How does Apple do it? Case Study on Premium Pricing

In the previous post we discussed how you can charge premium price without losing sales and still have customers love your products. No one does this as well as Apple, the most valuable company in the world by market value. Apple never competes on equal playing field with their competitors. They write their own rules and come up with innovative products that no one has dreamed off year after year. Their slogan explains how they have been able do this – Think Different! As a result Apple has been able to charge premium price for all its products and enjoy remarkable sales growth and margin for a long time.
What is their secret sauce? In this post we attempt to decipher their strategy by understanding how they apply the rules of premium pricing we described in the earlier post.
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How to Charge Premium Price (and Have Customers Love you for it)

Do you want to increase prices for your products without getting a hit on your sales? How about customers thanking you for charging them higher price? You probably think we have lost our minds, but trust us; it is possible do just that! We will show you how in this post.
It seems counter-intuitive to say that you will be able to improve customer satisfaction and increase sales while at the same charging more. Conventional wisdom says that if you are not doing well lower the price and customers will flock to your business. As natural as it seems, this is simply not true. Competing on price is not a sound business strategy for small business owners as explained in the previous post.
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Tools you can use to Uncover Customer Needs

Finding and serving the “right” customers is the most important step you can take to improve your sales. Many small business owners feel that the task is easier said than done. As a result, they fail to align their business with the right customer segment. Even when they do attempt to do it they either go about finding the customer needs in ad-hoc fashion or they use wrong tools to segment the customer base.
As we have noted earlier, we firmly believe that segmenting the customers based on their needs as opposed to demographics or location can improve your sales significantly. But how do you go about finding what customers really need and want?
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How to Improve Sales 5X by Focusing on Customer Needs

In the previous post we discussed how you can find the “right” customers for your business. By segmenting your customers based on their needs you can not only identify the customers that best fit the value your business provides, but also it provides you the action plan to target those customers. This is one, and most important, reason why we prefer to segment and target customer based on their needs. Once you have identified the “right” customer base you don’t need to spend extra effort to attract them to your business.
So, how do you go about finding the customer needs? While there are several approaches you can take to find out what customers are looking for, you can start with a set of attributes that are universally valued by various customer segments. These attributes give you a good starting point towards the path of finding right customer base.
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How can you Find the “Right” Customers for your Business?

One of the biggest mistakes you can make as small business owners is try to serve all customers who walk in to your business equally. We showed in an earlier post that not all customers are created equal. It is your responsibility to find the customers that are “right” for your business. Many business owners, however, struggle to find these “right” customers. They either go about finding them in an ad-hoc fashion or not worry about it at all. This could be a mistake.
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What Business are you Really in?

“What business are you in?” This is one of my favorite questions to ask when we meet with small business owners and entrepreneurs. On surface this appears to be a very simple question. If you are a pizza business owner, of course you are in the business of selling pizza or food. But, think about it in terms of what value are you bringing to your customers rather than what you are selling. Are your customers really craving for pizza or are they looking for the convenience of no cooking and pizza happens to be one of the choices? Are they ordering pizza to feed bunch of kids at a birthday party? Are they looking to satisfy their hunger after late night partying without having to drive to your store? As you can see, how you look at your business can have a significant impact on how you run your business. In fact, it can determine the success or failure of your business down the road.
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