. But lots of us to coffee shops for different reasons. Blue Bottle here in San Francisco, the last time we were here my boyfriend went to Blue Bottle and paid seven dollars, not for a latte. For brewed coffee. For a cup of coffee, he paid seven dollars. And he loved it. He loved it! And then he went somewhere else and paid the same thing the next day! (laughing) So, why did he go there? The experience. The training. The quality. The other kind of people who were gonna be in the room. The interior. And what was he looking for? Not just for caffeine, though he was certainly looking for that. He was looking for a quiet place. He was looking to people watch. He was looking to read a book and feel good about it and kind of enjoy the ritual of the coffee experience. And that ritual alone, for many people, is worth that much money. So that's a 700% spread. And there's all sorts of coffee in the middle too, right? You've got your McDonald's coffee that's maybe a little higher than gas station, you've got your Dunkin Donuts that's maybe in the middle, and you've got your Starbucks and your Peet's that is going to be just under the super high quality level. You go there, as we talked about earlier, for consistency, for knowing what you're gonna get every single time and being willing to pay for that. Each of these businesses makes a lot of decisions. When a business serves coffee, it makes a lot of decisions, and those decisions affect price. Those decisions affect price. If they make a different set of decisions, suddenly they cannot choose to price their product the way they would've chosen to price it before. So let's look at some of those decisions before we look at them in your own business. So the first decision they're gonna make is where did the beans come from? Where did the beans come from? Did they come form the local roaster? Did they come from the regional roaster who is internationally known? That's where Street 14 gets theirs. They get theirs from Stump Town. Did they come from the super high end boutique roaster, or did they buy the Robusta beans that are roasted at mass and not by exceptionally awesome roasters? So where they get the beans from matters. Also, just even location. Like where those beans are sourced, it's just like wine. You can get it from this region or that region, and that greatly affects prices as well. So where will the beans come from? How will we brew the coffee? At the gas station, it's the batch brewer, they're brewing as much coffee as humanly possible or at least as much coffee as they know people will drink, or they think people will drink. And that's a particular type of brewing. Of course, espresso is a way of brewing coffee. French press is a way of brewing coffee. The thing that's really hot, the seven dollar coffee, that's the hand pour over coffee, where you know you go, and you watch them, and it looks like a mad science lab kind of thing going on. They've got the boiling water, they've got the vacuum pot, they've got the Chemex. And the guy or the girl is just there, they're swirling and they're into it and they're measuring and they're grinding, and it's amazing, and I love watching it! And that's part of why I pay more. So when the coffee shop chooses to include that as an option, they are choosing to say, we're gonna charge more for this. We're gonna make this an environment that you want to sit in for an hour, and you're gonna pay good money to do it. Is coffee our core offering or just a bonus? When coffee is your core offering, you can choose to charge more for it because that's your focus. If coffee, no matter how good it is, is kind of a side item, a sideline, it's harder to charge more for it, because people are going to naturally assign less value to it. So maybe think about that in your own business. What's the core offering, what's the sideline? Can you get everything out of that that you want to get out of it? Is this a hangout or is it a grab and go? Grab and go tends to cost less. People hanging out, you're not just paying for coffee then. You're paying for a seat, you're paying for WiFi. You're paying for someone to bus your table, maybe, or just wipe your table down. So again, that's why those higher end places are gonna charge more. Because you're actually buying more when it's assumed you're gonna hang out for a while. How much are we gonna train our staff? Street 14 invests hours and hours and hours and hours into each of their staff members. So their staff members know how to calibrate the espresso machine, as much as they know how to do the dishes. They know the different coffee growing regions. They know different methods of brewing coffee so that they can recommend different brewing merchandise and offer advise to customers who come in. They know where their beans came from, how they were roasted, so they can sell bags of whole bean coffee. So how much you're gonna train your staff also depends on your price. Can you charge more for a Chemex brewer, if your staff can also train someone how to use it? Absolutely. How much are we willing to customize the beverages? Starbucks I think kind of wrote the book on getting you to assume that you can have your coffee however you wanted it. They charged for that. At Street 14 it's a little different. They will make your coffee however you want it, but they have a very specific pricing scheme that goes along with that to either encourage or discourage it. But you know, are you willing to customize? The gas station, not willing to customize. They will not be brewing you a new pot of coffee if you ask for it. (laughs) So where the beans come from, how they brew the coffee, training, customization, all of these decisions affect how much a coffee shop, or any kind of establishment that sells coffee, it affects how much they can charge for that cup of joe. So how are the decisions you've made affecting what you can charge? What decisions have you made that affect what you can charge? Does your DIY website make it harder to charge high end prices? Does your thrown-together email newsletters affect how much you can charge? Does the amount of training you've gotten for yourself affect how much you can charge? Does the way you talk about what you do affect what you can charge? Does the platforms that you use, the eCommerce, the checkout, the checkout system that you use, the marketing systems that you use, the way you design your ebook or your program. Does that affect how much you can charge? Absolutely, absolutely. And so if you found it very very difficult, or even a little bit difficult, to charge what you want to charge, to make the choice to charge what you want to charge, I think you need to ask yourself, have the decisions I've made affected my ability to charge what I need to charge? The answer may vary, but a lot will be yes. The good news is, if you've made one decision, even inadvertently, even without knowing, you can always go back and make a different decision. You can have your website redone. You could change platforms. You could spend more time on this, you could go get that certification. So that you are making the decisions that are in line with what you want to charge. So we're gonna do a little activity and this is in your workbook. We are on page 14. So again if you don't have a copy of the workbook, you want to click that enroll button on your video screen and you can download this workbook once you enroll in the program, for free. And we're on page 14. And I'm calling this activity low-end to high-end. It's not an awfully creative title, but it is what it is. So what I want you to think about is a business that is intentionally positioned on the low-end of your market. So think about the whole conversation. There's a coffee conversation, right? Are you in the personal growth conversation? Or are you in the health conversation? Are you in the jewelry conversation, the fashion conversation, the design conversation? What conversation are you in? Now I want you to think about a business that has intentionally positioned itself on the low-end of your market. And intentional is important. I don't want you to think about the people that you perceive as undercutting you because they don't know any better. I want you to think about somebody who has chosen to maybe deliver solutions that scale. And so they can do it for a much smaller price, but they've had to pay the price of getting up to scale. So Target is a great example of this. Target is a business that positions itself on the low-end. Maybe not on the lowest end, but on the low-end of the department store market. So if you think of Target as a department store, they're on the low-end of that market. And they do so very, very, very intentionally. They do so to the point where they even choose, and this is the next question, what decisions have they made that makes sense with what they're charging, they choose to bring in high-end designers that you would otherwise see in high-end department stores and redo those designs with cheaper materials. Maybe with slightly different focus. So they're actually choosing to take a high-end product and turn it low-end so it fits within the store. They do the same things with, so that's clothing, they do the same things with home goods, they do the same things with food. They're constantly taking high-end things and re-imagining them on the low-end. So what is a business, or who is a business, that is intentionally positioning itself in the low-end of your market? And then think about the decisions that they've made that make sense with what they're charging. What decisions have they made that makes sense with what they're charging. I'm gonna go through this whole activity and then we're gonna turn it in to hot seats. So for you guys, I'm gonna put you on the spot in just a couple minutes, so do your best to brainstorm now (laughs). Alright, and then consider what values do those represent? So let's stick with our Target example, because I'm enjoying this. There are two equally important values going on with the Target decision, especially as it relates to designer collections. They know their market is really interested or really aspiring to high-end design. Great fashion designers, great home designers. Their customers have an eye for design. And they know their customers have a mind for price. Their customers do, at least on a regular basis, make decisions based on price. So they've combined these two very unusual things, these two very unusual values, to create a brand that we are all really, really familiar with, whether you love 'em, or you hate 'em, or you think they're stuck up, Target has created a value proposition we can all name very easily just by combining those two values. And then backing that up, executing on that, with particular decisions that they've made that then go back to price. So they know they can charge 30 dollars for a dress that by the same designer might've gone for 300 or 3,000 dollars. So they're intentionally positioning themselves on the low-end, but they're backing it up with the decisions that they've made and the values that those decisions represent for the customers they want to serve. Now we're gonna do the opposite. I want you to name a business on the high-end of your market. Name a business on the high-end of your market. This is the business that has intentionally positioned itself up there. They charge a lot. They deliver on it. They're well known. They have a great reputation. Maybe this is the brand you aspire to be. Maybe this is what you hope your business turns into. Maybe not quite, that's okay. But you should be aware who's on the high-end. And think broadly again. Think about your market in terms of that bigger conversation. That bigger conversation. So let's take another example, 'cause we could talk about department stores all day but that sounds boring. So let's think about Tony Robbins. Tony Robbins being in the personal growth conversation, the personal growth market. He's on the high-end of the market. So what are some decisions that he's made? Well he's got platinum mastermind programs that are $100,000 a year. That's a decision (laughs). He's got super exclusive seminars. Invitation only programs. He is internationally well known. He chooses to be seen with clients that are famous in their own right. And that's how he's positioned his business. He's also positioned his business so that anyone can get in at the bottom. The man writes internationally best-selling books. So people get in and then they work their way through higher and higher and higher up the chain to the point where you get to the extreme high-end. So what values do those decisions represent? What values does it represent that he's charging $100,000 for some coaching with him, essentially. Well, exclusivity. We mentioned exclusivity earlier, that's a huge value. Luxury - his clients have a value for luxury, for the service that goes along with luxury. For being taken care of. For feeling like they're rock stars. They probably are rock stars, they're used to this. So feeling that way, being treated that way, that's a high value for them. Now, let's consider your business. First of all, think. Are you towards the lower end? Are you towards the higher end? Where do you fit into the market in general? How do you think of yourself? How do other people think of you, think of your brand? What decisions have you made that make sense with the price that you're charging? What decisions have you made that are really consistent with the way you want to be perceived? And the prices that go along with it? So this is an opportunity to go rah rah on yourself. We're not looking for the critical side of this. I am looking for the positive side of this right now. What decisions have you made that are really consistent with what you're charging or what you wanna charge. And what decisions have you made that are really consistent with the way people perceive your business? And then finally, what values do those decisions represent? So earlier we talked about what your customers' values are, why they might be willing to pay more for what you offer. Time to come back to those. What values do your decisions, this time, represent? They could be your personal values, or they could be things that you know are really important to your customers. What values do your decisions represent?

Class Description

Ready to reach your revenue goals with less hassle and more ease? Join CreativeLive for a class that will teach you the core pricing and business modeling skills every creative entrepreneur needs to know.

Business strategist Tara Gentile will take you step-by-step through the process of using multiple revenue streams to amplify the earning potential of your business. If you're operating your business launch to launch or contract to contract, this is the course for you. You’ll learn the principles of value pricing so that more customers are ready to buy. Tara will also guide you through the process of creating a business model that makes selling natural and sustainable. You'll never worry about where the next sale is coming from again.

By the end of this course, you’ll have concrete, easy-to-implement strategies for running your business with the business model and pricing that will help it thrive.