by Jeffrey Prag
by Jeffrey Prag
On the go? Listen to the podcast version of this article, below…
Pricing your product or service is one of the most important (and difficult—let’s not sugar coat it) decisions you’ll make as a business owner. The pricing model you choose will impact virtually every part of your business. Most importantly, your customers.
Your pricing needs to reflect the cost to create your product or service, your unique value-add, and relative market research. But at the end of the day the most important aspect of your pricing is what your prospective customers are actually willing to pay vs. the value you provide them.
The good news is, this isn’t a decision you only get to make once.
The more strategic you are about your pricing at launch, the more opportunities you’ll have to increase your price and your unique value proposition as you grow.
Here’s what we mean…
You want to introduce your product at a price where you can gain market share. After all, the best way to ensure your success is by having customers—they will become your main source of promotion.
There are two common techniques for doing this: price it low so people are willing to adopt or price it high to reinforce its importance.
We don’t usually recommend the latter—but it has proven very successful in the electronics market where companies often take the unique approach of driving value and importance by pricing their products incredibly high at launch.
In a niche luxury market, it works. (We all know a guy who paid $10k for a TV just to say he spent $10k on a TV.)
But, in most cases, you’d want to price your product on the lower end and slowly increase it as you gain market share, enticing those early adopters and building brand recognition with their sphere of influence.
For example, if you knew through competitive analysis that the market would support your product at $100 you might introduce it at $85. But for every 10 units sold, you’d increase the price by five percent.
To make this work, the key is to deliver a brand experience your customers can’t live without.
You can’t just raise prices based on your popularity—that’s not going to go over well. You have to make sure you’re driving additional value to your customers.
That may look like:
- Introducing new features as you raise the price, rewarding your early adopters for their investment and encouraging new customers to join to reap the benefits of an ever-evolving product.
- Running a promotion to include a bonus offer for those who purchase after a price increase, like a discounted monthly subscription fee or complimentary accessory, for example.
- Offering your existing customers a discount code to share with their friends and family, allowing them to share their positive experience with your brand organically.
It’s also important to understand where your product is going to live in the market.
Will it be a premium product, or will it live somewhere in the middle?
If you want to move your offer into the premium or high-end market, for example, your customers are going to expect more from you. Your value-add will have to evolve to include increased customer service infrastructure, a more robust buying experience and an elevated brand presence to match.
No matter where your product lives, you can’t let your fear of choosing the “wrong” price hold you back. As your business evolves, so will your pricing strategy.
But if you need help, it never hurts to bring in the experts…
Howbridge helps businesses like yours develop strategic pricing frameworks and revenue strategies to ensure you’re making a profit while capturing the true value you provide.
This includes refining your brand strategy and marketing to identify and speak to the audience you are trying to reach, making sure no customer is left behind. We’ll help you differentiate yourself in the marketplace by demonstrating how your offer satisfies an unmet need (and why that matters).
Don’t let your fear of under or over-pricing stop you from changing the lives of your future customers.
Get in touch to book a Discovery Call and we’ll get to work on a pricing strategy you feel confident about.
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