The Art of Pricing

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Speaker C: welcome to Accelerate your Business Growth where we're exploring all sorts of business topics. Experts from around the world join me, your host Diane Helbig for a conversation where they share their expertise with all of you. Take what you need when you need it. Featured on Inc.com Forbes and MFNBC's yous Business this podcast is recognized as one of the best podcasts for small business, sales, leadership, social media and more. When it comes to business, Accelerate youe Business Growth has got it covered and now on with the show. My guest today is Edeosa Agbon Lahore. She is a behavioral economist and CEO of Decision Alpha, a pricing strategy firm that helps businesses achieve sustainable growth through smarter psychology driven pricing. With over a decade of experience across global financial institutions and startups, her work helps businesses replace guesswork and anxiety with confidence and profitability. Ediosa's insights have been featured in MarketWatch and Morningstar. Thanks so much for joining me today. Ediosa.

Speaker B: Thank you for having me, Diane.

Speaker C: I'm thrilled to have you here. I'm going to jump right in with my first question, which is because you mentioned, um, or I mentioned confidence when I was reading your, uh, bio. So how can business owners build confidence in their pricing and stop that second guessing thing that they do around what they're charging?

Speaker B: Yes. So part of the lack of confidence is rooted in not truly understanding the value of what they deliver. As a business owner, Right. We think we did. The value we deliver is one specific thing, but to our customers is you're saving me time and money and effort and I have a great relationship with you. All of that adds to the value outside of just the the thing you deliver, the service are good. And so for business owners, a lot of that lack of confidence is rooted in not fully understanding the value that they deliver to customers. But then it's also rooted in a false assumption that price is the only thing that matters to the customer. And so there's this sense that business owners have that if I raise my prices, if I change anything with the prices, my customers are going to flip the table and just walk away and leave immediately. Right. But that's not the truth. That's not reality. Retention loyalty is affected by a lot more than what you charge. And so that's something we try and teach business owners when we're working with them.

Speaker C: That's so great. I'm so glad that you brought that up, because you. Do you hear it that, uh, you know, people shop on price? Well, not necessarily.

Speaker B: No. No.

Speaker C: Yeah. Okay. So now talk to us about why benchmarking competitors prices often leads to underpricing and what should we be doing instead?

Speaker B: Yes. So this is one of my favorite things to talk about, partly because it has never failed. I was having a conversation with somebody at a VC event. So it's one of those events where you've got, like, the people who can invest in your business, the people who want business investment. So there's just, you know, elevator pitches flying left and right. Everyone is trying to be on their A game. And I'm talking to this founder who's built this incredible platform that has something to do with operations and logistics. It sounds very technical, but sounds very, very useful. And so I asked this founder, oh, what are you thinking about pricing it? And she goes, we're looking at our competitors, and we'll probably just try and Undercut them by 10% and maybe grab market share that way. And I was like, okay, I'm horrified. Let's start from scratch. Let's start from the beginning. The reason you don't want to anchor a benchmark to your competitors pricing is, first of all, you don't know that they haven't made mistakes in their pricing. You don't know that they've gotten it right either. And so if you go in, you look at what they're doing, you assume it's right. You might be pricing yourself too low because that's what your competitor is doing. That's the first, most obvious one. The second one is that in businesses, we have a habit of calling our services the same thing as our competitors. So I was talking to, um, bookkeepers a while ago, and I was trying to give them the example of you might call your service. I, uh, do bookkeeping for small businesses. But your booking pin includes. Yes, I keep the books, but also every Single month. I'm going to look at insights and patterns. I'm seeing trends from your data, and I'm going to surface three or four insights to you as a cfo, as a business owner that could be useful to your business overall. Your competitors, who also say that they do bookkeeping, don't surface any of those insights. And so you're charging what they're charging. We are delivering way more value. Right. So it's just fully understanding that the most important thing when it comes to pricing is that by understanding how do your customers think about your value, how do they reflect that, what's the value delivered to them, what is the quantity, how do you quantify that? And then, yes, do understand what your competitors are charging, but that cannot be the only metric because it could lead you down the path of underpricing and not being able to justify your own price.

Speaker C: Wow, great example. I love that because I had never really thought about that, that they may be undercutting their competition and then you're coming in even lower and it's race to the bottom. Yeah. Right. Okay. So really, how would you suggest an entrepreneur figure out their pricing?

Speaker B: Very, very tactically, what I love and tell entrepreneurs to do is first of all understand who's using your product and how they're using it.

Speaker A: Right.

Speaker B: So you want to segment and just understand who are my customers. Right. As a bookkeeper or, I don't know, a PR firm, a lawyer, I might have people who come in and they are accessing my service quite often. Right. They need the highest level of my expertise. They need specific kind of, um, more handhold. You know, they're more power users who call them power users if it was a technical, um, product versus other people who come in once in a while or they need a lower level of service, etc. Just kind of understand who is using your product and how. And that starts to give you the mark. The segments you have in your business. Once you have those segments, you then want to go to sample size a couple of those customers and just have a conversation around. I want to understand what is the value of provider. Right. So that can be how you know, how useful was the legal advice? Right. Legal advice work. What are the different elements of value provider? Because then they might say things like, oh, you saved me a lot of time when I work with you, or oh, I keep coming back to you because my staff feels that when they work with your staff, it's just seamless, it's easy, it's enjoyable. You just want to go to them and understand tactically just what is the value we provide? How do you think about the value that we provide outside of just my bookkeeping, my legal services, what else is the value that you get from me? Then you want to take that value and you want to help them and you want to ask the question of how would you quantify this value? And you can ask it like that, just kind of rough numbers. Or if you weren't using my service, what would you be using instead? Right. If you weren't using my bookkeeping services, if you weren't using my legal services, if you weren't using my banking services, what would you be using instead? Is it, oh, actually I would have my own in house bookkeeper, and I'd be paying them $100,000 a year instead. Right. You want to understand what the replacement value is for services because then that helps you start to quantify and get to a place of um, oh, this is what they're benchmarking me and this is what they're comparing me to. So those are easy places to start from just to understand who are my customers, how do they see my value, what is the number they put on that value on the different value drivers they see me bringing to them.

Speaker C: Wow, I so love that. And when you were talking about that, I was thinking that also helps you with your marketing because you hear the value proposition. Yeah.

Speaker B: And then you can lean into that. So if you have two different market segments, as it turns out, maybe your marketing line has always been speaking to we are the best because we get it done faster. And then you talk to your two different market segments and realize your power users love that you get it done accurately. But then people who don't use it that often love that you get it done faster. What do you do now? You market more accuracy. Right. So it really does help you understand what is the language I should be using for the different people who work with me.

Speaker C: Right. And who you don't work with, trying to attract.

Speaker B: Exactly.

Speaker C: Yeah, yeah, yeah. Okay. So when I was reading through your, you know, your bio and I said, you're a behavioral economist, what are some simple behavioral economic insights that can help, uh, a business improve their profitability without raising their prices?

Speaker B: Yep. The first one is I like to tell business owners to think about offering options. So a lot of times, especially if they're a service based businesses business, they've got one flat hourly price. Mhm. But there's a way to package up, uh, the services you offer within that hourly and say, hey, if you're Coming just for a. I'm a lawyer. Estate planning. You're coming for estate planning. It's this flat package, and it contains these three things, Right. So think about offering options rather than just offering one hourly rate. The reason you want to offer options is because if I told you, Diane, my hourly rate is $280 an hour. What is the decision I'm asking you to make? It's.

Speaker C: Go ahead.

Speaker B: No, it's essentially, do you want to work with me, yes or no? Right. It's a. Yeah, binary. Yes or no.

Speaker C: Yeah.

Speaker B: If I say to you my estate planning package is $4,500, um, we find that most. That's okay for most people, but if you've got investment properties, it goes up to about 5,000 because we want to make sure they're putting them into a trust. Which option do you prefer? Right now it's no longer, do you want to work with me, yes or no. It's, oh, which package makes the most sense? I assume I'm going to work for you or work with you. Now, how am I going to work with you? Right, right. So that's one simple thing business owners can think about is what parts of my services can I package up and offer as options to my clients? As opposed to saying, this is the hourly take it or leave it, and, you know, fingers crossed, they say yes.

Speaker C: Yeah, right, right.

Speaker B: That's one way.

Speaker C: Okay, no, no, go.

Speaker B: Another thing that you can, they can think about is what we call the, um, the decoy effect. Right. And I want to be clear that this doesn't always work. If your client is somebody who buys your services quite a lot, it might not resonate, but in the decoy effect, what you actually, what you're essentially doing is looking at the packages you already have and trying to anchor and drop clients up to a, ah, different or a higher value package. Right. So let's say you've got three packages, $100 a month, $200 a month, um, and, um, $300 a month. You want to get everybody you want. I want to sell a lot more of this 300. But right now, because it looks like it's the most expensive, everyone is just choosing the $200 option. They're going for the middle one. Let's do this. We're going to phase out the $100 option. We're going to introduce a $500 option. And I know most people, nobody, most people don't really want the $500 option. But what they're going to be doing now is comparing the 2 and 300 to the 500. Now, that reference point has shifted. Everything we do as human beings, we measure relative to reference points. So I don't know, I don't go, oh, the water is cold, it's colder, uh, than I expected. Right. Everything is reference points. And so by introducing that new $500 package, you've shifted the reference points that your clients are using to make that decision. So that's another simple way where I don't expect most people are going to go to the 500 if they do that. Fantastic. Happy. But what I wanted to see was more people go for the 300. And by introducing that 500, I've shifted their reference points and driven increased likelihood that people will go for the option that I want. So that's another way to think about how do I sort out the options I'm giving to customers to drive them one way or another? We talk about pricing can be a steering wheel, right? It is. I'm going to use it to help customers go this way, that way. I'm going to use it to outmaneuver my custom, my, um, competitors. I'm going to use it to drive more precision and growth in my company. So thinking about it in that lens of all of this can be a steering wheel. I can use it to shape decisions one way or another.

Speaker C: Wow, that's fascinating. It sounds simple and yet it doesn't feel simple. For me. It's a. Oh, I never would have thought of that before. And really understanding how people decision make and how they buy.

Speaker B: Yes. And that's kind of the joy of what we do is I say it's elegant. Right. It's not. It's not complex. It's not sophisticated. It's not meant to be. Oh, my God. Here's 32 spreadsheets. It's. Let's get to the heart of how people, um, are making decisions. And once you get it, it's intuitive. You're like, oh, oh, yeah, of course. That makes sense, right? Yes.

Speaker C: Yeah, yeah. Wow. It's so great. Adios. I'm so glad that you joined me to share this information. I've never heard it before. I think it is incredibly valuable. Will you tell the listeners how they can find you, please?

Speaker B: Absolutely. They can find me by emailing me at etiosa. That's ETI N O S A a decisionalpha co. We also have a free pricing playbook. Anyone can grab it, download it, learn more about what I'm talking about. They can get that at, uh, playbook to P L A Y B O O K. DecisionAlpha Co got it and

Speaker C: gotta remember to do that Co not Com right?

Speaker B: Yep.

Speaker C: Excellent. Well again, thank you. I appreciate you sharing this information with us and listeners. Thank you. You are who we're doing this for. Thank you for tuning in to this episode of Accelerate youe Business Growth, a production of Evergreen Podcasts. Discover more episodes of this podcast and explore others@ahevergreenpodcast.com as always, continue to prosper and be curious. And if you're looking to get your sales strategy headed in the right direction, pick up a copy of Succeed Without Selling on Amazon or wherever books are sold. Until we meet again on another episode of Accelerate youe Business Growth. Goodbye and Good Day Labor Day savings

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