Bad Advice You’ll Find On The Way To Pricing Nirvana
The ultimate guide to pricing like a boss — don’t do sales, don’t lower your prices, and don’t charge what you’re worth.
Pricing — it’s either a friend or a foe to you.
When it’s a foe, it’s a stressor, an annoying bug you can’t seem to get out of your head. You waver back and forth on being priced too low but are fearful of raising that price because you don’t want to lose any customers.
When you nail it, you hit it at that sweet spot where your prices are high enough to make you happy and your customers are willing to pay that price. It feels great when you hit this pricing nirvana.
The journey to pricing nirvana is riddled with challenges, confusing contradictions, and analytical spirals that’ll make your head spin. There are plenty of opportunities where you’ll be tempted to fall off course.
You’ll come across a lot of guidance that seems sound enough, but is actually advice you shouldn’t follow unless you understand the repercussions of following it blindly. Here is some of that bad pricing advice and why you should be wary of it.
1) Have a sale when inventory isn’t moving
When inventory isn’t moving, the immediate, typical reaction is to reduce your prices and put everything on sale. I tend to do the opposite — no price cuts and no sales, I just employ more sales strategies to put my products/services more front and center.
I’m a firm believer that pricing shouldn’t be reduced unless it’s highly strategic, rewards good behavior, and only available for a short period of time. Reduced prices should shower the fast action takers, AKA your loyal fans with rewards.
What many businesses do instead is use reduced prices to reward the transactional shoppers who don’t have much loyalty to the brand, and probably aren’t the brand’s most raving fans.
When you pull the sales card in this context, you create a honeypot for transactional shoppers. Sure, your loyal fans will enjoy the sale you throw, but why throw a sale where the only purpose is to move inventory? It seems like a missed opportunity.
Why not throw a sale at the beginning rather than the end of a new release (an early bird offer of sorts) so that you can make it clear that you’re doing something special for your loyal fans?
What do you think will feel better for your fans — first dibs with a discount to thank them for being avid followers, or giving them scraps of what’s left in different sizes when the inventory is dwindling?
There may be times when you have to have a sale to move inventory because you overshot your numbers. In those scenarios, the same logic applies — give your superfans first access and deep discounts not available to the general public (they are probably the ones who will buy the most anyway). Whatever is leftover can be made available to the general public.
2) Lowering your prices will make everyone happy
At whatever crossroads you’re at, you may have come across a time when you had the option to lower your prices to satiate multiple customer types. It may have felt like a win-win — who doesn’t love lower prices, right?
Did you know that if you lowered your price, you do so at the risk of losing all the customers who may have bought from you in the first place? That’s right.
Pricing for your customer is highly psychological, it’s not just math. ⠀
Buying is an emotional transaction, not a numbers one. ⠀
Even if your customer is crunching numbers in their head when considering your price, they are still relating your price to other emotional experiences they’ve had with products and services similar to your price. ⠀⠀
Instead of looking at your prices according to how ‘expensive’ or ‘affordable’ they are, look at your pricing from the perspective of how emotionally compatible it is with your customer.
Brand equity matters — not only do customers want to buy a product that does what it’s meant to do from a functional perspective; they also want to buy from a brand that embodies the quality, style, and standard that they’re looking for.
Customers view price as a signal of trustworthiness, they view it as a shortcut to determine if they can buy from a brand without worrying about it falling apart or not delivering on the experience they’re looking for.
Take Supreme for example — the perfect example of a brand with strong brand equity that can slap their logo on a red brick or an Oreo and have it sell 1,000x above retail on the resale market.
When a Supreme product is on the market, you can believe that it’ll have style, be highly coveted, and be worshipped by its fans — they have a strong standard that they always meet, and their customers don’t want to pay a dime less (for many they’ll pay more).
Lowering your prices isn’t always desirable, for some brands it actually scares away their customers. Price for emotional compatibility, not with the assumption that your customers are fishing for discounts.
3) Charge your worth
This is a common one amongst service provider circles that have to charge an hourly rate for their services. Those who are nervous to charge premium rates for their services are told to “charge your worth”.
I agree, I do think that you should charge your worth, but let’s get more specific shall we? Because in my opinion, this statement is extremely vague.
Your worth can mean anything, from internal perceived worth, external perceived worth, skill-based worth, to experience-based worth.
As a service provider, your pricing needs to hit the intersection of skill and experience-based worth. Once you find a number that sits comfortably within this intersection, you should then align this pricing with what your market is willing to pay for your service.
If the price that your market is willing to pay is much lower than your skill rate, then your skill rate becomes null.
You will either have to pay the market rate or sell to a different market that is more aligned with your skill rate. You can’t try to convince your market that your skill rate, which is higher than what they want to pay, is worth it.
This is where a lot of people go wrong with the “charge your worth” advice. They take their skill rate, which may be too high for their market and try to sell their service to them anyway. The result? Lackluster sales and a confused business owner.
This is a losing battle, so don’t waste your time. Go after the customers who have already convinced themselves that they want to pay your prices and go in for the close.
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