Every company wants to be able to charge more for their products and services. Today, with access to information at everyone’s fingertips, it has become more apparent that some organizations are able to charge more for the exact same product. This is evident when comparing pricing for generic vs. brand name groceries, pharmaceuticals, etc. But time after time, people compare the ingredients and still pick up and pay more for the name-brand. Why? Because that brand has established credibility and trust in the market. This divide becomes more significant when comparing services or many of the more complex products that companies are buying for their organization since there isn’t a list of ingredients to directly compare. If you aren’t the biggest and best-known company on the market, all is not lost – while brand status can greatly contribute to a company’s pricing freedom, it is not the only factor that enables companies to capture a price premium. Building up brand presence can take years, even decades, and requires significant exposure. Regardless of where a company is on that journey, it can enhance its legitimacy in the short-term to immediately bolster its pricing freedom.
How can companies increase their credibility and legitimacy when they’re not supported by a big brand name?
First, they can develop market legitimacy. Being viewed as a market expert provides an immediate sense of credibility, and therefore they can differentiate themselves in the market relative to seemingly similar competitors. This is primarily a marketing and thought-leadership effort and is accomplished by focusing on a niche or challenge and then highlighting specific experiences in the key segments they are seeking to legitimize themselves in. By coupling this with relevant customer references a company can speak to its expertise without needing the big brand name to support it. The key here is picking those target markets and challenges that the company truly understands and focusing on them – it is difficult, if not impossible, to develop market legitimacy for all segments and all buyers on all topics. In addition to increasing pricing freedom, market legitimacy tends to help “get your foot in the door” at new accounts.
Second, companies can tap into buyer persona legitimacy. In this instance, a company is proving its knowledge of the market by appealing to specific buyer’s behaviors and priorities. By effectively addressing a target buyer’s challenges and opportunities, companies can differentiate themselves as experts. They can translate their value proposition to the specific pain-points of their buyer to demonstrate a deep understanding of the client’s situation. This exercise is jointly owned by marketing and sales, as marketing should provide insights into what target buyers care about, and sales needs to leverage that knowledge to convey expertise with the buyer. Developing buyer persona legitimacy helps reaffirm expertise during the sales meeting, which keeps the buyer’s attention and increases pricing freedom by extending the conversation and expanding the relationship.
The final, most effective way to increase pricing freedom without developing a big brand or overhauling the products & services the company is taking to market is through intimacy-based legitimacy. Here, the company can put both market and client knowledge to work to deliver results and develop a trusted advisor relationship with their customer. Over time, as a company proves its value, it naturally builds credibility, therefore enabling it to move into the top right quadrant and secure Strong Pricing Freedom. It is unlikely that intimacy-based legitimacy will impact the pricing on the first deal, since, unlike the other forms of legitimacy, establishing intimacy takes time working together with the customer. Intimacy-based legitimacy is founded on delivering on the promise – exceeding expectations from the initial sales conversations. Once those table stakes are accounted for, intimacy is accelerated through activities such as providing advice, value, and guidance on topics that are interesting to the customer (particularly between or unaffiliated with sales meetings). In essence, helping customers with their problems in a way that does not come across as self-serving will pay significant dividends, including immense pricing freedom on future pursuits.
Written by: Anthony Paluska
About the Author: Anthony Paluska is a Partner at McMann & Ransford with experience helping organizations overcome commoditization by developing stronger, more intimate, relationships with their customers. He has leveraged his management consulting, problem solving, and change management skills to support 15+ Fortune 1000 organizations, across a multitude of industries.