Become the most expensive and stop selling a commodity

1. The one real aim over time

Raise the price. Over time, on this view, every service business has one real objective, and it is to push the price up. In this view, that applies to a traditional service.

The exception. The aim holds except if your business is a low-cost leader whose main value proposition is being cheapest. For everyone else, put here at the vast majority because they use people to deliver their service, the target is to be the priciest provider in your area. Why? The reason given opens with an "if" whose condition is not established on this page, and ends: you are probably also the best.

Price speaks in both directions. On this account, a price carries a message both ways: it tells buyers what the thing is worth, and in equal measure it is a way to draw in better customers.

2. The upward cycle

Take the idea to its natural extreme, framed as a "let's say": suppose you do the work well, and more people want it than you can serve.

• The owner who minimizes profit. A bad owner, bad here meaning one who keeps profit as low as it goes, simply lets the wait lists run very long, until people who will not wait go elsewhere.
• The enterprising owner. Supply and demand: with more demand than supply, raise the price. At the new price you still sell as quickly as before, but the wait list gets shorter. If a long list is still there, you can raise it again.
• Why the list comes back. As you get better, and because you keep doing good work, word of mouth spreads and the wait list grows back.
• Where the extra money goes. The added gross profit from charging a premium, with a reputation behind it, lets you attract better talent. Better talent lifts the reputation; you do good work, demand rises, and you can raise the price again. Each time you raise it, you also draw better customers.

It is called a virtuous cycle of price, and in shorthand it runs: a big price draws "a better person"; then come more gross profit, stronger talent, a stronger reputation, rising demand and a higher price; then more gross profit again, more talent, more demand, round and round.

The same upward cycle, told as what a higher price does for clients and for the business, is section 3 of SOP 2 — Set a price from the value gap, not from competitors; that page treats price as a message about value in section 4. Raising the price when demand outruns what the crews can handle is section 8 of SOP 205 — Run the home-services playbook stack, and a business at full capacity is one of the signs of a price set too low among the rules in section 3 of SOP 82.

3. Judge a provider by their price

From the cycle comes a shortcut, offered as a view: you can almost tell, at a glance, how good someone is at their service from how they price it.

The one exception. A provider whose whole strategy, from the very start, was to be the cheapest in the market. That, it is noted, you would know if it were your own strategy: from the first lease you signed and the first person you hired, every decision was made around being the low-cost leader.

Price lining up with skill in a long-established service business, and a price that keeps rising as the sign that quality has held, is section 4 of SOP 203, the page on underpricing among other faults.

4. The low-cost leader decides on day one

Chosen, not fallen into. A large discount retail chain, on this account, works only because it chose to be the low-cost leader. Cutting your price because you cannot sell well is not that; put bluntly, it is being bad at business.

Built for it from end to end. Being the low-cost leader has advantages, for sure. But the whole of the business's operations has to be set up for it. The example is a low-cost agency at $200, $300 or $400 a month:

• Your staff will not be hired in the United States.
• You are not doing anything custom.
• Everything runs on offshore virtual assistants plus a great deal of automation.

That is the game such a business plays. Gross margins of 80 percent might still be within reach, on this view, with no reason seen why not. You will have to sell far more units, and that is fine, because you chose on day one that this was the game you would play. A low monthly price for marketing work sold to small businesses, and how long such buyers keep paying it, is in section 3 of SOP 229 — Sell to richer customers and rewrite what you measure.

Few or many. It is either a few buyers who pay a great deal, or a lot of poorer buyers; that is put with a little hyperbole, as is granted. When you sell to the many, though, what you sell has to scale. Both ends, and the preference here for not sitting between them, are section 4 of SOP 229.

Only one direction. A rising price is called the eventual outcome: as long as the work is good, it will always rise.

5. "I can't": the offer is a commodity

Expect some of the owners in this spot to object that they cannot raise the price; they will probably say so because what they sell is commoditized.

The HVAC objection. Take an owner in HVAC as the case: buyers, that owner says, will compare them with the company down the street. Exactly, comes the reply, and that happens because you are selling a commodity.

Change what you are selling. Do not sell ten chiropractic visits. One provider's back adjustment against another's is a commodity: close enough that the buyer picks the cheapest. Sell the wellness program instead. Sell the plan that improves the house. Sell the fact that the buyer will end up saving more with you. For a hands-on practice, selling the result rather than the sessions is also worked in section 3 of SOP 232, the drill of the ways to make a customer worth more. How a strong brand can turn a commodity into a premium product is section 2 of SOP 94 — Pair the brand with what the ideal customer likes.

6. For home services: this job against the life of the home

For anyone in home services or work related to construction, here is a reframe to use whenever you present a price. The aim is to break the frame of who is cheapest; the reframe is called local against global.

• Local. Look only at what this one job costs the buyer: install the thing, build it out, restore the basement, fix the roof, or whatever it is. On that cost alone, you are certainly the more expensive.
• Global. Set that against the cost of the whole home over the time the owner plans to live there. How that sentence ends is not established on this page. What follows it: a buyer can spend less, but will pay less today and more over time.
• The proof. Then show a case study: a customer who first went with a competitor who is, without question, cheaper than you, who came to you later because you fixed that work, and how much less their spending came to across the next three years.
• No data yet. If you do not have that data, gathering it is part of marketing, on this view; maybe you should collect some of it.

Once you have it, you have a compelling story for why your price is above everyone else's: getting the higher-quality thing is in fact in the buyer's own interest.

7. "I can't": fear

The second reason owners give for not raising the price, on this view, is cowardice: they are simply afraid. The remedy offered: spell out exactly what you fear will come of it. The answer is that people will turn it down. And then? You would put the price back where it was. You can always put it back.

Trying a higher price and rolling it back if it fails is also in section 7 of SOP 224 — Set fractal price tiers and read price off the close rate, and moving a price in measured steps is SOP 128.

8. How to raise it

This part is kept short. Your price can probably go up if you:

• get better at how you sell;
• take the commodity out of the offer;
• sell to better customers.

The HVAC case. Back to the HVAC question: selling to everyone, on this view, is part of what makes you a commodity. Suppose you aimed at homes with higher incomes. When you get to those houses, they have more than one unit. Their owners care about ease and about speed, so give them priority: tell them most providers can come out but will take two weeks to get there, while you can arrive that same day, so they sleep comfortably tonight. Can you do that? The answer offered: probably.

What richer buyers will pay for. People with more money, on this account, will spend more to be comfortable, and will spend more again to have it done at once.

Risk, speed and ease. When you ask how to raise your price, ask how you can do the work faster, how you can make it easier for the buyer, and how you can do it at a time that suits them.

Impossible only if you copy. Raising it is impossible, on this view, only if you do exactly what the next provider does; if that is you, stop. If you cannot see how you would do it faster, finding out is a valuable problem for your business to solve.

When the item is the same as everyone else's. In a second example, a reseller cannot change the thing itself, so, for business buyers and consumers alike, change everything around it:

• how fast it reaches them;
• how easy it is to order and renew;
• how it arrives, perhaps split into portions that are easier to use;
• how good the service is, which is put, tentatively, on the risk side.

Those are what justify a premium. Where business buyers send one quote request to many suppliers and compare numbers, answer by phone, sooner and more than once, to build rapport and show what a late or unreliable supplier costs them. For consumers, brand is the only lever named for pushing the premium up.

Aiming at richer buyers is SOP 229's subject, and selling speed and ease as upsells in their own right is section 5 of SOP 231 — Build the next sale into the offer and anchor high. Another answer to a question about HVAC, where the unit sold is the same as everyone else's, is in section 6 of SOP 224.

9. Leave the commodity behind

Leaving the commodity matters especially, on this view, for those in what can be called well-understood services.

• Knowledge work. When you sell knowledge-based or consulting work, you already sell something kind of intangible, so the price turns very much on how well you convince someone that your way of solving their problem will solve it.
• Traditional services. A physical therapist, or any trade where you can say "I am a …", fill in the blank, and everyone nods and understands. A title nobody can picture, such as entrepreneur, works the other way: no one knows what it means.
• The test. If your job is one nobody can name, the issue probably touches you less. If everybody can name it, you are a commodity unless you play the game right.

Do not be filed under the trade. Make sure people do not call you a chiropractor, so that they do not measure you against the rest of that trade. What you want them to say is that you are just a really good health person, kind of holistic. That comes from having reframed how you deliver your products and services against everything else on offer. The goal is to sit where no one compares you, and that is what lets you charge more than anyone else.

10. What this page does not decide for you

• Why the most expensive is the best. The reason begins with a condition that is never completed; only "probably also the best" is given. Not established on this page.
• Who the better person is. In the shorthand for the cycle, "a better person" follows the price; whether that means a better customer or a better hire is not said. Not established on this page.
• Less than what. The case-study customer spent less over the next three years; less than what is not said. Not established on this page.
• The cost over the life of the home. The sentence that sets it against this one job is left unfinished. Not established on this page.
• How far. This page gives no figure for how much to raise the price at each step.
• Risk. Risk is named beside speed and ease, but the HVAC questions cover only speed, ease and timing; the reseller example ties risk, tentatively, to service.
• The low-cost agency's margin. 80 percent is what such a business might still run. The words after it read "No reason. We can't."; the page reads them as no reason why you cannot.

11. The checklist

Step	What to do
Choose your side	Decide whether you are a low-cost leader by design from day one; if not, aim to be the most expensive in your area
Raise into demand	When demand outruns supply, raise the price; you can raise again while the wait list stays long
Spend the margin	Put the added gross profit into better talent, and let the higher price draw better customers
If you go cheap	Build the whole operation for it: offshore help, a great deal of automation, nothing custom, far more units
If it feels like a commodity	Reframe what you sell: the program, the plan, the saving, not the visits
In home services	Set this job's cost against the cost over the life of the home; back it with a case study, and maybe collect some if you lack it
If it is fear	Spell out what you think will happen; you can always change the price back
Then	Sell better, take the commodity out of the offer, sell to better customers; if you do, your price can probably go up
Ask	How can it be faster, easier, at a time that suits the buyer?
If the item is identical	Change delivery speed, ordering and renewal, packing and service; answer quote requests by phone
Leave the trade's name	Keep people from filing you under your trade; reframe how you deliver so no one compares you

12. What this page does not cover

The anchor and adding a zero to your price are on SOP 231 — Build the next sale into the offer and anchor high. Tiers priced for the fractal shares, and reading your price off your close rate, are on SOP 224 (titled in section 7 above). Choosing among pricing models is on SOP 82.