[Music] hi Shannon Waller here and welcome to the inside strategic coach podcast with Dan Sullivan Dan you have a really interesting take on pricing we were talking about it earlier today and I thought what a fantastic topic because a lot of people don't know how to price their service or their product or their experience and you have a context around it which I find quite novel and quite useful so when you think about pricing either one of strategic coach products or coaching one of our clients on how to price something how do you look at it I can give you five different dimensions on how we approach it and just generally what you intend to charge I would say that the vast majority of entrepreneurs what they will charge is totally determined by what the competition is doing so they're taking their reference from people who actually don't mean them well so their Authority is people who actually don't want them to have any return on pricing so from the very beginning I didn't want to use my competition as my reference point and the reason is that I didn't want my value creation to be determined by what they were doing I wanted to be completely independent of what people who perhaps might think that the or my competition are doing if they're worrying about it at night if somebody's worrying about it at night I want them to be the person worrying about at night I want to sleep soundly but here's the thing about pricing and a lot of people think that there's some objectivity to pricing and there really isn't one of my clients who's really really knowledgeable on the stock market he said that the average price on the big board on the New York Stock Exchange now lasts 21 seconds 21 seconds so the price has changed well what's that determined on I said well for this next 21 seconds this is what it costs and 21 seconds later and it can go up and it can go down and the sheer complexity that determines that is being determined by million different factors so there's no objective way of knowing what the price is except what that you have to pay right at the moment so it's totally subjective but I tried to get a handle on this in terms of pricing so for example I said now I don't want to know what my competition is charging you know if they have a $10,000 price I don't want to know what they're doing for that I'm going to look entirely at the check writer at the customer and I'm going to say when they spend $10,000 on something what kind of experience are they buying with $10,000 and how does that experience get packaged what comes along with that experience so for example it might be you know for certain check writers it might be a week week in New York at a really good hotel have great restaurants you know they go to shows and everything else and it's for a whole week and it's $10,000 so I said so what is their criteria while they're spending $10,000 in New York for what kind of value they're receiving in your money and all of a sudden you begin so I said you know I kind of have to look like New York I have to look like a really great hotel I have to look like a really great restaurant a first class show and then just the general experience of $10,000 it isn't about what a workshop or what a program or an educational conference gives you for $10,000 is what do people expect at our highest level right now you know it's $50,000 so I say you know what do people pay $50,000 for well they spend that you know and this isn't the highest price but they spent it on great College year for their children so I said so what kind of satisfaction what kind of emotional experiences are tied and these are all subjective these are not objective okay and you just have to get in what they think is valuable that they would write a check for $50,000 so that's one thing that is entirely subjective and you have to see it entirely through the checkw writing pleasure of your clients and customers you do not look at it from any other standpoint of competitiveness in the marketplace with other people and there coaching is a big deal and this is a topic for another podcast Channel I think coaching is the number one industry of the 21st century as important as management was in the 20th century so my feeling is the 21st is going to be more and more of a coaching Century every area of human activity is going to be coaching second one is that when you're scared about quoting a price remember you're the only one scared about it the person who is the prospect or the potential customer or client well they're not scared of your price because they haven't heard your price so all the fear you have about pricing is strictly going on in your own nervous system and in your own brain and the confidence with which you say the price is part of the sale okay and in order to make yourself confident you got to be okay with a no you got to be totally upfront that it's $50,000 and they say oh no no no you know I'll do it for 40 and I says I'm sorry I said the kind of people who join my program don't even look at that as a cost they look at it as an investment so you're looking at $50,000 as a cost so what that tells me is that this is not the right program for you so people who pay $50,000 for our upper level program they say Well that's getting what I'm going to get out of this program that's a pretty good deal okay so that's another thing and then the other thing I've got like a formula that any time you ask for a price the first time that's higher than any price that you've ever quoted in the past it's going to scare you and that's very very natural because the for C's concept we have in the program is that you're committed to quoting a higher price because you believe you're worth it and it's going to require Courage the first time you do it but the first time you do it whether they say yes or whe they say no if you stick to your price you're going to gain capability and confidence you just ask the Ron check writer and that's my attitude and somewhere along the line somebody's going to say gee that sounds really reasonable and you're into the confidence level you just found it so the value of things is strictly what people are willing to pay for it and I want to talk about it I'm a big sports fan I was just noticing the contracts that some of baseball players really top baseball players are getting $450 million for 13 years 330 million I think it was for 13 and 30 million for 10 years and we were having discussions in one of the coach workshops an entrepreneur say there is no baseball player worth $450 million I said well of course they are somebody just wrote the check somebody just signed the contract you know it doesn't matter what happens this guy's going to get 450 $50 million and they said but it's absurd and I said well no and I said I'll give you a number I said first of all it's only billionaires who write this check so somewhere along the line they got to be a billionaire because they kind of understand pricing so if they're writing a $450 million check over 13 years they probably have a 10 times multiplier in there somewhere that if I do this now I'm going to get $4.5 billion doar back from this investment and there's an interesting ratio and it goes back when I first started watching baseball was the late 1950s and I went back and I checked what's the ratio in 1959 so 60 years ago between the total amount of salaries for a ball club and the market value of the baseball company the baseball organization and the ratio is exactly the same they know exactly what they can spend based on the value of their ball club and the end the ultimate value for them is what they would sell their ball club for so it's really really interesting so those are just some of my thoughts about pricing I find it fascinating Dan and you have really implemented this with Coach because you have very much a Hospitality yes model talk about that for a moment because first of all I think it's provides a very gracious atmosphere it's wonderful we have your attitude when someone comes in late is not to make them wrong but simply to put them at ease and let's get them as comfortable as possible but it really did come out of this model that you have about what you're comparing yourself to is not a competitor but rather what someone else would pay that kind of money for yeah and I would say that you know and I'm going to connect pricing with packaging here that how do we package ourselves as strategic coach and I think with very few exceptions over the years people said you know this is just such a great environment you've created here you know the way it's designed way it's decorated how everybody interacts with us and I said yeah and I said I've always had a passion of visiting when I wasn't staying there and often times staying with really top-notch hotels and I just watch what it feels like when you walk into a what they call a five-star hotel we had a very famous local example that is now I guess probably 50 years years old and it's the Four Seasons Hotel that started with a motel in Toronto back in the late 60s or early 70s and from the moment you walked through the doors you just felt taken care of and I said so one of the things that people associate with a great experience and a great return on any kind of check they write is that they are immediately feel that they've been totally taken care of by the other people so I tell our team I said they're coming for the workshop and we constantly try to improve the impact of the thinking exercises and the way the structures happen in the workshop but I have to tell you their most memorable thing from the time they arrive and even before they arrive how they were communicated with before they arrive is that they felt totally taken care of and I remember the Four Seasons had a great line for a number of years it's you're home when you're not at home and yesterday in one of our workshops somebody who you know really really knows educational conferences and workshops he said I want to tell you this is my second visit and I've been here you know for two days and then four days because they get a double up at the level that they're at and he said I just feel like at home and then a lot of people in the room said yeah I feel kind of like I'm at home here and to me that us getting a five-star rating you know it's a festar rating we've done our job as far as how they feel about the fact that they're writing what other people would consider a really big check what a cost for something and I feel that if they feel at home the term cost is not part of their thinking you know it's an investment and they got this out and what we're going to show them that for as long as they feel that this is is a worthwhile investment we're going to keep increasing the different ways in which they feel at home that all goes into my pricing so I see it more and more not from our point of view I see it certainly not from the point of view of our competitors I see it entirely from who are our check writers and what do they feel good about when they write a check this big that they feel they're going to get a tremendous return so Dan we've talked about what pricing is and I think you've really also described why it's important how can people take action on this some people are so aware of what their competitors are doing and they're always like trying to get ahead but this is really a different mindset around pricing so what can people do in their own business you talked a little bit about packaging to really kind of implement this way of thinking in their own practice in their own field well first of all if you're starting to get bored with your business your price isn't high enough okay so whatever price you're charging for what you consider to be your maximum service and your best capabilities but it's not doing the trick anymore there's no magic to it for you you aren't charging enough so I remember back during the downturn in ' 08 and 09 one of our sales team brought up would we ever discount during this period and I said well I would discount but I might double and there was this gas double they said well you know it's a downturn and I said yeah but it's not a downturn for everybody it's only a downturn for the people that you're talking to so I said what if we doubled and it was going from 10,000 to 20,000 I remember at the time I said why don't we just create this new program and we'll charge 20,000 for it and it filled up like nothing MH okay and this was a great learning experience for me because some people we had known about for 10 years we've been talking to them for 10 years and they said yeah yeah I'm going to do the program sometime but the moment we doubled our price they started to sign up and we had no problem selling out at twice the price we' ever charged and I have to tell you I was very confident talking to our salesperson yeah we might double I've scared you I was scared you know I I was really really scared I almost said bad word there but afterwards I started talking to people I said you know you've been talking to us and you've been positive toward us for a long time but you didn't sign up until we doubled our price why did you do that and they said because we knew who we weren't going to be in the room with and we felt that at your previous price we would be in room with people I didn't really want to be in the room with cuz I knew some of them and I didn't want to be in the room where they would be but at Double the price I knew it was too rich for them that type of person would never be so again this is very psychological this is about they're buying an experience okay so the other thing about price is if you're thinking about product or you're thinking about service I have to tell you price is never based on product or service Harley-Davidson would be a great example anybody who knows motorcycles knows that Harley-Davidson is not the best motorcycle in the world but the experience of owning a Harley and the sound of a Harley especially the sound it's a patented sound is the most desirable motorcycle experience in the world not the greatest machine not the greatest engineering not the fastest and everything else so people are overpaying for an experience I mean some people would say they're overpaying and I have an older brother who for 20 years was a acoustical engineer for Harley and his job was to modify the Harley at the factory so they would pass the noise restrictions of any country and then he had a way that once you got it into the country you could turn the harly sound back on you know so I know this subject very very intimately you know and I said they're not paying for a product here they're not paying for a service they're paying for an experience I find this fascinating because a lot of people don't recognize that and I think they sounds harsh but dumb themselves down or dumb down the experience or commoditize themselves when in fact what they need to be doing is increasing the value of the experience and increasing their price to make it exciting and a little bit scary I mean your pricing formula of double and then add 20% is scary well yeah so just to end this off you know I've got this kind of smart mouth answer people say well how should I price that and I says well raise your price in your mind right now and tell me when you're scared and they said okay I'm scared I'm scared of this price I said okay so your formula is number one the price you're charging scares you plus 20% and they said oh my God oh my God I'm really scared and I said no listen to me I said you're the only one who's scared here there's no checkwriter in the world who's scared now because you haven't asked anybody to write this check and they said well why the 20% and I says because when they don't blink then you don't have to kick yourself afterwards and again it's just psychological it's just your confidence level but your pricing is sure proof that you're willing to ask for a price that scares you plus 20% is that you're committed to yourself and you're committed to your value and that you're willing to go through a period of courage including the courage to be rejected M because you want to develop a new capability and be better paid for how good you think you are in the future and that takes you to a whole level of different confidence and the moment you do that you will attract that new level of check writer into your world Dan this is so powerful I love it so the formula is it scares you plus 20% and I cannot tell you how many clients have come in after implementing the formula well first of all they charge a higher price than they've been charging and then the person doesn't blink and they're like they're kicking themselves like oh I should have asked for more and your formula prevents that from ever happening so we have had a lot of clients tested out and they're like it worked and then they absolutely deliver on that value because they know how to create a great experience but it's such a powerful way to do it and again completely different than how anyone else thinks about pricing thank you Dan thank you Shannon