Pricing Is The Foundation Of Your Business.
Pricing affects every aspect of your business. It can throttle or catalyze your growth. It can be the wind in your sails or the anchor around your neck. I would argue pricing is the single BIGGEST decision a business can make.
Why, then, do we spend so little time and energy making sure we get it right?
More often than not, we outsource the work of setting a price. We copy the prices of those around us (what I call: mediocre mimicry) and in doing so, we give away the entire foundation our business is built upon.
Deciding to cap your prices at $500 is going to have vast repercussions.
Deciding to cap your prices at $50,000 is going to have vast repercussions.
Deciding to cap your prices at $500,000 is going to have vast repercussions.
Introducing: Price Bands
Colours of the visible light spectrum exist within a range of frequencies. Though there may be many variations of red, they all feel like red. Unless you're colorblind, you know when you're looking at something that is not red.
The same is true of prices. They exist within bands, that are generated on the spot by the perceiver, and a client will feel when they've moved from one to another.
For example, a $50 Uber ride is different than a $50,000 car.
But a $50 Uber ride might be in the same "band" as a $75 Lyft ride.
A $50,000 SUV might be in the same band as a $65,000 hatchback.
You create these bands through your internal pricing, but you may also be in a particular brand based on the decision set of your buyer. For example, if they're looking at 4 options, you might occupy the lowest band of the four.
Full Spectrum Pricing.
My recommendation for (almost) every business, is to find a way to occupy the entire spectrum. From $0 to infinity. Price your way across the entire breadth of options. Create super-ultra premium options. Create low-cost affordable options that scale. What's stopping you?
You can do this in a number of ways. You might do it through sub-brands, or by redeploying/repackaging existing products/services. But by occupying every pricing possibility along the continuum, you know you're maximizing your ability to capture high and low-ticket revenue.
Let's try a simple example to illustrate why this matters.
Imagine you have a customer who needs a creative project done. Perhaps a year's worth of video editing and a series of blog posts. You charge a $2000 retainer, $24,000 for a year–and you feel good about it.
However. The client would have needed to make 2-3 hires to have access to this work internally, meaning they would have paid at least $150,000 before benefits, hiring, training, etc. You could also have moved this service category up to the higher price point, and delivered a more limited service at the price point you ended up charging them.
Efficiency, effectiveness, and ROI would all rise.
By not offering this higher price point, you couldn't have a conversation that highlighted this opportunity. You gave away the farm for pennies on the dollar.
If you don't let them pay for it, they won't pay for it.
Everyone Loses When You Don't Use Full Spectrum Pricing™ And Charge Across The Entire Spectrum.
Ultimately you want to allow buyers to purchase a solution that:
- Matches their needs.
- Is commensurate with the degree their need.
- Is commensurate with their financial resources.
If you don't give them an opportunity to spend more money to receive a higher degree of service, then you're cheating them, yourself, and your economy.
Do you ever worry that you're undercharging?
If you want a step-by-step formula you can follow to raise your prices without hurting demand then you'll want to grab your free copy of my newest book: Triple Your Prices: How To Raise Your Prices Without Hurting Demand.
About Me: Hi, I'm James. 👋🏻
I'm building a Strategic Revenue Advisory firm that provides SMBs, Agencies, SaaS, and Solopreneurs with the opportunity to bring their biggest ideas to life. Here's how I can help your business.