I can make a room full of business owners change their minds about their pricing power with a simple game that takes two minutes.
First, I ask, “What’s the current price for a gallon of gas?”
Every time, they all come within a few pennies of the right answer. Everyone knows the price of gasoline.
Then, I ask a second question: “What’s the current price for a bottle of hot sauce?”
This time, no one answers. Their silence begs another question: “Who cares?” And that’s the point. The price of hot sauce doesn’t make any difference. It’s beneath our notice.
When pressed, the average guess is three times the actual price of hot sauce. Why do we know so much about the price of gas and so little about the price of hot sauce?
Because we buy gas all the time. We drive past a dozen gas stations per day advertising the price. If the price of gas goes up, we all notice it, talk about it, and see it in the news. If the price of gas goes up, it has a noticeable effect on many people’s personal finances.
If the price of hot sauce goes up, no one knows. We might buy it once a year. If we run out, we just go to the store and buy more. If it’s $1 or $3 or $6, it makes no difference to our personal finances or anything else. We don’t give it a thought.
Why does this matter? Most businesses have both gasoline and hot sauce in their portfolio of products and services. But they treat everything they sell like gasoline, afraid that if they raise their prices on anything that their customers will leave them. It’s only true on the gasoline, not the hot sauce.
Don’t just focus on the gasoline. Where is your hot sauce?
Take a good look at everything you sell. Find your hot sauce. Where is the price sensitivity very low or non-existent? Finding your hot sauce is one of the fastest, low-risk ways to increase profitability without risking sales volume.
Test this out by charging more for just one of your ‘hot sauce’ products or services, and let me know what happens.