Mastering the Art of Strategic Pricing

Hello and welcome to Mastermind Mastery, the podcast for professionals who want to create and run successful peer advisory councils, or as we call them, PACs for short, or they're also known as peer groups or business mastermind groups. I'm your host, Tina Corner Stolz, founder of Elixir Council, where I've been in the industry running groups since 2005 and now help those like you with education, certification, and support wanting to do the same. At one time, I ran 10 groups, nearly 100 members, and sold my groups For a Good Multiple and recently released my second book, Your Seat at the Table: How to Create and Run Your Own Peer Advisory Councils, published by Forbes, and grateful to you that it's an Amazon bestseller. I invite you to join each week where we share strategies and techniques to successfully launch and become a master of running your PACTs. You'll hear insights, perspectives, dos and don'ts, learn from my and my guests' mistakes, successes, and get the inside track to key takeaways. Each time we have a guest, we'll be having a bit of fun. So are you ready? Let's get going and dive into today's episode. Hello everyone, it's Tina here. We have a special event coming up in November in St. Petersburg, Florida. It's the first ever national open conference for anyone wanting to run and already running peer groups or mastermind groups. Join us for 2 days, VIP reception with the keynote speakers, and a full day of upping your game and running groups with peers like you who are experienced or just want to get more knowledge before starting their journey and creating their first group. This conference is for you if: 1, you're already running groups and you want to be better, or you want to be the best. You want to learn from other experienced moderators and get inside tips to the latest meeting techniques. Or 2, if you're thinking about creating and running groups and want all the knowledge on how to do it right and learn from veterans, then this conference is for you. But time's running out. There's only a few VIP tickets available and the conference has limited capacity. So as soon as we hit it, we're going to have to close registration. So join us in downtown St. Pete, November 9th through the 11th. It's the best self-development gift you can give yourself. And don't you want to be the best at running groups? See you in November.

Hello everyone. Welcome to Mastermind Mastery. This is the podcast for you. If you are looking to create and run successful peer advisory councils, mastermind groups, I'm Tina Corner Stolz, your host. And today's episode is about pricing. So how do you make decisions relative to pricing? How do you do rate increases? Do you discount, don't discount? And how much do you charge for your membership? How do you figure all that out? And I love this topic because It is just not something that's talked about, and I think it's overlooked. And I think people don't actually price relative to what their value is. So I'm going to give you some hacks today, some tips on how can you increase pricing without even notifying anybody. You know, it's never too late to raise your pricing. We're going to talk about the real cost of discounting, and I want to make sure you truly understand the impact of that. When to do it, when not to do it, all those things. And we're going to talk a little bit about, you know, what if somebody wants you to do something different for their membership and how do you handle that and deciding what you're going to charge, all of that. So let's kind of get, get started right out of the gate. And I'm going to show you, share a couple of stories as well. And I'm also going to share a tool at the end of the episode you can get in the show notes called The Power of One. And that's a little bit of what we're going to talk about. So let's talk about pricing right out of the gate. One of the things that we teach in our academy, very first thing out of the question, there's 27 decisions that you need to make before you even have one conversation with a prospect when you're starting your groups. And one of those 27 decisions is pricing and what are you going to charge for your membership. And so how do you decide that? So first of all, we're big fans of market-based pricing. Okay? And it—

that—

what does that mean, right? So first of all, what it means is, is that you got to see what everybody else is charging relative to you and what you're going to do in your market. So whether you are in-person groups, virtual groups, or you're a hybrid, what is it that your closest competitors— what are they charging, first of all? So it's not only what are they charging, But you have to know based upon what encompasses that price that they're charging, the length of the meeting, obviously, right? You know, the frequency. Um, it could be also relative to the type of person in the group. So you might have a less sophisticated group, so therefore pricing might be less sophisticated. A more sophisticated type of member, depending upon the type of member that you want, then that's going to command a different price as well. What else are you bringing to the table in regards to tools or assessments or your level of expertise or the meeting structure? All it gets wrapped into what you charge. So it isn't as simple as, well, my competitor ABC down the street is charging this. You have to really understand what is all baked in to the offering that dictating their pricing, right? And you're going to have your own offering. So when I say market-based pricing, it's as simple as is that if I'm in Kansas City, Missouri, versus if I'm doing a group in Blacksburg, Virginia, I might be doing the exact same thing. But in Blacksburg, it just isn't— I'm not going to be able to command the same pricing I could in Kansas City. It's just because of the market dynamics. There, right? They're not used to paying, right, Kansas City pricing. Or you can use something like Washington, D.C. pricing, right? So lawyers, as an example, I can remember this vividly that there's a law firm I know so well in D.C. Their average rate was $700 an hour. Very good at what they do. Obviously, they had an office in Roanoke, Virginia, and that attorney doing the exact same work could not command $700 an hour, right? His per hour price was way less. In times it was $500 or $400 an hour, but for the exact same type of service. That's just because of the market, right? So first you're going to look at all of that from the standpoint of the type, the frequency, and Also, when I say frequency, it's both the length of the meeting, the frequency of the meeting, and the type of member you're going to have and the market you're in and what you're offering. It all gets wrapped into your pricing, right? I will encourage you— this is hack number 1— is that as you start out, and even if you've been doing this for a while, is that with every single new member conversation, You raise your pricing a little bit more and you test it. So for example, if I'm getting a member for $1,000 a month, I may, in my next conversation with a prospect, it's now not $1,000 a month for membership, it's $1,100 a month for membership. So I push the envelope to see what the market can bear relative to what my offering is. And if you really truly believe you're worth it, you will get it. Okay? So, so much of this is a mindset that you're worried about. You know, I'm, I'm not gonna get that pricing. People are not gonna become a member cuz they, they won't pay that. You never know until you ask.

Okay?

So I always encourage you to keep inching your pricing up, even if it meant instead of $1,000, I say, oh, it's $1,000. $25.

Okay.

And just see. So nobody's gonna not become a member over $25 a month. They're just, they're just not.

All right.

It'll be a different reason if they don't become a member. So my encouragement to you, hack number 1, is increase your pricing a little bit every single conversation you have, and you're eventually gonna find where it is you max out that you're comfortable with. Okay. Some of you may say, but wait, how can I do that? And not all of my clients, i.e., my members in a group, pay the same pricing. Aren't they going to wonder and find out? And the answer is no. In the countless years I've been doing this, no member ever has come to me and said, Tina, the member I sit to every month pays less than I do. Why is that? So first of all, they don't talk. Number 2, if they did speak, it's always grandfathered in. And what I say is, you know, last in is going to be paying the higher price, right? So you do have something that you can say, which is, you know what, I increase my pricing a little bit at a time. So as you come in, everybody else around the table, yep, is going to be paying less. But the person that comes in behind you will be paying the same or more than you. So that keeps everything above board and your integrity in place. So you could be fine. Okay, now what happens in regards to how do you increase your pricing? So I read this years ago. I wish I could tell you where I read it so I could give them credit, but what I read is, is that today we put in all of our membership agreements that every quarter there's a 1% increase. It's automatically built in. So hack number 2, in your membership agreements, build in your rate increase automatically. Okay? So you've notified them, it's when they're becoming a member, and it's done, and you never have to mess with it again. So 1% a quarter, never had anybody question it. So here's what happens. Is that every quarter their monthly fee goes up 1%. 3 more months later, it goes up another 1%, and it just continues. So it is a very subtle increase. Having it quarterly is way better than if I did it annually because quarter, it's, it's smaller, but it compounds, and it means more than waiting to do something once a year. But my point is this: you bake it in, you have decided it, what it is, you've already notified them because that was the membership agreement. You never have to do that again. Because the one thing that I will guarantee that the majority of you guys out there listening right now do is that you want to increase pricing, but you just hate thinking that you have to do the notification. Then people are going to question their membership. You might lose members, or you have to have this difficult conversation as to why, and then you have to justify it. And then, you know, and then, and then, and then, and it's just not a good experience. It's very stressful and you worry about it. And I'm saying eliminate it. You never have to deal with that. Okay, hack number 2: build in your price increase in your membership agreement. I'm a huge fan of the 1% quarterly. If you don't want to do that, do some other percent at some other interval, but just build it in. Okay, so that's number 2. Now let's talk about discounts. I am not a fan of discounting. Okay, discounting is extremely costly, and you may, if you do discount you do it, that it happens once. It's not an ongoing discount that is received and that it just hits your bottom line once. It doesn't hit your bottom line in a recurring way. Okay, so discounting is what I call one of the most destructive things to do to your business, even though you may think, well, isn't it better to have this member than not have them at all? No, it's not. So why is that? So let me work on your mindset for just a minute. Many times discounting has to always do with you're trying to close a deal, right? And so I'm gonna give you, um, a story by my dad because when you think about pricing and how you increase profitability of your business, There's like 4 ways to do that. One is you raise your pricing, right? That increases it. You sell more. So that means selling more members, right? That's a way to increase your profitability. You reduce your cost. That's another way. And whether your costs are fixed or variable, right? So the issue in what we do, okay, in groups is that you have limited number of seats around the table. Okay, so if you discount a member's dues, you've now discounted permanently their seat at the table. You cannot make that up by selling another member because you only have so many seats around the table. So if you're putting a group together and your max in the group is 12 and you're filling that 12th seat and you discount it, you've now permanently discounted that member in that seat number 12. And you cannot make that up, right? So you have to think that way. It's not like you have unlimited sales of a group that you can do. So what is the real cost of discounting? So the story— I'm going to use my dad, and I'll never forget this, and it's what I call true learning, um, that academic books can never teach you. And he sold as he was in his latter part of his career, and this was actually right before for, um, a year or two that he had to stop working, and he was in his 80s. So, um, my dad was on the phone, and on a cell phone. He was in the passenger seat. I was driving, and I heard him get a business call, and I actually knew about who this person was on the other end. And this individual was one of his long-standing customers, and his name was Jimmy. Dad had obviously quoted him the price for a concrete mixer truck. Okay. And I could hear Jimmy and Jimmy goes, hey Joe. And you know, he goes, hey, I want to talk to you about, you know, this truck that you priced. And he goes, I just, I'm really interested in everything. And I know that you've asked $44,500 for it. Dad goes, yep. Price is $44,500. And Jimmy goes, well, What about $39,000? And Dad, without skipping a beat, goes, oh, Jimmy, it's $46,500. And I thought my dad's lost it because he first quoted $44,500. Jimmy said $39,000. What you're typically taught in school is you negotiate to the middle, right? So he would have negotiated from $44,500 somewhere in the middle to meet Jimmy's $39,000 offer. But that is not what my dad did. My dad instead raised the pricing. Instead of $44, he said higher price. And I thought he had lost his mind. Like, oh my gosh, my dad cannot be doing business this way. And what else is he messing up? You know, he's getting older. And my head started to go down a rabbit hole about maybe what I needed to do in a conversation. But that is not what happened. As soon as Dad offered the higher price, Jimmy starts laughing and he says, Joe, all right, $44,500. So my dad did not discount. He had a fun way of making that point. Jimmy respected the value of that truck and still bought it at full price. And my dad got full price. He didn't feel like He needed to discount to get rid of the truck. So my point being is, what is the real cost of discounting, and how can you prevent when somebody really is trying to get a deal from you that you don't need to do it? So number one, when somebody asks for a discount, you can just say, I appreciate you asking, but the price is the price. And you'd be quiet and you shut up. And I will tell you, the majority of the time they will still become a member of yours at price you quoted them originally. If they do not, there's a different issue that you have to uncover. Okay, so what's the real cost of discounting? I'm back to that. If you guys have ever heard the power of 1%, this is what I'm going to put in the show notes is a link to this Excel spreadsheet. It is phenomenal. And it's a spreadsheet that what's the power of 1% when you increase your sales price by 1, you decrease your cost by 1%. Okay. You increase your sales by 1.

Okay.

And you decrease your other bottom line costs by by 1. So the effect is, is actually a 20-some-odd percent increase to your profitability from doing these small tweaks of 1% across the business. So what happens if I discount my sales 1%? It's not 1% off the bottom line. It actually equates to 20-some-odd percent off the bottom line. Of your sales pricing and a net negative overall 9%. It's a compound. So anytime you think that I will just discount this membership ongoing, so instead of charging $1,000 a month, I'm going to charge this person $950 for the rest of the lifetime value of that client, you're missing out $50 times every single month they're a member that you lost out. And was that necessary to do? So my point being is the real cost isn't minor to you, it is major. When your member, i.e., prospect before becoming a member, gets that deal, they really went out big time in the long run. You do not. Okay. So discounting, be extremely careful about doing it and you're way better off giving a one-time discount instead of something that goes over the lifetime value. One of the things that I recognized that I didn't recognize the, the true impact is that when I first started out, I had a member who talked me into this. And on the surface, it seemed like a no-brainer. And the member said, you know, can I get a discount every time I refer you somebody that becomes a member? And I'm sure, like, sure. She's like, I would like a $50 a month discount every time I refer a member. I'm like, okay, I'll easily do that. The next thing I know, she was a non-dues-paying member. So in some ways you can kind of argue, but I got all these other members at full paying dues, you know, cost of acquisition was lower. So really, you know, it was that worth it? Well, when you think about every month I wasn't getting paid by her and she was taking a seat at the table, it was an expensive cost of acquisition. So you just have to look at it all. Okay. And what's the right decision for you? What I'm getting at is take discounting seriously because it does have a bigger impact to your bottom line of profitability than you would think. And that is why when you practice the combination of every conversation, just raise what your price is a little bit at a time. Matters over the course of a year. Don't discount because that matters over the course of the year. You will suddenly have a really profitable, okay, peer advisory group business. That with that extra cash, you can do something for your members. You can treat them to a social if you want. You can bring in a speaker. You can do all kinds of things or not. But the point is, is you will have the cash to make those decisions. So I hope this is helpful in regards to pricing. You're walking away with getting some answers to the question of, first of all, how do I get a regular increase? That I don't have to ask my members about all the time. The rule of 1%, how that compounds, the power of that, how to figure out your market-based pricing. And, uh, this will all lead you to more money in your pocket that you can do great things with. Okay, so until next week with our new episode, it's great to spend time with you guys on pricing. And until then, go make it happen.

Hey, moderators of groups, thank you so much for listening to today's podcast. To get access to today's show notes and exclusive content and resources, visit TinaCornerStolz.com/podcast or LXcounsel.com, where you can also become part of an exclusive online community, attend our academy, or get free resources, templates, templates, checklists, and more. And you can even contact me there as well. So if this episode resonated with you and you know someone who can also benefit from listening, please share with them by taking a screenshot and even posting on your social media. I also love reviews and appreciate hearing from each of you, those actually doing this wonderful work. Please tune in next week for another episode of Mastermind Mastery. And I'll close by sharing something my mentor did after every learning moment. He shared a shiny pebble from his pocket with anyone he passed knowledge to and asked them to forward that pebble—knowledge—on. So now I encourage you to go pass on a pebble—the takeaways you learned today—to either your existing groups or fellow peers. Now, go make it a great one.