Summary
- Pricing fails when it’s set by copying competitors instead of supporting your marketing story.
- Competing on price turns your practice into a commodity and leads to price wars.
- Lowering price does not create value, it removes value.
- The first step to better pricing is differentiation, not comparison.
- Once differentiated, price becomes a tool that creates value.
- Price and marketing affect each other. Strong pricing strengthens marketing, weak pricing hurts it.
- Price acts as a shorthand that helps people quickly understand your value.
- In a distracted world, people rely on price to interpret quality and positioning.
- Price must align with how you position your practice, such as cost-efficient or high-quality.
- Misaligned pricing creates confusion and breaks trust.
- High quality with low price or low cost positioning with high price both fail.
- The right price reinforces your narrative and attracts the right patients.
- Differentiate first, then set pricing that aligns with that positioning.
People struggle a lot with pricing because they don’t see how it fits into the overall narrative of how they’re trying to market their product or service. So let’s say you’re trying to look at the competition and price your dental exam, your braces, or your dental implants. The mistake is that we come at it from a competitive lens. We look at the market, see what other people are charging, and try to charge something similar or try to beat them a bit.
The problem is that we make price the main focal point of how we will beat the competition. When we focus on the competition, we can’t help but become like them. When we focus on the competition, we become a commodity. So the first step to escaping the commodity race, escaping price competition and price wars, and creating margins because you’re able to create value in a different way beyond price, is differentiation. Creating value by lowering your price is a very uncreative way. There are better ways to create value. We’re not creating value, we’re removing value, so it’s not really creative.
The first thing we have to do is differentiate. If you haven’t seen my video on differentiation, go check it out. It walks you through an exercise on how to differentiate your practice, how to look at the market, see the competition, and say, “This is where they are. We’re going to be over here, and as a result, we’re going to be a better choice for the people we choose to serve.”
Once you differentiate, now we can actually look into creating a price that is valuable. Believe it or not, price creates value. Price affects your marketing, and your marketing affects your price. The stronger your pricing, the stronger your marketing. If we have a terrible price, it’s going to hurt our marketing. If we have really good marketing, we’re going to be able to raise our price. If we have terrible marketing, we’re not going to be able to increase our price.
Price and marketing exist in a strange loop where one affects the other. It’s like the chicken and the egg. Which comes first? My argument is that you start with differentiation.
Here’s how price plays into the overall narrative. Your price is a shorthand. It’s a shorthand for all the functional signals and all the other things. When someone doesn’t get it, when someone doesn’t understand, how do we help them understand quickly? That’s price.
If I go to a wine bar and I know nothing about wine, how do I know wine A is better than wine B? If I know nothing about it, it’s typically going to be the price. It’s a universal shorthand.
Consider this. We’re the most distracted generation ever. We’re 50 times more distracted than our parents. Our parents were 50 times more distracted than their parents. So we’re 2,500 times more distracted than our grandparents. Our brains constantly filter signals, filtering out things we don’t care about. As a result, we lead with shorthand. We lead with a summary of what a product or service represents, and that happens to be price.
How you price affects the narrative people tell themselves about your product or service. A low price creates one perception. A high price creates another. This directly affects your marketing.
Next is alignment. When you go through the differentiation exercise, you pick two or three axes of how you will differentiate. Axes are the things people care about. One axis might be personalized care versus efficient and fast care. From there, you’re choosing how you want to be as a practice, what you want to stand for, and how you will be better for people. You polarize by choosing to be one way instead of another, being worse for some people and better for others.
Price has to align with that. Your marketing determines your price. If you choose to align with cost efficiency, that will impact your price. On the flip side, if your marketing is about high quality or luxury, that should affect your price.
The trap people fall into is saying, “We’re going to go for the highest quality and offer value by lowering the price.” What happens then is the shorthand gets messed up. The alignment breaks. People see it and think, “There is no value.” We assume people will be rational, take time, and figure out how valuable the product really is. That’s not what happens. People are irrational. We conserve attention because we’re distracted. We rely on shorthand, and it must align with how you present yourself or it becomes confusing.
Imagine if Rolex was $100. You would assume it’s a scam. It’s out of alignment. On the flip side, if you promote yourself as cheap and cost-effective but your price is expensive, that’s also out of alignment. Or if you position yourself as cost-effective, attract people who value that, and they walk into marble floors and a $20,000 front desk, the narrative breaks. They’ll assume what they were told isn’t true.
Perfect pricing is aligned with your narrative. It allows people to quickly understand what your product or service represents. So to begin pricing properly, first differentiate. Then create alignment and let price act as shorthand for the rest of your marketing.