You’re probably pricing your products and services the wrong way.
4 min read
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Successful entrepreneurs are usually moving so quickly to get to the next big thing that they typically just come up with a price off the top of their head that they think sounds fair and run with that. Or they might look at their competitor’s pricing and take the “Goldilock’s approach” (not too high, not too low.) Or they figure out their costs, add in a desired margin, then cross their fingers and hope for the best.
Don’t worry — we’ve all done this at various times along our entrepreneurial journey.
Fortunately, there’s a much more strategic approach to pricing that will help sell your products and services at a price point your customers will love and that’s profitable to you.
After all, you’ve worked hard on developing a product that solves a big problem for your target market. Now it’s time to make your customers happy and grow your revenue.
Related: Why Some Prices Are More Right Than Others
1. Price based on “true value” comparison
Let’s pretend that you recently started a Keto-based coaching company to help people lose weight. You’ve gathered together a list of prospective customers that you’ve been carefully building a relationship with over the past few months. Now you’re ready to offer them your first product: a 6-month inspirational weight loss program for people who specifically have 100 pounds or more to lose.
If customers buy your program and lose 100 pounds, what will this mean for them? How much would they value being able to throw out their elastic-waisted jeans and having the confidence to start online dating? What is it worth to have their weight-related health issues, like high blood pressure, be a thing of the past? A hundred thousand dollars? A million dollars?
By asking the question and speaking to prospective customers about how they value it, you establish a true value for your product as seen through the eyes of your target market. Now the price you decide to charge for your course is a mere fraction of its true value, but very likely higher than what you originally thought you’d charge. Just as importantly, now you’re armed with powerful messaging to use in your advertising.
For example, is losing 100 pounds and being able to throw the football to your son without feeling like you’re dying worth $297? Of course it is! Now your price point is a bargain because the value you are delivering is so much more.
2. Use a micro-pricing strategy
Say you have the choice to buy an individual bottle of beer or a 6-pack. When you buy an individual bottle, it works out to be more expensive per bottle than the per bottle price as part of a 6-pack. But if you’re new to the beer brand and just want to try something different, buying a single beer at $3.99 instead of six of them at $24.99 sounds a lot more appealing. This is a great pricing strategy to use for first-time customers because it reduces their fear of making a wrong decision, and it gives you the chance to provide an amazing first experience so the customer will be left wanting more.
Related: A Simple 3-Step Approach to Successful Social Media Advertising
3. Use “premium pricing” to discount from
This is my least favorite pricing strategy because people usually implement it unethically by “puffing up” a premium price (which no one would actually pay), and then offering a generous discount, which ends up being the price you would expect to pay. However, this strategy works — which is why many big box stores use this pricing strategy. This is a powerful pricing strategy for a reason. It gets a lot of customers in the door, but don’t use it too often because it effectively conditions your customers to never expect to pay full price again.
I’ve just given you three solid pricing strategies to start implementing in your business, as well as traps to watch out for. Now you can leave the guesswork to your competitors and start testing these out!
Related: Entrepreneurship Is a Journey in 7 Stages. Enjoy The Ride.
