“Sales isn’t an activity, it’s an exchange of value: your money for my solution.
In addition, your money is also solving problems for my family.”
~ Chandell Labbozzetta
The Pricing Conundrum
Price may be one of the most studied and tested areas of product development. It’s certainly one of the first questions that most clients and students ask me.
I get questions like…
- Am I charging enough?
- Am I charging too much?
- Why do some people say, “Is that all it costs!” And others say, “That’s way too expensive!”?
- How much should I charge?
- Should I feel guilty because my price is 2X what my competitors charge?
- I can hardly pay my bills, can I raise my prices so I’m not working for $0?
- How do I overcome objections to my prices?
- What’s the perfect price point for my product or service?
If these questions are raging in your head… You’re not alone!
These same questions have been keeping economists up at night for centuries and have consumed billions of words, millions of pages and hours.
There’s a good reason for all that angst, too… Because the answer is quite simple AND very disturbing for economists and governments…
What do I mean?
Once Upon a Time…
Back in prehistoric times and in pre-currency days if you wanted something you had to trade.
So… You went to your neighbour with a dozen eggs and asked if you could exchange the eggs for a new blanket (which his family makes). Unfortunately, he keeps chickens too, so he doesn’t want any eggs, but after some probing, he tells you that he’d be happy to exchange the blanket for 2 litres of milk.
BUT… none of the people who have milk cows are interested in eggs, although one of them says he’d take a quantity of spun wool. Eventually, you are able to exchange your
- Eggs for a basket of apples;
- Apples for a sack of fleece;
- Fleece for a bag of flour;
- Flour for spun wool;
- Wool for 2 litres of milk…
And hours later, you go back to your neighbour and exchange the milk for the blanket!
Phew!! (Lucky he hadn’t sold it to anyone in the interval.)
That was a complex process, wasn’t it?
A weekly market, made all that swapping a lot faster because you didn’t have to walk nearly as far to make those exchanges, but it wasn’t until money came into being that it became absolutely simple.
The only thing you need to decide is how much ‘currency’ you are willing to take in return for your blanket. And, if lots of people want your blanket, you might be able to exchange it for enough currency to buy 3 litres of milk (or to save some currency for another day).
How this Affects YOU and Why it Matters
The reality is that ‘the perfect price’ depends on who you are selling to and how much they want a solution.
Think of some of the ‘Go Fund Me’ campaigns and look at the situations people are raising money for and the generous responses they receive.
I saw one person donate $100,000 to help a child get cancer treatment in the USA. Why? For that person the opportunity to solve the problem was worth that much money and, although they didn’t know the child, helping him out make them feel good.
Price | Value | Quality | Quantity…
They’re all heavily dependant on:
- WHO you are selling to
- HOW you are selling
- The CONTEXT in which you are selling
… Far more than they depend on WHAT you are selling.
So the bad news is that there isn’t a single ‘perfect price’.
And the good news is that you can set your own ‘perfect price’.
The Price is Right!
Possibly you found the previous section depressingly uncertain if you were hoping I’d give you a formula.
The other way of looking at it, though, is that this opens a world of possibility for you.
Imagine that you know how much money you need, and how much time you are willing to invest to make it… So that you still have time for family, friends, travel, hobbies and other things that are important to you.
Now, you just need to find people who need and want the product or service you offer and are in a position to pay the price you have set… And let me tell you a secret:
“It is not 10 times harder to sell 1/10 volume at 10 times the price – in fact, it’s much easier.”
When you know how much you want to charge each client, then you simply find the people who will recognise the value you deliver at that price. Once you’ve found one person like that, it’s easy to clone them and keep the sales rolling in.