Master Product Pricing: Earn More Money Today!

Summary

In this video, Evan provides three key tips for pricing a product or service. First, focus on the value you're offering to customers rather than just the cost of production. Second, understand your target audience and align your pricing with their budget, whether it's high-end or mass market. Third, consider your business stage, as startups may need to start with lower prices to build credibility. He encourages testing price increases over time to find the sweet spot that reflects the value you're adding, ensuring sustainable business growth.

Takeaways

• 💡 Focus on value: Pricing should be based on the value you provide to the customer, not just on your cost to produce the product.
• 🔍 Understand your audience: Determine whether you're targeting high-ticket, low-volume or low-ticket, high-volume customers.
• 📊 Value-based pricing: Customers are willing to pay based on the value they perceive, regardless of your production cost.
• 🚗 Market positioning: Like Ferrari and Honda, different products target different audiences with distinct value expectations.
• ⏳ Stage of business: Startups often need to price lower initially to build a reputation and prove their value to customers.
• ⚖️ Risk perception: New businesses face a bias, as customers may view them as risky compared to established companies.
• 📈 Increase pricing over time: As you gain experience and prove your value, raise your prices incrementally to reflect this.
• 🎯 Ideal customers: Higher-paying customers typically appreciate your value more and are easier to work with than low-paying ones.
• 🔬 Test pricing: Continuously experiment with price increases to see how much value customers perceive before hitting their limit.
• 🛠️ Build reputation: For startups, it might be necessary to offer lower prices or even free services to build a client base and portfolio.

Q & A

What is the main factor to consider when pricing a product according to the script?

The main factor is the value you are adding to the customer, not just the cost of producing the product.

Why is it a mistake to price a product solely based on production costs?

It’s a mistake because customers don't care about your production costs. They only care about the value they perceive from the product. If they see it as less valuable than its cost to you, they won’t buy it.

What are the two main pricing strategies based on your target audience?

The two strategies are high-price, low-quantity (targeting fewer, higher-paying customers) or low-price, high-quantity (targeting many customers at a lower price point).

How does understanding your target audience help with pricing?

Knowing your audience allows you to tailor your product and its price to their budget and value expectations, whether you're aiming for a luxury market like Ferrari or a budget market like Honda.

How does the stage of your business affect your pricing strategy?

As a startup, you may need to lower your prices to attract customers and build credibility. As you become more established, you can gradually increase prices to reflect your added value and experience.

Why might customers be hesitant to buy from a startup, and how should startups address this?

Customers may see startups as risky because they lack a track record, making it uncertain whether they will be around to support or maintain their product in the future. Startups should lower their prices initially to gain trust and build a portfolio.

What is one common pricing mistake entrepreneurs make, according to the script?

Many entrepreneurs underprice their products or services, staying stuck at a lower price point even as they add more value. They should test higher prices to find what customers are willing to pay.

How can entrepreneurs test and adjust their pricing over time?

Entrepreneurs can gradually increase prices by 10% or more and monitor customer reactions. They should find the point at which they start receiving pushback and adjust accordingly.

Why are low-paying customers often less ideal for businesses?

Low-paying customers often require more effort to please, are less likely to appreciate the value of your product, and rarely refer others, making them less profitable and more difficult to work with.

What example does the speaker give of their own experience with increasing prices?

The speaker started by charging $500 for a blog post but eventually increased the price to $2,500 over time by adding more value, such as writing longer posts and creating videos, while testing the limits of what clients would pay.