How to confidently charge your worth
Determining the price point for your product or service can be tough. Here's one way that works for me.
You’ve spent months designing every minute (that’s “my-newt” not “men-ut”) detail of your new product. Painstakingly laboring over little design choices that, if you are honest, probably won’t impact the buyer’s decision very much. Still, this has been a labor of love, and you can’t wait for people to see what you’ve created.
So, launch day comes, and you anxiously wait for the virtual cash register to start ringing. But it doesn’t.
Why the heck not!? You nailed the design. Your advertising is on point.
There can only be one reason…you mispriced it.
For $*$&$ sake!
Today I’m going to share with you a method I have used to dial in my own pricing. So, I can stop cussing about it.
Breakdowns in pricing
If you are anything like me, figuring out how to price the products and services you offer has been a series of trials and tribulations. No matter how much research I did, I still struggled to figure out the price point where I was 1) happy with the amount I earned per sale and 2) maintained a reasonable amount of volume.
I’ve found that there are generally two types of breaks in pricing. The first is when the price is too high for virtually any buyer. The second is when the price is too high, even for the right user persona.
You need to accept that there is a portion of the marketplace that won’t buy what you have to offer, no matter how good the price is. For some markets, that could represent a huge chunk of the market. Let those prospects go. The group you want to dial in are the buyers who are 1) experiencing the pain points your product can solve for them and 2) are willing to pay, what you charge, for those pain points to go away.
Another way you will experience a breakdown in your pricing model is imposter syndrome. It doesn’t matter how experienced you are in your field or how good your work is; most people will feel like an imposter at one point or another.
What I find interesting is that imposter syndrome rarely shows up when you work for someone else. In most instances, people don’t feel like they are being paid enough. However, the minute (”men-ut” ;) ) you start a business, something inside you says you shouldn’t get paid for your work.
How do I get around that? I trust the data.
How to determine the price of a product
The biggest mistake you will make with pricing is trying to guess what to charge. Don’t do that to yourself. Instead, trust the data.
That data can come from a lot of places. Such as competitor research (make sure you are comparing apples to apples), talking to prospects and asking what they pay for similar solutions, and using my daughter’s technique.
Notice that when I mentioned talking to prospects, I didn’t ask them what they would pay. Few people will tell you the truth because money is always an uncomfortable topic. Instead, I asked what they are paying. Guess what happens if they feel pain but aren’t paying for a solution? The pain isn’t big enough, or they haven’t found a solution yet. The latter is pure gold.
The method that helped me dial in my pricing the best was using a technique my then 12-year-old daughter casually slung at me one day.
Her idea? Set your price lower at the start and raise it incrementally until you hit the sweet spot where volume stays high.
For my courses, I tried all kinds of pricing. I offered them for free. I tried high-ticket pricing for my most popular course. That brought in some revenue, but my conversion rate was too low.
So, I tried her method. She’s brilliant, not because she is mine, but because it worked like a freaking charm.
I started with an entry-level price point that I was comfortable with and made the buying decision super easy for people. Then I increased my prices by 10% after every month, where my conversion rate remained relatively the same as the prior month. I stopped when the conversion rate dipped significantly.
The above approach may not work for you. Not the part about increasing your prices gradually until your sales volume slows down. Because the toughest part is setting the initial price. What I wouldn’t do is start out with offering your product for free.
It’s really hard to go from free to $1. Whereas $1 → $2 - $4 - etc. is much easier.