The fact is, most small business owners approach pricing in completely the wrong way.
And to be honest, I don’t blame them. Pricing is one of those areas where business becomes both an art and a science, and it can take a lot of time to master.
Heck, did you know that there are entire books out there that JUST talk about pricing? That’s it! Entire books that just tell you how to set your prices.
If you’re the knowledge-hungry type, go ahead and look up those books. For the rest of you, I’m guessing you’d prefer a shortcut to smart pricing so you can learn the essentials and get on with growing your business.
And that’s exactly what I’m going to give you today!
I think the best way to approach this is myth vs. fact style, since for many of you the key to smart pricing will mean not just learning good habits but also breaking current bad habits.
In fact, I think you’ll be surprised by a lot of what you learn here…I know this stuff certainly surprised me when I was still learning it.
Myth: The Price That Creates the Most Sales is Correct
It’s easy to see why people get this wrong. After all, more sales means better business, right?
Maybe…but you have to keep in mind the bigger picture.
In the short term, this does lead to more sales, since there are always bargain hunters out there ready to snatch up the “cheaper” option.
And yeah, it is technically possible to cruise along with this kind of business…but you’ll never build significant long-term wealth.
Plus, when the economy gets tough, these kinds of businesses are the first to close their doors.
Fact: The Price that Creates Stable Margins is Correct
Now THIS is strategic thinking, and this is where you start to get real, lasting wealth out of your business.
The correct price in your business will always be the price that results in healthy profit margins, so that you can enjoy the abundance you’ve earned and also keep investing back in the growth of your business.
The funny thing is, there’s actually a huge sliding scale here as far as what the correct price is for each business. It’s not a simple matter of always going low or always going high.
For example, most luxury businesses don’t have very high sales volume, because 99.9% of people can’t afford their prices. However, they survive and thrive by cultivating a small, loyal, extremely wealthy audience and selling them increasingly expensive goods.
On the extreme opposite end, you have companies like Walmart, who drive their prices as low as humanly possible but still turn a profit because they sell to a mind-bogglingly huge market.
In both those cases, the companies involved are ALWAYS investing significant money back into their businesses. Wealth comes from sustained and strategic growth, not just short-term profits.
Shopping at Walmart is cheap. Becoming Walmart is expensive. If you want to drive your prices further and further down, you have to plan on truly massive scale.
Myth: Pricing is a Financial Decision
Again, this problem comes from not seeing the big picture, and it manifests most clearly during sales presentations when newbie business owners try to argue down price objections.
The thing is, if your prospects are looking at your price as a financial decision, then you haven’t really done your job.
Because the truth is, money is the perfect excuse to back out of anything scary in life.
If someone is looking at a potentially life-changing opportunity, such as the chance to get in the best shape of their lives through personal training, they can back out and save face by pulling a cost objection. They can convince themselves that they’re being responsible and avoid the embarrassing truth: that they’re afraid and uncertain about what they want.
On the flip side, you don’t get to hike up your prices just because you want or need more revenue.
If you want to sell high, START by selling high. If you want to increase your prices later, demonstrate greater value to your clients and prospects so they’ll know you deserve higher prices.
Fact: Pricing is a Marketing Decision
In fact, this is why it’s possible to LOSE sales by setting your prices too low. Your prospects might look at your cheap prices and think, “I’m worth more than that! I’m going to go find the premium version of this.”
Again, the point of pricing is to create stable profit margins, not just short-term sales.
You want to research your market, choose the highest price they will respond to, and work on building a relationship with your client base so that they’ll want to continuously do business with you and recommend you to their friends.
Committed to your success,