You should increase your prices even if you’re not famous

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.

When pricing your products never underestimate your worth Click To Tweet

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.

With a smaller niche you can charge a higher price Click To Tweet

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.

Those who can't compete on quality will compete on pricing Click To Tweet

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.

If you become an authority in your niche, you can charge premium prices Click To Tweet

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 charge more, you need to sell less Click To Tweet

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?

If something costs more, people who buy it will value it more Click To Tweet

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.

Don't charge a high price for something which hasn't got much value Click To Tweet

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.

If you provide value charge for it, if not don't provide value don't sell Click To Tweet

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.

Without value, there's no product Click To Tweet

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.

Nobody likes to buy something full price and see it on discount a month later Click To Tweet

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.

Don't teach your audience that you're eventually going to discount your products. Don't discount them! Click To Tweet

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.

Offering discounts tends to attract the wrong kind of customer Click To Tweet

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.

The only discount allowed is early bird pricing for people in your list and previous customers Click To Tweet

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.

Always price for value: if the client is getting lots of value, set a high price Click To Tweet

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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4 Comments

  • Ed Davis 2016.05.25 at 06:54

    Hey Michele, really great article. This could not have come at a better time. I’m just now working on pricing a new product/service my company will be offering and let me tell you it’s hard. I haven’t had too much experience with value based pricing in the past and the uncertainty is difficult to deal with.

    Let me ask you, how do you put a dollar amount to the value you are providing your customers? My service will directly save customers time and money and not to mention peace of mind – but due to its high value, I’m afraid of potential customers getting sticker shock at the price.

    I’m a short term rental property expert and am launching a Home Automation service for other property owners. Check out my site for details if you’re interested!

    Reply
  • Michele Finotto 2016.05.25 at 16:52

    Hi Ed, glad you liked the article!

    As for your answer, I know value based pricing sounds hard, but really it comes down to showing your potential customers how much they can expect to make/save by using your product, or even better just tell them how it can make/save money for them without giving exact figures (because each lead’s situation will be different) and try to have them reach the conclusion that your product is actually cheap compared to the value it can deliver.

    I know it sounds hard, but if your selling something that can make me $2000 a month, I’d be more than happy to pay $100/month for it. If it’s $10,000/month, then $250 or even $500 a month would be quite cheap. On the other hand, I would be hesitant to pay $20/month for something which promises to make me more than a few hundreds a month. But unless you can get your leads to reach that conclusion by themselves it’s going to be hard.

    Very generic answer, I know, but if you want to go into more details, you can send me an email.

    Take care!

    Reply
  • Nadya 2016.05.27 at 09:31

    Hello Michele. Thanks for the interesting and useful information about pricing. In my business, I noticed what I was doing less than the price I attract the wrong customers’ cause they come they are looking for a small price, and they go quickly to the next one the price is lower. But I always thought that will draw more people to low prices in the end, they come and go to seek lower prices. once again thank you for your article, I’ll read your articles to analyze and correct my mistakes. Sincerely.

    Reply
  • Michele Finotto 2016.05.30 at 21:01

    Hi Nadya,

    Sorry for the late reply!

    Sure, more people will be attracted to lower prices, but that’s not ideal. I think it’s much better to have less people paying higher prices, because in my experience people who are on a quest to find the lowest price will usually have unreasonable expectations and will require much more work to keep them happy…which to me doesn’t make much sense.

    Good luck on your business!

    Take care!

    Reply
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