Marketing Mistake #8
Not Charging The Perfect Price For Your Product Or Service
Based on my experience, I can say quite confidently that you’re likely not charging the right price for your product or service.
Pricing is the quickest and easiest way to grow your business with significantly increased profits.
Here’s how most people go about pricing their products or services (I’m sure you’re no different) …
1. You look at what your competitors charge (many people don’t even do this simple step!)
2. You decide ‘where’ you want your customers to view you – are you ‘low priced,’ ‘middle of the road,’ or ‘high end’?
3. You then price your product or service based on the results of the two scenarios above
This is what’s known as ‘price positioning,’ and to a certain extent it does serve a purpose, but what it means is you base your own prices on where you see yourself positioned in the market in relation to what your competitors charge.
You might be saying to yourself, ‘well that’s fine – isn’t that how I should be doing it?’
This is a huge and fundamental mistake.
People rarely buy on price. Sure there is a small percentage of people who buy the cheapest, but this is a minority.
What people are buying is based on 'VALUE.' And ‘price’ and ‘value’ are two very different things.
Let me explain…
As a rule, people automatically value your product or service more if you charge higher (unless it’s viewed as a commodity). The opposite is also true!
This may surprise you, but think about this simple example…
You go to two different restaurants on two different nights…
The first restaurant has a low priced menu.
Although you may think “great a cheap meal”, you will start having some doubts about the quality of the food and the service – even before you enter the restaurant.
You keep these doubts hidden until you wait ten minutes to be greeted. You pass this off as “one of those things,” but your doubts are starting to come to the fore.
You are seated at your table. The table is still dirty from the previous diners. The waitress comes and takes down your order. She has to keep asking you to repeat what you wanted. You really are now worrying. Not surprisingly your order comes and it’s all wrong, and so on.
The point here is as soon as you saw the menu the doubts started, purely because the price was low.
If you’d had a good experience then you’d be surprised and you’d definitely go back.
The second point here is this – the restaurant should charge more if they serve you well and you have an enjoyable experience (the value is greater!).
The second restaurant you go to is different – very different.
The menu is very expensive. In fact you’ve never been to a restaurant with prices so high. However you automatically think, “it must be good if they charge these prices”.
As long as you are treated exceptionally well and your food is excellent, you would never quibble about the bill.
The point is that as soon as you saw the prices you perceived the restaurant to be very good, even before you entered!
If you’d had a bad experience you’d never go back and pay those prices.
The point here is this – although the restaurant charged high prices, they demonstrated to you with their service and food why they charge high prices.
In other words the VALUE THEY PROVIDED AT THE VERY LEAST MATCHED YOUR EXPECTATIONS.
It’s exactly the same with the prices you charge. If you charge too low, your prospects will automatically think you can’t be that good. On the other hand if you charge high prices you’d better make sure your clients receive excellent value from you – because that’s what they’ll expect.
Ultimately what I’m saying is that you cannot determine how much people are prepared to pay – you must let your clients or customers decide what the perfect price is. You could be lucky and get the price right, but the odds are stacked against you.
What you’re looking for is a price point that gives you the biggest PROFIT (not revenue!), over the lifetime of the relationship.
The only way you can come to this ‘perfect price’ is by testing.
In simple terms this means having one price for the first 10 customers, another price for the next 10 and another price for the next 10. You can then calculate which price generates the greatest profit.
If your business is predominantly an online business where the majority of people buy online, this is easy to do. Not so easy offline, but still very doable.
That doesn’t mean the highest price automatically wins. What you may find is that more people buy at a lower price, which means you make more money because you get more clients or customers.
The Ultimate Principle On Value And Price
What I hope you’ve gained from this so far is that as long as you provide excellent value – people will flock to your business and pay you handsomely for the privilege.
Often many people make the mistake of thinking that price is the main issue in the mind of their prospects or clients or customers.
But what they’re missing is that if everyone is viewed by the prospect as ‘the same’ – i.e. businesses don’t take the time or effort to differentiate from others and add considerable value, the only way they can choose is based on price.
But when you add so much value to your business – substantially more than your competitors, you leave the prospect with little choice.
And often they’ll pay you much more than anyone else.
Because you’ve added so much value!
Also when a client or customer decides to leave you and turn to one of your competitors, often they’ll say, "Your price/fees are too high"...
More often than not, what they’re really saying is this…
"Your products or services are not worth what you charge. I’m just not getting value for money!"
There’s a big difference!
If you add so much value to what you offer, people are prepared to pay much more for your product or service. I appreciate some won’t. Some people are only after the best and cheapest deal they can find.
But let me ask you these questions…
“Are those people the sorts of clients or customers you want?”
"Are they likely to stay with you long?"
Hopefully you answered “no” to both questions.
You’ll be amazed at what you can charge if you start adding value by offering things like guarantees, bonuses, extra support and so on.
Build extra value and you’ll be surprised how high your ‘perfect price’ climbs!
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