Pricing is an important part of your strategy. We all know it. Still, when it comes to pricing, many business owners stumble and fall right into the trap of setting their prices too low.
Don’t get me wrong. If your business model is ‘low price – high volume’, then that’s perfect. But if you’re setting your prices low for another reason, then chances are you’re doing more damage to your business than you might think.
Here are some very common reasons for going low:
- You’re just starting out. No one knows about you. So, to get that client list going, you offer prices that your audience can’t resist.
- You use what I call “subjective pricing”. You base your prices on your sense of self-worth, not on the value that your clients are actually getting from you.
- You’re in a slump and lower your prices to get yourself out of it, instead of working on your offer or your marketing.
- You suffer from money blocks. The belief that money is “bad” makes you shy away from it and set your prices way too low.
These reasons have one thing in common: they are all based on FEAR. Fear of not being good enough. Fear of not being able to make it. Fear of not being worthy. Fear of being untrue to your values.
But here’s the problem: fear doesn’t make good business sense. Letting your emotions – not your business goals – guide your price strategy, will create incongruencies that will confuse your client. And confusion is NOT the way to get more sales!
Case in point:
I had been subscribing to the newsletter of this mindset guy for a few months. At first, I liked him. He is very subtle and not at all “salesy”. I immediately sensed that this guy is here to help. Great.
But. As the months went by without a single offer, I started to wonder how this guy makes money. I mean, what does he actually sell? And when he finally made his offer some weeks ago, it made me completely lose confidence in him. Why? Because he priced it so low!
The product was something I would have considered investing in. But the price: 9 USD! Nine dollars! Nine! I immediately sensed that something must be wrong. That this guy is a scam. That he doesn’t know his stuff. And that his view on success is so different from mine that it doesn’t make sense for me to follow him.
Seconds later, I hit unsubscribe.
Compare this with another expert that I’ve been following. Also very helpful. Also very friendly. But not at all subtle when it comes to selling: in fact he early on stated that he was going to try to sell me something at one point. And I appreciated that. To me, that shows honesty and integrity. It shows confidence in your offer.
The price for this second guy’s offer: 1,997 USD. And here, I struggled with my decision. I was THIS close to buying. He had made such a great sales pitch that I was 99% convinced. And most importantly: that 1% which made me hold off my purchase didn’t have ANYTHING to do with the price.
So what are the lesson here? Well, the two most important ones are:
1) It’s not about the price, it’s about the VALUE. It’s being able to talk confidently and clearly about WHAT you’re offering, and to focus on what the BENEFITS of your offer are. Not shying away from a higher price level – but being able to explain why it’s worth it.
2) You need to be congruent, consistent and clear. If you’re in the business of helping people, you need to help yourself first. You need to walk the talk. And if what you’re offering is high quality, then your price needs to reflect that quality.
Pricing has so much to do with psychology. We make assumptions on quality based on price. We decide if we want to be part of a tribe based on price. We make decisions on something’s (or somebody’s) worth based on price. Even our levels of post-purchase satisfaction depend on price.
So, the way to get more customers is not to lower your prices. It’s to provide PRICE LOGIC. To match price with quality – and to make that link incredibly clear to your audience. If that logical link is missing, then the minds of your customers will try to create it themselves. The way they’ll do that is by making assumptions around quality and brand association. And those assumptions will impact their decisions.
What are your thoughts around pricing? How do you set your prices? What challenges are you experiencing? I’d love to know! Send me a message or comment below.