Your worth. Your value. Your prices.

[Ikke]

I personally thought it was a nice way of showing another way of letting the customer set the price. Which is quite relevant to this topic i believe

 

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[Jason K]

YouCanMakeSales, I apologize for my part in taking this thread off-track. I am allergic to much of what passes for marketing wisdom and had a hypersensitive reaction solely based on my perception (which is just my perception, not necessarily reality) of rehashed out-of-context content.

I appreciate you taking the time to say so.

 

[ALSL]

This is so strange. Personally, I found his "re-hashed copy and paste" post to be extremely valuable. In fact, what he wrote is pretty much the same method as Dane Maxwell's in contacting small business owners and finding out their problems, then having THEM tell him the price they're willing to pay for the solution.

Dane, of course, has his own businesses making him money, which gives his coaching credibility (since he used those techniques to create those businesses) but still, good material is good material. The fact that he wrote what was basically a script that anybody can follow is something to be admired.

I'm definitely going to be trying his script out, probably practicing it in front of the mirror a couple times first.

Also, concerning relevancy, I actually think it's extremely relevant.

OP was talking about a pricing strategy that is for dummies. The reason he did so was because he didn't have the confidence to set a price then go with it.

In response to this, youcanmakesales tells OP how he can extract the appropriate pricing from potential clients. If OP applies the techniques mentioned PRIOR to building his business, he could actually pre-sell it and maybe even have paying customers PRIOR to building the business!

Just my 2 cents.

 

[nzerinto]

I think YouCanMake added some good value to this thread. I for one have never read the earlier post before (on the other forum), so "rehashing" it on this forum is much appreciated, because otherwise I would've never had a chance to read it. Besides, he does mention at the start that its a copy and paste...

In regards to the original topic, there have been a number of businesses that followed the "pay what you think it's worth" model. From what I recall, there was a restaurant doing this, and what ended up happening is that people were paying MORE than the equivalent cost at a similar type of restaurant.

What they believe happens is that the largest motivator to paying more is that people inherently don't want to appear "cheap", so they'll pay more, just to make sure they don't look bad.
I'm sure there are a raft of other reasons why they pay more (including wanting to encourage the business, so more follow suit!), but I thought that point was very interesting.

 

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[Jason K]

I think YouCanMake added some good value to this thread. I for one have never read the earlier post before (on the other forum), so "rehashing" it on this forum is much appreciated, because otherwise I would've never had a chance to read it. Besides, he does mention at the start that its a copy and paste...

In regards to the original topic, there have been a number of businesses that followed the "pay what you think it's worth" model. From what I recall, there was a restaurant doing this, and what ended up happening is that people were paying MORE than the equivalent cost at a similar type of restaurant.

What they believe happens is that the largest motivator to paying more is that people inherently don't want to appear "cheap", so they'll pay more, just to make sure they don't look bad.
I'm sure there are a raft of other reasons why they pay more (including wanting to encourage the business, so more follow suit!), but I thought that point was very interesting.

Thank you for seeing the value.

A couple comments:

First, Budget "fit" is one of the three keys of understanding whether you want to work with a prospect or not. You definitely have a lower limit. So say your prospect announces that they believe $200 is a fair investment for a solution that brings them $200,000 over the next 12 months. I would respond with something like, "Really, John? A $200 investment to bring you $200,000? You want to think that one through again?" I am ready to walk away from any prospect at any time. Jokers are not a fit. Budget is tied right into your self-esteem. Ever taken on a prospect who you agreed to let pay you far less than what you felt you deserved for that project? How did you feel about that prospect? Resentful, right? And whose fault is it? So we must have a minimum that we'll happily do the work for--and if our prospect can't or won't pay us that amount or more, we don't do the work. Otherwise, we'll get tied up with low quality, bad fit clients who we resent.

Second, high prices often create perceived value. If it costs that much, it must be worth it. Alternatively, something cheap can't be very good. The method I described typically puts the prospect into the mindset of seeing the value the solution is creating. Even if they are "cheap" and believe a 5% investment of that total revenue is fair, that often results in a price that is many times what the salesperson would be happy with.

 

[RealOG]

I think you are confusing "pricing" with "sales". YCMS post does a great job of selling value, which I consider a key element of any direct sales method. However, how do you price if you don't have the option of meeting one on one with every customer? What about retail, where you have about 7 seconds to capture your customer? Most consumers don't want to pour through paragraphs of data and numbers, or meet with a customer rep when they are making a simple buying decision.

Bottom line, you customer will only pay for the value they PERCEIVE. Pricing is actually and incredibly complex and very overlooked piece of marketing. Most businesses price based on either what they want to make per transaction or base it on what their competitor is charging. They completely overlook customer value. If you can afford it and have the time to spend on it, value-based pricing is by far the most effecitve way to price your product or service.

An expert pricing strategy involves looking at:

• Customer perceived value
• Actual customer value
• Competitors' pricing
• Customer psychology
• Customer segmentation

I did a preso three B&P's ago on customer segmentation and how you can add value to an existing business through value-based pricing and customer segmentation. Not sure if it's somewhere on the forum, but might help here.

The "pay what you want" strategy is more of a charity-style of pricing and inevitably leaves dollars on the table. I would not advise it for anything you are selling with a goal of high profits. What it has been best for is publicity, like when Radiohead did it with their album back in '07. Shareware/freeware is an example of "pay what you want" in action, very few of those ever reach any real revenue. Add to that, "pay what you want" is almost unsellable as a business model, it probably makes sense to invest some time in figuring out what to charge.