How much should you charge for your service or your product?
Lots of entrepreneurs and business owners struggle with this.
There is no one right answer. In this article I’m not talking about pricing high or low. That is largely a function of the market you choose to serve. Your branding also plays a part in pricing.
You don’t expect budget prices when you go to a five star hotel neither do you expect sky high prices at a budget motel even if both sell the the same exact bottle of mineral water right?
This article is about how you can price your product or service strategically by offering a low, mid and high price option.
I’ve used this method successfully while selling offline and also online.
Why options work
Offering options is a great way to price your product or service. If you think you can offer only one single price for a product then very likely you haven’t thought about it creatively.
Pricing options can work whether you sell soft drinks or cars.
One great example is buying a car. Car manufacturers have figured out that options allows them to up-sell you to a higher end version of the same model. Yet at the same time if you really can’t afford the higher end version, they have a lower end version you can still buy.
What happens is that you see all the nice options, perhaps better safety features and your heart is telling you to get the better pricier version yet your brain is saying it is over your budget.
In some cases, you begin to rationalize the purchase. The car sales person can just say it is just a few extra dollars each month when you finance the car.
You have just sold yourself on the pricier model even when it is over your budget!
If they have offered just one version then you may probably consider the competitor instead of thinking which version you want!
The same happens even for smartphones these days. Instead of launching one single model, most mobile handset makers released two or more models at different price points.
Apple does it with models with different storage. Other company does it too.
By giving the customer either two or three options you make your potential customer stick around and find out more which is a better deal.
You may think it is hard to set multiple price points. I had the same problem when I did it. After cracking my head for a few days I managed to create 3 price points.
The first is a very low price for a basic option. The middle price is the full blown product and the highest price included help or some sort of consultation from me.
What was surprising was most of the sales came from the middle and higher end! And nobody consulted me even when they paid for the higher package.
Still can’t think how to create price options?
How about packaging it in different quantities. This works for things all kinds of things ranging from groceries, stationary, training programs, etc. The book store I go to sells pens, pencils and they sell in packages of 3 sometimes 5 or even more.
Instead of a discount . . .
You can also use this method when a customer asks for discount. Instead of offering a 5% or 10% discount, you can remove certain parts of your product or service to reduce the price.
What happens a lot of time is that the customer starts to weigh which is a better deal.
Try it the next time you want to buy something. Put yourself as the customer. Think how long you took to make a decision.