Want to dominate your market in record speed? Now you can using the Power of Pricing in order to create an outrageous offer your competitors likely cannot match.
We teach several strategies for using price to maximize your profitability. With a few exceptions, these never include discounting for discounting sake.
One of my favorite pricing strategies for dominating a market is based upon the lifetime value of the customer. This can be a game changer for a business, and this strategy has literally transformed entire industries.
The strategy involves establishing a super low initial investment for your customers, which is a fraction of the total cost of the actual product or service, and internally financing the rest. You’ve seen these type of offers by large furniture stores that offer either no money down or little money down with no interest for six months. This enables someone that cannot afford to shell out $2500 to simply make a series of “easy” monthly payments.
Game Changer Strategy Revealed
In this Profit Tip I want to share another personal story to drive home this powerful profit generating strategy. ADT Security® is a nationwide home security company that sells and installs burglar alarms. For a typical home this may cost $1,250 if they purchased from a local security company.
In contrast, ADT Security® charges a tiny fraction for their installed alarm system, around $250 in total. But ADT understood the power of the Lifetime Value of a Customer and therefore gets the customer to instead commit to a three year “monitoring service” with a monthly fee of $44 or so.
They charge $250 for the ENTIRE SYSTEM INSTALLED vs $1,250 by the competitors for like-kind equipment.
Let’s take a look at the numbers.
- Equipment and installation charge = $250
- $44 * 36 Months = $1,584.
- Total Revenue = $1,834, not counting the additional years of monitoring after the 3 years that likely adds thousands of dollars to the Lifetime Value generated from the alarm installation.
Game changer? Just try to find a local, independent security company these days that is not a dealer for one of 4-5 such national companies that has now deployed this pricing strategy. Plus ADT generates significantly more revenue and profits!
By the way, this type of strategy requires capital to finance the upfront cost of installing the equipment. If you have high profit margins you can elect to deploy this strategy as a limited time offer to control your cash flow or find an underwriter that will finance the program for you.