Technology today is making it easier for customers to bypass traditional distribution channels. As a result, customers today are in charge and armed with information that can dictate what they will pay. In the property management business, property owners and tenants enter the conversation with much more information than their counterparts five years or ten years ago dreamed of ever having.
As a result, smart property managers must learn how to better position what they sell in a way that helps them be more profitable (or in other words, helps them sell more profitably in an unprofitable world). In the next few blog posts, we’ll discuss how you can be more profitable in an unprofitable world and give you specific strategies to be able to do so.
I’ve been reading an interesting book by Brian Solis entitled: What’s the Future of Business? Changing the Way Businesses Create Experiences. His observation is pretty profound. He says:
“How customer’s behavior is changing, how it’s impacting decision making, and how that decision making is affecting the business landscape is what must be documented, communicated, and shared within the organization. How your customer behavior is evolving is already impacting your bottom line and it’s becoming more profound every day.” –p. 23.
Yanik Silver makes this observation in his book Maverick Startup:
“You have to charge a premium price so you can provide extraordinary experience and value. People are just banging their heads against the wall trying to undercut their competitors. I think that’s totally wrong!…If you boil down my biggest profit windfalls in my business (and those of the most astute marketers I observe), it comes down to selling premium products and services and premium prices. [Here are] six reasons why you should charge premium prices for your product or service:
“Reason 1. More Profits.
Ok, no surprise here. When you sell for higher prices, you make more profits. Very few companies have been able to sustain a ‘low-price’ position in the marketplace. Sears couldn’t. Kmart couldn’t. And now it remains to be seen what Walmart does with that position. (Actually if you study Walmart, you’ll notice they are bringing in some significantly high-priced, high-margin products.)
“Reason 2. Better Customers.
Price qualifies your customers more than you might realize. The ones that pay [the least for property management] are going to be the ones who whine and complain the most! They’ll tax and strain your customer support team. But in comparison, the customers who spend significant amounts of money are surprisingly easier to deal with and less demanding. Think about the last time you gave free advice to someone, what happened? That’s right. Nothing. But if you had made them pay you for consulting, they would have taken it to heart.
“Reason 3. The Psychology of Pricing Works in Your Favor.
This is a big one! We’ve always been taught, ‘You get what you pay for.’ It’s not uncommon for a prospective customer to discount a product or offering because it’s ‘too cheap.’ If the price is not in line with what it should be, you’d think there is something wrong.
“Reason 4. You Can Deliver More Value.
Ultimately the value you provide will dictate the profits you receive from your customers. Increase the value and your revenues go up. By selling high profit products with high margins, you have lots more wiggle room to deliver sensational value. You can really wow your customers and buyers. Not only can you throw in high value extras, but you can afford to deliver truly unique, unadvertised, bonuses, and follow-ups.
“Reason 5. Some Buyers Will NOT Buy Low-Priced Items.
It sounds crazy, but some customers are only premium buyers. If you gave them a discount, it would actually decrease the response. Plus, some customers are only comfortable buying in the high-end range.
“Reason 6. You Will OWN the Marketplace.
I think this is the biggest reason of all. This means you can afford to pay more to acquire a customer. This is huge! If I’m in the same marketplace and I’m competing against someone who only makes [$100 for managing a property] and I have a $10,000 offering, there’s going to be almost no contest. I can spend more on pay-per-click internet ads, more on traditional advertising, more on affiliate payouts, more on offline follow-up, more on testing unusual advertising places, etc.
“…Fact is, the business owner who can spend the most to acquire a customer will WIN. Period. End of story. Most people are undercharging for what they provide. My rule of thumb, and one of my values I look at every morning in my planners, says, ‘I get rich by enriching others 10x -100x what they pay me in return.’ That’s a big deal for me. If you pay me $1000 for a product, I want to make sure it delivers you $10,000 in value. I suggest you consider something similar. If your product isn’t good enough for you to raise your price on it, make it better!’ –Maverick Startup, pp. 47-50.
He continues with three steps to ensure your product or service has high perceived value:
“Charging a premium needn’t make you nervous about pricing yourself out of the market. The first step at the ‘how’ to double or triple your price is to start brainstorming the value you provide.
“Step 1. Brainstorming Additional Value
Either find a trusted advisor, work with your team (if you have one), or just grab a blank, yellow legal pad and start coming up with answers. It doesn’t matter how crazy they are. Just write them all down. In fact, the rules of brainstorming should be used:
- Rule 1. No criticism allowed (turn off your left brain)
- Rule 2. The wilder the better; everything’s possible.
- Rule 3. Quantity of ideas
- Rule 4. Jump off and ‘plus’ other ideas. (In other words, work like improv actors would by saying, ‘Yes, and…’ to continue the thought and make it even better.)
You want to start with a blank slate and just contemplate ‘blue sky’ questions like these:
“How can I provide 10 to 100 times the value my customers expect?”
“What can I do that will absolutely amaze them?”
“How can I get my customers the result they want on a silver platter?”
“How can I do it for them?”
“Step 2. Check Your Thinking
Setting higher prices begins in your head. People are usually too slow to raise prices, and it’s more about confidence and self-image than the actual value delivered. Get Maxwell Maltz’s book, Psycho-Cybernetics, and consider your self-image. We all have self-images in every single area of our life, and if you are not charging a premium, it’s usually more to do with what’s in between your ears than the actual marketplace. Which brings me to my next point: Never allow your competition to set your prices. Just because someone else charges x dollars, that does not mean you have to charge similar prices. There will always be a very profitable spot for businesses at the premium scale who deliver what’s perceived as exceptional products and value.
“Step 3. Targeting the Right Marketplace
Another mistake I see a lot is going after markets that cannot afford to pay premium prices.” –pp. 50-51.
I really like Mr. Silver’s approach. As I see it, there are six main problems with selling on the position of price. They are:
- It is hard to sustain. There will always be someone who will enter the market and try to compete with you solely on the basis of price. Even if that property manager loses money, they will stay around long enough to become a problem for you. They will likely force your prices down.
- You and/or your team becomes so accustomed to selling for less that they don’t know any other way to sell. As a result, shifts in the economy have woken many property managers up to the realization that their sales skills aren’t as sharp as they thought they were.
- It is much more difficult to create a great experience for the property owners coming into your business without profits to create and market the experience. For example, Disney charges more than any other amusement park experience in the marketplace. As a result, they can provide a better experience (better rides, better employees, better training to help employees interact well with their guests, etc.)
- You can’t afford to spend more money on marketing to get future property owners into your business since you may just be barely breaking even or losing money to bring in the property owners you’re signing agreements with now. By trying to be the cheapest, you won’t have the profits necessary to create the great experience for the next group of property owners you’ll work with.
- You have to grow your business more slowly. Your ability to buy new leads and continue to offer better property management is limited if you don’t have the profits to reinvest back into your business.
- You can only afford to provide an ordinary experience that can easily be copied by other competitors. Your best business ideas will always be copied by other competitors. Make it so it is difficult to copy. Don’t be ordinary or boring.
If you would like help to have established systems and processes in your property management business to help you increase your value and profitability, please set up a time to talk with one of our franchise developers here: https://calendly.com/pmifranchising
