Thinking. About Business.
Price Your Business to Sell
Buyers ignorance = seller’s dilemma
By David Chopko
You want to sell your product, service or business. You know it is worth five times more than any offer you’ve
gotten. Or alternatively stated, those crooks (prospective buyers) want to steal it for 20% of its value. What should
you do? How should you tackle this pricing problem?
Economists teach us that the worth of any thing is equal to the amount a buyer is willing to pay. More appropriately
stated the worth of something is the highest price that an educated buyer is willing to pay. In the open market, the
worth of an object is the highest price one person or group of people, acting as one bidder/buyer, is willing to pay
at one set point in time. Therefore, by the classic definition of worth, maybe the people aren’t stealing your goods
or business. Maybe it’s worth only 20% what you think it is worth. To get the highest price for anything, the seller
needs a large group of buyers with both the willingness and wherewithal to purchase. A seller really can’t control
the wherewithal to pay of his potential buyers. But controlling their willingness to buy is something different. The
seller may not be able to control this, but he certainly can influence this.
So back to your first question, is your “saleable good” worth five times your current best offer and if you still believe
it is, how do you get your asking price? Step one—expand your group of potential buyers. Perhaps no buyer, who
has knowledge of the product or service, values it to the “correct” level today. If you broadened the current pool of
buyers, this might change. You do this by marketing/advertising. You tell more potential buyers about your offer
to sell your product or service in the hope that one of these contacted will value your goods more than your current
buyers. This means that you can’t advertise your product to the same group to which you’re advertising today.
You need to change who you are targeting. From a practical standpoint, this likely requires you to target a different
demographic. The difference may be their age, sex, location, social status, wealth, educational level, etc. What you
want is someone from this new group to value your product or service as you do (& you think others should).
Your second point in the battle to get your ‘fair’ price is to educate your buyers. If your potential buyers knew what
you know, logically they also should see this same value and hence understand its worth. You need to teach this
group what you think they need to know.
Teaching a group is far more challenging and complicated then it might sound. First, you must decide who to teach.
And you don’t necessarily only have to or even want to teach only those with the ability to pay. The cereal companies
learned this lesson many years ago. They taught our children to request and plead for certain cereal brands knowing
full well that no child would ever purchase a box of cereal. Is this different than attempting to influence/teach the
doctor at Lancaster General or Hersey Medical, who wants the hospital to buy some new piece of specialized medical
equipment? If she wants the equipment, she will negotiate with, (plead with) the hospital to buy it. If the medical
equipment manufacturer thinks this doctor may be successful in her efforts, and it wants to sell this latest, greatest
piece of equipment, it may promote its products to the physicians and not the hospital.
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Alternatively, in this equipment scenario, the target may need to be much broader than only physicians. It also
could/should include hospital administration and even those who’ll need to secure or provide the funds to buy the
equipment. For example, what if, by some remote chance, a wealthy local benefactor is convinced that if his favorite
hospital had this special equipment, it would make a meaningful difference in the quality of his life. Given these
facts, then maybe this is the only person, who needs to be ‘educated’. But what if this wealthy potential benefactor
is not scientifically astute enough to comprehend the increased value this new equipment will bring to him and he
can’t (won’t be able to) understand the science behind the equipment, even if this is clearly explained to him. Then
the seller needs to ‘educate’ someone the benefactor (potential funding source) will trust, assuming that this someone
has the ability and willingness to convince the potential benefactor that he’ll be better off if the purchase is made.
Getting back to the initial challenge of finding someone to pay you what your goods are worth, the goal then can be
expanded to find either a buyer, who values the goods/services as you do or to find someone, who can persuade a
potential buyer to value the goods as you do to purchase them.
As noted above, that someone is a person already possessing the knowledge you want him to have or a person who
can be ‘taught’ about the value of your product.
You’ve likely surmised that “teaching” in this article is the code word for ‘marketing.’ We use marketing to convey
the product’s attributes to the target audience and to ‘educate’ potential buyers or purchase influencers. Once that
buyer knows what we know, then we believe that he should value the goods/services as we do. If communication
was free and everyone lived in this world to please us, then everyone would be willing to expend the time and the
energy/effort to fully learn about your product. Also in your perfect world, you can send your message to each
individual in a way that she could most easily understand and send it as many times as needed to accomplish the
mission. But this isn’t the world in which we live. You have limited funds and most people don’t want to take the
time or expend the mental energy to understand more about your product. You face the standard challenge we all
face. Your challenge is to determine
• What your message to educate the target audience should be
• How to send this message to get the response you seek in the time frame you want
• How often to send this message
And to do all of this in the most cost effective manner spending just the correct amount so that the long-term ROI
for this marketing investment is maximized.
Circling back to your initial dilemma, how to get a fair price for your product or service, it appears that you don’t
have a pricing problem. You have an education/marketing problem. Your potential buyers won’t offer you what
you want because you haven’t shared with them all of the value that your product offers. Until they know as much
as you do, or at least enough to value the product as you believe it should be valued, they’re highly unlikely to offer
that ‘fair’ price.
Note to readers: I’m searching for a unique pricing situation which can be developed into a publishable college
pricing case. Ideally this would involve a new product but it could center on an existing product or product line. If
you are aware of such a situation or your company is personally facing such a challenge and you’re willing to share
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relevant background information on your industry, company and product, I would welcome hearing from you.
David Chopko ([email protected]) teaches pricing and market planning in the University of Delaware’s Lerner Graduate
School of Business and helps small businesses develop and implement pricing strategies.
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