You are probably pricing your products and services incorrectly.
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This article was translated from our English edition.
The opinions expressed by the collaborators of Entrepreneur they are personal.
Successful entrepreneurs generally move so fast to get to the next big thing that they usually just come up with a price that seems fair to them and run with it. Or they look at their competitors’ prices and take the “approach Goldilock“(not too high, not too low). Or they calculate their costs, add a desired margin, then keep their fingers crossed and hope for the best.
Don’t worry, we’ve all done this at various times throughout our business journey.
Fortunately, there is a much more strategic approach to pricing that will help you sell your products and services at a price that your customers will love and that will be profitable for you.
After all, you’ve worked hard to develop a product that solves a big problem for your target market. Now is the time to make your customers happy and increase your income.
1. Price based on a “true value” comparison
Let’s say you recently started a Keto-based coaching company to help people lose weight. You’ve put together a list of potential clients you’ve been carefully building a relationship with over the past few months. Now you’re ready to bring them your first product – an inspiring 6-month 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 ditch their elastic waist jeans and have the confidence to start dating online? What good is it that your weight-related health problems, like high blood pressure, are a thing of the past? One hundred thousand dollars? One million dollars?
By asking the question and talking to potential customers about how they value it, establish real 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 it is most likely higher than what you originally thought you would charge. Just as important, you are now armed with powerful messages to use in your advertising.
For example, is losing 100 pounds and being able to throw the ball to your child without feeling like you’re dying worth $ 297? Of course yes! Now your price is a bargain because the value you offer is much higher.
2. Use a micropricing strategy
Let’s say you have the option of buying a single bottle of beer or a six-pack. When you buy a single bottle, it is more expensive to buy them individually than the price per bottle as part of a group of six 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 much more appealing. This is a great pricing strategy for first-time customers because it reduces their fear of making the wrong decision and gives you the opportunity to give an amazing first experience so that the customer will want more.
3. Use “premium prices” to make discounts
This is my least favorite pricing strategy because people generally implement it unethically by “inflating” a higher price (which no one would pay) and then offering a generous discount, which ends up being the price they would expect to pay. However, this works, which is why many large stores do. This is a powerful pricing strategy for a reason. You get a lot of customers at the door, but don’t use it too often because you effectively condition your consumers to never expect to pay full price again.
I just gave you three solid pricing strategies to start implementing in your business, as well as pitfalls to watch out for. Now you can leave the guesswork to your competitors and start testing them!