Try This Pricing Strategy to MAXIMIZE Your Product Profits | Molly Ann Luna
You're a service-based provider trying to land on the perfect price for your paid offer.
You've done your research, seen what's on the marketplace, tried to position your pricing slightly below the average, or even pitched your offer as a 'name your price' scenario only to find that your clients are committed to doing the work.
You're frustrated because you know your work changes lives, and if you're being honest, you're resentful because you're pouring your heart into your work but getting little payout.
Honey, I've been there.
In today's episode, I want to share a pricing strategy to maximize your product profits to do the significant work you felt called to do and get paid handsomely to do so.
First off, whether you're brand new to business or you've been in the game while let's make sure we're on the same page.
What's a pricing strategy?
A pricing strategy is an approach used to set the price of a product or service. It includes all the methods you use to calculate the right price to keep demand and profits as high as possible.
Using a pricing strategy encourages you to look at various factors that can affect your profit margin so your final decision is always based on logic.
It eliminates your bias as you're pricing your product and leads you to consider market research.
Great pricing strategies are essential for generating a substantial profit and sustaining growth over time.
Before you can price your offer and sell it, you need demand.
We're not trying to create demand but channel it.
If you don't have a market for your offer, this strategy won't work for you.
But we're going to assume that you have a common market that meets the needs of one of these three categories: improved health, increased wealth, or improved relationships.
When picking a market, we want to look for prospects experiencing pain, purchasing power, and who are easy to connect with to get your offer seen.
Your ideal prospects must not want but desperately need what you're offering.
It would help if you pressed on the pain. The degree of pain must be proportionate to the price you will charge.
Pain could be an unhappy marriage, overweight and winded when playing with the grandkids, lack of sex life, embarrassing smile, outdated style, or no circle of support.
When your prospect hears the solution to alleviate their pain, they should be magnetically drawn to your solution.
The pain is your positioning.
If you can articulate the pain your prospect is experiencing accurately, then you're in a position to charge a premium price to alleviate the pain.
Once you're clear on this, we can discuss putting together a pricing strategy.
How much to charge for your paid offer?
With inflation on the rise, as a seller, you must be able to keep up with the ever-changing marketplace or become financially sunk.
It's not enough to think about making more sales but rather focusing your efforts on growing your business.
How to grow your business?
Get more customers
Increase their average purchase value
Get your customers to buy more often
Type of Pricing Strategies:
Value-driven vs. price-driven purchases
Commoditized = price-driven purchases, aka a race to the bottom
Differentiated - value-driven purchased aka category of 1
A commodity is a product available for many places, is pronto be placed on price.
If a customer compares your offer to another and thinks they're pretty much the same, they'll choose the cheaper one.
Doing this makes you a slave to your business, creating just enough to get by.
For example, let's say you're a service-prover who can comfortably serve ten clients/month for $500/mo. Then your business will cap at $5,000 /month.
To increase your profits you can either sell more clients or have them be worth more by increasing how much they spend or buy over time.
Gross profit = revenue - the direct servicing of an additional customer.
Service is $500/month, and it costs $100/mo to operate; therefore, your gross profit is $400.
Life Time Value = gross profit x number of purchases an avg customer will pay over the lifetime.
Revenue = 500/mo x 80% margins (gross profit $400/$500revenue) x 6months = $2,400 Lifetime Value
*note admins, operation costs are calculated in LTV
If we're unable to increase the number of clients we can serve on a month-to-month base, but we want to grow our business financially, we must increase our prices.
How to charge lots of money?
To be able to charge a lot of money, we want to focus on creating a magnetic offer that's unmatched in value and goes above and beyond on delivers results.
Using a premium price money model will allow you to get paid to get new customers consistently.
The ultimate goal of using a premium price money model is so that we can remove the cash restaurants on your business that are holding you back from growing your business.
We want to get you more customers at higher ticket priced offers for less money.
Increase response rates - clicks
Increase conversions - sales
Premium prices - charging more money
Firstly you need to have a magnetic offer.
Doing so increases your results when it comes to advertising.
If you pay the same amount for new leads, but more people respond and buy at higher prices, your business grows.
A business does the same work. Fulfillment is the same, whether you promote a commoditized or magnetic offer.
The magnetic offer makes the business look different and forces your prospects to stop and think differently to assess the position offer, leading to a value-driven purchase over a price-driven purchase from your buyers.
Doing this establishes you in your category. You are making it too difficult to compare prices and making you a standout option.
If the client sees the cheaper version of the same offer, your prospect is inclined to go with the more affordable option.
You can cater to price shoppers, but I'm telling you, this is a losing battle.
Instead, flip the script and create an offer that provides MORE value than the price. It's all about positioning. Even if you're 3x more expensive than your competitors in the marketplace, prospects will line up around the block if you can provide a person with $100,000 in value gained and charge a tenth of that $10,000.
We want to make an offer so different so that you can skip the awkward conversation about why they should choose you.
Differentiate your offer, make it incomparable and value-driven.
Now, suppose you want to take your business to the next level. In that case, it's time to think about how you can create a magnetic values-driven premium offer and systematize it to serve more people without directly trading your time for the money.
In that case, you'll want to tune into the next episode.