Improperly pricing your product or service is one of the most common methods of entrepreneurial self-sabotage. There is a whole lot more to consider when pricing your product than just simply calculating overhead and profit margins. Pricing is psychological.
Recently, I made the decision not to purchase something because I thought it was too cheap. I had considered joining some group coaching. The webpage I looked at was incredible and the coaching itinerary had everything I wanted and then some. I was excited to sign up, and knowing what other similar courses cost, I was prepared to spend a few hundred dollars a month. When I got to the bottom of the page I was amazed to discover that it was only $47/mo. But I wasn’t excited, I was confused.
I began to wonder if the course was actually as great as it said it was. Surely if that person really believed in their product they would have charged more. Eventually, I decided that it was too much of a risk to my money, and more importantly my time, to sign up. In my mind the $47 investment became a greater risk than a $300 one. The person offering this course sabotaged their own sales by being too cheap. Everyone loses in a race to the bottom, so quit being cheap, and price your products appropriately.
When pricing your product, keep these 3 simple rules in mind.
Your product should be priced in proportion with:
- The problem it solves for your customer
- The type of customer you want to attract, and
- The value which you want your customer to place on having it
Remember this: The moment you make a mistake in pricing, you’re jeopardizing either your reputation or your profits, and sometimes both.