Setting your price? Pricing strategy is all in your head.
People get all bent out of shape over pricing their products. They make the mistake of coming from within themselves and what they think they would pay to purchase something instead of letting their target market determine the price. Nearly all of us do this. Pricing really should never be set by the merchant or the service provider’s whims. It should be tested by the merchant based upon marketplace response. The only way to know price for sure is to test. It is all in what the people you’re trying to sell to think.
Here is what happens when we price based upon what we think we would pay: you price too low. You think dumb, inaccurate thoughts like, “Who am I to price this high?” Or, “No one would pay this much,” when in actuality, some would. If we know for certain that some would pay that much based on proof, based on the data, and we don’t price our products and service accordingly, then we’re doing ourselves — and our market — a disservice. Price, it turns out, is all in our head.
Marketing legend, Joe Polish, says, “When we pay, we pay attention.” The money invested in the object, course, service or advice makes it more likely for us to pay attention to it. We may not act on it, but we’re more likely to pay attention to it. Free, while often downloaded, is also often ignored. When we pay, we remember more. And when we pay more, we feel like there is more value. We pay less, we expect less value. Your market very likely feels, thinks and acts the same way, even if you think your market is different.
Don’t feel bad about charging higher prices. Be proud of your higher prices. Tim Cook isn’t embarrassed that Apple charges far higher prices for their laptops and mobile devices than the competition. Tesla isn’t embarrassed they charge north of $100,000 for the Model S and the Model X. Both companies provide exceptional experiences in their products and feel they can charge accordingly. They are proud of their high prices. They show it by creating exceptional things, marketing them well, and rarely discounting. We should learn from their methods and pricing strategy.
Testing pricing is so easy with today’s tech. All you have to do is perform simple A|B split tests where one is your standard, control pricing. The other is the one you’re testing response on. Today’s optimization web apps can handle this work for you with no problem. The great news? After a few dozen tests, you’ll know. You won’t be guessing on setting your price.
Do not based your price decisions on your self-esteem or by pulling price out of thin air or by what your father-in-law told you. Price is widely elastic. Look at what people are able and willing to pay in your market. Look at your experience. Look at your expertise. Look at your bonuses. Look at the problem-solving. Look at how you make people feel. Look at your energy. Pick a high price point and then get to testing. And if you have to decide between a higher and lower price, take the high road and pick the high one.
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