4d • Minute Reads
Everyone's No. 1 Pricing Problem + the Fix
Words I like: The only thing worse than selling a $1,000 thing to a $100 buyer is selling a $100 thing to a $1,000 buyer.
Minute Read: Stop Pricing to Your Finances/Budget Situation
Most of us starting in business or beginning our first -preneur will price according to what we can afford. That's a big mistake, especially when we have so little money that we are actively putting our sweat into a business to make it.
So since we can only afford to spend $100 in our moment of life, we charge everyone else the same even if they can easily pay $1,000. So we lose $900 and that $900 is almost all profit.
Problem: You're pricing based on what you would pay. Not what it’s worth to the right person.
It’s like the mechanic who says “changing oil is easy”.
Yea absolutely... for a mechanic.
For everyone else it's a huge pain to do and they're willing to pay far more to not have to do it.
Just a little perspective shift for you:
1 in 10 Americans has a million dollar net worth. They've got the money.
You just aren't selling them something they want, don't have an enticing enough offer, or you're priced so cheap they don't believe it works.
I had a guy in the mobile car detailing space that I knew was underpriced. ($45 for a complete service)
I wanted to double the price now and then raise it even more 3 months later. The guy fought me.
After 5 weeks of no increase in revenue and him still needing to work his fast food job, I was able to get him to push through a rough 70% price raise. ($45 > $75)
What happened next is that he lost almost half of his customer list (from 9 cars to 5 a week). Devastating? Wrong.
At his old price, he was doing $405 a week with 9 services.
With the new price, he was making $375 with 5 cars.
In other words he was still making 92% of the revenue while only having to do 50% of the work.
Now that we had a bunch of time, we started knocking on the doors of the neighbors and pitching them the new price. What happened to sales?
Close rates went up! We had a client list of 23 two weeks later and then 30 the next week.
Why?
They were so cheap compared to what they were delivering that people didn't believe it worked.
Price is a signal.
If your signal says "budget option," richer people tune out before you even start to pitch.
Most businesses stay low on cash by targeting the people who complain the most and pay the least.
Then they assume that's just how business works. It's not.
It's just how THEIR business works.
One person paying $10k on something that costs you $2k is the same as 400 people paying $50 on something that costs you $25.
And guess what, their money spends the same :)
Sell to wealthy people long enough and they'll make you one of them.
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Everyone's No. 1 Pricing Problem + the Fix
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