Most business people never plan any price changes.
They go back and forth choosing a perfect price for “now”. And then freak the hell out a year later when it isn’t sustainable. Then stress out about cutting corners or having to break bad news to clients. The worst part of all is that they look unprofessional during this.
It’s time to have the conversation almost nobody ever talks about.
Pricing the wrong way
I’m not talking about anyone in particular. (Definitely not you, or me! *wink wink*) But some people have made this mistake. It goes a little like this…
- Spend all year long coming up with new business idea.
- Cram in as many special features and services as you can for one perfect price.
- Launch business with tears of joy because you actually have customers.
- Realize soon after…that the business isn’t sustainable (or won’t allow growth) because the initial price was too low.
- Freak out about having to raise prices or provide less for the same money.
- Invent new products to add revenue, but they only distract from your core product/brand.
- Get desperate at some point and DROP PRICES. *screaming NOOOOO!!*
Basically, you shot your own f**ken foot in the beginning by giving everything away for one low price.
This is why I sincerely believe the best way to be competitive as a new market player…is to offer LESS FEATURES (choose only essential ones). Then add more over time (evolving in the direction of your brand positioning and strengths, unique viewpoints).
The worst way to be competitive…would be to have all features in your product, and then at a lower price than your competitors. This sets the bar too high and now puts this silly expectation in your customers that your brand most always have every feature AND be cheaper.
Pricing the right way
Plan your pricing increases right from the start!
- If adding new features (to existing products) – then plan price increases on your products.
- If adding new products – then plan slight increases to existing products but price new products higher.
Basically…everything grows. New products, new features, higher price, higher revenue. I think the most important thing is to see the future before you get there.
- What new features or solutions do you see in the future?
- Should those new features be added into existing products, or simply created as new products?
- What new price points will make sense for these new features and products?
Believe it or not, pricing (should be) is the easiest part. Set a price for now and make your product the best it can be right now. Then later, adjust both pricing and product.
It really helps to correlate your pricing increases with product improvements.
How else do you create a more positive association with price increases? How else do you make price increase announcements more of a celebratory event? On the flip side, you should also not be releasing so many new features without a price increase.
The hard part about pricing.
The hard part is getting clients used to new pricing and products in a way that makes sense.
- Clients should feel that your prices are always fair.
- Prices can change but not be confusing (too many moving parts or hard to calculate end costs).
- Products can change but not alienate clients (people paying for what they don’t use).
- New products should be exciting, rather than alienating clients. (Existing customers feel you’re abandoning them, and discontinuing support for old products.)
- I firmly believe you should NOT raise prices on existing customers unless you need to. New pricing should only be for new customers!
Make your company fun!
Customers need to know that your company is dynamic and exciting. Always new changes. Always new things. And that they should jump on immediately to be grandfathered into the best price. What a great way to sell price increases, right? 🙂
PS: I’m literally not kidding. I increase my sales by announcing PRICE INCREASES, not price discounts!