I’ve often seen, as I teach small start-up businesses around the world, that they charge too little.
New company owners often feel that they must price low to get business - but actually the opposite is true.
We (all of us!) actually look at the price of items before we look at the quality.
(Think when you go clothes shipping, car shopping, for example).
We look at the price first.
We’ve already briefly seen what’s being offered, so we only look at the price 2nd.
And then we buy, for only one of 2 reasons:
1) It’s so cheap, it’s a bargain and we must grab it quick before they sell out, or,
2) It’s so expensive, it must be good.
In The First Example,
if you’re the seller, you must still “attract the eye” - and then give a good reason why the price is so low (otherwise people will assume it’s rubbish).
- A good reason can be a special offer, time limited.
- This is why, for those of you with Ali Dropshipping stores, there’s a plugin-in (see the training, please!) which has a countdown timer (fully automated) which vastly increases sales.
For Amazon, you’re showing heavily discounted items instantly - people are already searching for discounted items, so they come directly to you (as they are almost impossible to find on Amazon!)
In The Second Example,
- we spend longer thinking about our decision, especially if we have no prior knowledge of the likely cost - i.e. it’s something we’ve not bought before.
So, I did a test a month ago.
It was possible previously to get full access to all of my courses
for $20/month or $60/year
So I increased the price to $50/month or $300 /year.
As almost everyone buys the annual membership, understandably, that’s a five times increase in the price.
That meant that even if sales dropped by 80%, I’d have the same income …
(Example: 5 new members each day at $60/year = $300 .. which is the same income to me as 1 member each day at $300 for a year).
On the other hand, if people could see the value and the new membership applications continued at the same rate, I’d increase my income 5 times over.
That didn’t actually happen, though.
Instead, the rate at which people join increased 3 fold.
That meant that in April I increased my income from Tetmo.com to 15 times what it was in March.
Nothing else changed.
- Not the design. It stayed the same.
- Not the advertising. I don’t do any paid ads.
- Not the publicity. There was no-one mentioning me on TV, the web etc.
- Not the content (which increases every month anyway, as I add new courses)
The only thing that changed was the price.
And people clearly felt that the courses were better value at $300 a year than at $60/year.
So, what can you learn from this?
Well, the rule on how to price something is very simple.
- If you’re selling something and it’s selling really well, increase your price.
- If you’re selling something and it’s NOT selling really well, increase your price.
You’ll never lose out!