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Why You Need to Get Real About Pricing – Now

The Amazon Kindle took on books and dominated the e-reader market.

Uber replaced the taxi and revolutionized the transportation industry.

Apple has continuously made its latest products the most sought-after devices on the market.

The one tool that made these three events possible is PRICING!

The Kindle slashed its prices to take up huge market share before eventually raising prices on a sticky product.

Uber’s dynamic pricing algorithm encouraged drivers to be available whenever a customer needed a ride.

Apple charges a hefty premium on its newer products to make the product more exclusive and maintain their status.

Getting creative with how you price your products will allow you to unlock untapped revenue and change how people view your business.

Let’s talk about how you can exploit this to your advantage

Pricing is more than just slapping a value on your product or service. It's an art form. 

Ask any pricing expert, and they’ll tell you: the customer’s willingness to pay a price is the reflection of the value they perceive. Don’t believe us? Check it here, here, or here.

If you're not in tune with the perceived value of your offerings, you're playing a losing game. Too low, and you're undervaluing your work. Too high, and you risk alienating a potential customer base. Either way you’re leaving money on the table! 

So what’s the solution? Start testing different pricing strategies… like right now.

There are a number of pricing strategies that are omnipresent in today’s economy:

Cost-plus pricing. Calculate your costs and add a mark-up. 

Competitive pricing. Set a price based on what the competition charges. 

Price skimming. Set a high price and lower it as the market evolves. (Apple)

Penetration pricing. Set a low price to enter a competitive market and raise it later. (Amazon Kindle)

Each of these tactics is important to consider when developing your own pricing strategy, but one method stands head and shoulders above the rest:

Value-based pricing. Base your product or service’s price on what the customer believes it’s worth.

This method is superior for two big reasons

1. You build trust with your customer when you charge them a fair price

2. It gets rid of the risk of customer disappointment (buyer’s remorse), where a customer realizes that they grossly overpaid for a product

But let’s talk turkey. Finding that sweet spot - where the price aligns with the customers’ perceived value - isn't always a walk in the park. 

You can’t just ask your customers how much they would pay for your offering… or can you? What if I told you about a bold, unconventional method that shakes up the norm? 

Enter the "Pay What You Want" (PWYW) approach, where you ditch the fixed price tag and let your customers decide how much they would like to pay, with an optional "tip jar" or suggested prices for good measure.

Yes, this may sound absolutely bonkers, but before you unsubscribe, hear me out. It might appear ridiculous to not charge your customers anything, but if we look at past examples of this, it’s actually a proven way to see what your customers are willing to pay for your product.

Remember when Radiohead turned the music industry upside down with their PWYW album, "In Rainbows"? That was a masterclass in understanding the value of their product. They knew their album was worth a lot, and they didn’t restrict themselves by slapping a price tag on it. And guess what? Their fans agreed – to the tune of more revenue than all their previous albums combined. Wikipedia is another prime example. Running solely on donations, yet raking in millions, it shows the power of perceived value.

If you’re spending your time calculating how much your customers would pay for your product, it’s time to stop sitting around crunching numbers and flip the script! Let your customers tell you how much your product is worth.

In doing so, you’ll build your brand’s ethos: it shows that you believe that your product is worth something and that you’re certain that your customers will agree!

Rather than using PWYW as a long-term solution for your pricing, utilize the approach as a way to aggregate customer data. See what the average customer would pay for your product, and then integrate these insights into your pricing strategy as you build out different offerings.

Over the next few weeks, we will be gracing your inbox with more jam-packed insights on how to find the perfect pricing strategy for your business:

Week 1: Price Outside the Box (This week)
Week 2: Tiered Pricing
Week 3: Free Trials
Week 4: Packaging

Want to discuss this week’s theme with other readers? Join LoopNation, our free community!

Our big questions being discussed this week are:

1. What has surprised you about the way customers react to your pricing strategies?

2. What pricing strategies have you tried in the past? What was successful?

Here’s What You Loved

Datatera AI - No more copy-paste or scrapping - convert any file, website, or email to the spreadsheet or CRM in seconds.

Rhetor AI - An AI that talks to your users at any time to collect data and get real-time feedback.

Simplified - Use AI to supercharge your content creation.

Nectar - Turn your social engagement into revenue.

Browse AI - The easiest way to extract and monitor data from any website.

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