Increase Your Income By Increasing Your Prices (Money Levers #6)
When it comes to creating more income — especially in a short period of time — the usual low hanging fruit is to offer a discount. Putting something on sale and making a big deal out of it is pretty much the “one trick pony” tactic for lazy marketers. It is the go-to strategy.
But, does it have to be that way?
Don’t get me wrong — it does work. In fact, in Money Levers #5 about running flash sales, the discount was the driving factor. Of course, in order to ensure that discount pricing doesn’t kill your business, you need to ensure you do it right. For more on that, go back and read about flash sales if you haven’t yet.
What about going the other way?
What if, instead of discounting our prices, we raise our prices?
That brings us to the topic of this sixth installment of the Money Levers series…
Raise your prices to bring in more business.
If You Want To Make More Money…
… then charge higher prices.
It is that simple.
I grew the revenue of Blog Marketing Academy by 28% in 2015, and the primary driver of it was making more higher ticket sales. There were 3 main avenues for this:
- Offering an annual membership upgrade to all new Lab members who enrolled in the monthly membership. Made it a pretty no-brainer upgrade and the conversion rate on that upsell was pretty respectable.
- Running an automatic webinar which made a special offer for an annual Lab membership.
- Periodically opening up a lifetime membership option to the Lab.
The price ranges on these things ranged anywhere from $199 to $297.
So far in this year (2016), I am slowing phasing in price increases across the board. The lifetime membership of the Lab is currently on its way up to about $500, and the monthly rate will be increasing soon, too. There are also some higher-end things in store which will be available.
BTW, now is a good time to enroll in that lifetime membership in the Lab, before I hit my target price for it. :)
Why this works is just plain obvious… charging more money means you collect more money. I mean… duh, right? ;)
But, it goes right to the heart of the 3 ways to grow any business, which (once again) are:
- Get more customers.
- Increase the average transaction size.
- Increase the frequency of transactions.
Front-end offers — and flash sales — has the entire point of accomplishing #1 above.
But, raising your prices is how you accomplish #2. You can do this by
- Simply increasing prices on existing offers, or…
- Setting up upsell offers.
I mean, it just makes perfect sense to provide an annual upgrade opportunity to new monthly member signups, right? Of course it does.
What Can You Charge More Money For?
Well, as a recovering low price fanatic myself, I can tell you without any reservation that… chances are, you don’t charge enough for your products. :)
So, the first thing you should do is look at your existing offers and look for opportunities to raise your price.
Secondly, look at potential upsells.
- Add an annual upgrade option to monthly member signups
- Add an exclusive option for recurring members to upgrade to a lifetime membership
- Add an upsell to any one-time sale, such as coaching.
Just come up with something. You can go back to Money Levers #2 and use the Product Idea Checklist to brainstorm potential upsell offers.
You really shouldn’t put any offer out there for sale without at least some kind of upsell.
“But, My People Won’t Pay That Much”
I hear that all the time. Thought it myself lots of times. :)
Until I read 80/20 Sales and Marketing, by Perry Marshall. This is a great book and you should check it out. The main idea behind it is that the Pareto Principle, or the 80/20 rule, applies to sales as well. 80% of your revenue will come from 20% of your customers. In other words, MOST of your revenue will come from 20% of your customer base.
Put this into funnel terms, and it looks like this:
- Maybe 20% of the people who see your first offer might buy it. The other 80% will not.
- Of those 20%, 20% of THEM will take a the higher-priced upsell.
- Of those 20%, 20% of them will take an even higher-priced upsell.
- And so on
So, let’s take 100 customers. 20 of them will take a higher-priced item. 5 of them will take something even higher priced than that. Of those 5, 1 of them might buy your top-end offer and be willing to spend several thousand dollars with you.
The point is, there are always those people who are willing to pay more for a variety of reasons. They prefer the “done for you”, cadillac version of your offer and they’re willing to pay for it.
So, if you don’t have those kinds of offers available, you’re leaving a TON of money on the table. Sure, it won’t be the right fit for everybody. In fact, it’ll be wrong for MOST. But, there will be those few who it is right for. And those are potentially big sales.
Plus, let’s be real…
Those people you might think “won’t spend that much”… if you look at their lives, you’ll probably see they buy higher priced things all the time. Maybe some of them will take expensive vacations, or drive a fancier car than most, or live in a pretty nice house. Point is… they will spend money. However, they need to see the value first. It isn’t that they simply won’t spend that much… it is that you haven’t shown them the value.
Make the value you’re presenting outweigh the value of the money in their pocket — and they’ll buy.
Pulling In Short Term Revenue Using Price Increases
Well, the idea of Money Levers is to be able to generate revenue on demand and predictably grow your business. While raising your prices is a good strategic move to grow your business, it is more or less a long-term play.
But, you can turn it into a short term spike pretty easily. You simply announce the price hike in advance and give people a limited window to take advantage before the new price goes into effect.
It is super simple. It takes advantage of the same urgency that a sale would… except this time you’re going the other direction.
The good thing, too, about doing these price hikes is that you can use each one as an opportunity to make some sales before the increase takes effect. Then, the higher price gives you opportunity for discount sales from time to time without having to go so low.
Price is part of marketing. You might as well use it.
One Important Thing About Higher Prices…
Prices are definitely a component to marketing — and you can make money both by lowering prices temporarily (via a sale) or raising your prices.
But, always always always…. make sure your offer is worth more to your customer than you are asking.
In other words, if you’re going to raise your price, you better be damn sure your offer is worth it. Not only should you be looking for opportunities to raise your price, but even more importantly, you should be looking for opportunities to raise your value, too.
Make your offer more valuable… THEN increase the price.
You always want to ensure the balance of exchange leans in favor of your customer. (See: The Non-Marketer’s Guide To Pricing Your Digital Products)
OK, so far in this Money Levers series, we’ve establishes what the 3 basic levers are:
- Products and offers you can sell. (Read: Money Levers #2: Creating A New Offer Using The Product Idea Checklist (And Selling It Before You Make It))
- Predictable traffic (Read: Money Levers #3: Rethinking Traffic And How To Get It)
- A sales funnel (Read: The Foundation Of Real Blog Monetization: The Blog Profit Funnel (Money Levers #4))
Next, we began looking for ways to manipulate those levers to predictably grow your business and bring in income.
And then in this post, we’ve talked about increasing prices.
But, there are other maneuvers you can use as you pilot your business with those controls. And we’ll go there in the next installment. See you then. :)