Do you think you can’t charge a higher price? do you think charging more will get you fewer clients and thus lower revenue? do you think you need to have a super well-known brand to charge more?
I’m sorry to tell this to you, but you’re wrong.
If you want to build a profitable business, you need to spend some time working on your pricing. You can experiment with different price levels and see how it goes, but never underestimate your worth.
Let’s see how to find the right price.
Smaller is bigger
I firmly believe having a smaller niche is better than having a big one. Especially, because with a smaller niche you can charge a higher price.
I know it might sound counterintuitive, but when you’re working in a big niche, you’ve got lots of competitors, and with lots of competitors comes a battle to continually lower prices.
If a niche is so big to attract lots of competitors there will certainly be some who won’t be able to compete on quality and so they’ll compete on pricing which will eventually drive prices lower for the best products, too.
Instead, in a small niche you’ve got two big advantages: there’s obviously less competition which will allow you to set a higher price because there aren’t many alternatives; and with less competition — and if you’re providing real value to your audience — it will be easier to establish yourself as an authority, which will allow you to ask for a premium price.
It’s easier to sell less for more
The obvious consequence is that if you can charge a higher price, you need to make fewer sales to build a solid business.
Let’s say you want to sell shoes. You could sell very cheap shoes mass-produced in China, or you could focus on premium handmade shoes.
One is not necessarily better than the other, except that I think one is.
If you sell cheap shoes, let’s say for $15-20, you need to sell a shitload of shoes to make some money!
1,000 shoes? not enough. 10,000? still not really enough, but it’s a start.
With high-quality handmade shoes, the kind you can sell for $500, it’s going to be different. You’d need to sell fewer shoes. And with that, you’d probably be reducing your overhead, thus have fewer expenses: to sell 400 shoes, you don’t need to put in the same effort as to sell 10,000.
I’m not saying you can’t make good money selling cheap products. Walmart does it. But at what scale?
If you sell more expensive products, you get to choose the kind of customers you want to have, you’ll have to market less aggressively and it’ll be easier to build a solid brand.
Your customers will value your product more
Another added benefit of pricing higher is that your customers will usually value your product more.
I didn’t do an experiment, but I’m sure if you sold the same exact product to two different persons, one paying a low price and the other paying a high price, they would use and perceive the product in a different way.
And who do you want to be? The business whose product is valued or the one whose product is overlooked?
Remember to deliver the value
And don’t get me wrong, I’m not saying you should price your product higher no matter what product it is.
If your product has no real value in it, then it should be cheap. Or even better I wouldn’t even try to sell it.
But if you spent the time to create a great product, with tons of value, which solves a pain your audience is having, then you should price accordingly.
Whatever you decide to do, never forget that in the end, what matters is your customers. And you need to care about your customers, you have to make sure you deliver the best value you can.
And once you do this, you’ll be able to ask for a higher price.
Without value, there’s no product. And if there’s value, the price should be right.
Don’t think nobody is going to buy if your price is high because that’s not true, you just need to explain to your potential customers what’s in it for them, why they should care, how your product will make their lives better. This is what people care about, the price is important, but it’s an afterthought.
A word on discounts
And while we’re talking about pricing, let me spend a word about discounts.
Everybody likes to get a good discount, right? So you should offer discounts on your products, right? No.
While it’s true that everybody likes to get a discount, I also think that nobody likes to buy something full price and after a month discover you offered it for 50% less. They’d feel betrayed.
On top of this, if you teach people you offer discounts every now and then, you’d be telling them something else, really: “Don’t buy my product now at full price, wait for a couple of months until I discount it!”
And guess what? This is going to impact your bottom line tremendously, because now everyone who’s not 100% sure they want to buy, and also those who are 100% sure but are ok with waiting some time before they can get your product, those people are going to buy later when you’ll offer a discount.
And the people who bought your product right away, paying full price, are going to feel a bit screwed when they see your product offered at 50% off.
Finally, in my experience, offering discounts tends to attract the wrong kind of customer. And those customers will be the one who’ll need more managing: contrary to what you might think, they’ll be the ones who will expect more, they’ll be the ones complaining about every little glitch in your product and they’ll be the ones turning your business into a nightmare.
What you should do instead is to reward loyalty: tell people on your email list about your product and give them a chance to buy it early at a reduced price. Set a deadline and tell them after that date the price is going to go up and never come back again.
It’s still a discount, but it’s what is called early bird pricing: you reward people on your list, so people who’ve been following you for a while, and only if they act quickly. No more discounts after the deadline.
Don’t regret your pricing strategy
So give some thought to your pricing, don’t just assume you’ll have to set a low price because you haven’t built a name for yourself, yet.
Always price for value: if the client is getting lots of value, then you should set a high price, if the client is getting no value, you shouldn’t even begin to sell the product and get back to work.
Remember, if your product helps your client get more clients, reduce their expenses, free up some time, etc, then it will make sense to price it accordingly.
Don’t risk setting a low price and then see client avoid your product because they have a feeling it’s a cheap product.
Are you pricing your products too low? are you afraid of increasing your prices? Tell me more about it!
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