Sales Mastery
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Sales Mastery

How To Overcome Pricing Inception

Read this if you’re unconfident in your pricing

Photo by Shapeshift Report

Mastering pricing is much more of a mindset game than a numbers-crunching exercise.

Do you re-analyze your prices after you have a jarring customer interaction where someone tells you how expensive you are, or have that lingering thought that you’re leaving money at the table because you’re priced too low?

When you’re not anchored into a sense of reality of what prices are best for your business, you’re going to float every which way that the tides take you.

Vocal customer complaint? Lower?(!)

Products flying off the shelves? Higher!(?)

Your pricing strategy begins to feel like the plot of Inception where every little interaction and conversation feels like a subconscious manipulation to your numbers.

A top-notch pricing consultant could toss you a 40-page thesis defending why your e-book should be $19.99, but because your pricing mindset is so unstable, you price it at $1.99 because someone at a networking event commented that it’s too expensive.

If you can relate, and every price change you make is followed up with ?!?, then read on.

You Have A Spectrum Of Customers

I won’t spend beyond $50 on any new clothing for a full year, but I will spend $500 every month for 1 hour with my coach.

Different people are willing to pony up money for different priorities.

This same spectrum applies within your target market. Even if they share a similar set of pain points, there is a spectrum of customers who are willing to spend more or less money on your products.

If you didn’t realize this before, it’s no wonder that you’re getting a bunch of mixed reactions from the audience you’re selling to. When you congregate an audience that has different price preferences for your products, the reactions are going to be mixed and really put hits on your pricing confidence.

To stabilize this, get super specific on who your customers are and how much they’re willing to spend on your product or service.

Are they looking for something functional like $2 store-brand spaghetti at Safeway or fresh hand-cut spaghetti made this morning at the local Italian restaurant?

And if they want fresh hand-cut spaghetti, are they willing to spend $5 on it or $10?

If they’re willing to spend $10, how are you refining your marketing channels so that you only speak to the $10 pasta shoppers, and not trying to sell to general pasta lovers who think your prices are obscene?

The better you can listen to your specific segment of customers and ignore everyone else, the more valid your customer feedback will be to your pricing strategy. By cutting out the additional noise, you can waste less energy on feedback that isn’t even relevant to your business.

You Have To Detach Your Worth From Your Product

When you create your own business, it’s difficult to not attach your self worth to it — it’s your baby, and when someone criticizes your baby, you are going to take it personally.

This attachment is what makes your pricing woes hairier than they should be. When you attach your personal worth to your business, selling a product that you’ve created feels extremely vulnerable.

You feel like you’re showing the world the best you can do in one product or service presentation. Insanely scary, no?

When we show the best that we’ve got through a product or service we’ve created, the first thing we want is validation — validation that it’s good, validation that people want what we’re throwing down.

In pursuit of that validation, the moment that the product isn’t moving or sales slow down, we lower that price because we want to get that hit of validation.

I’ve seen 100 different variations of this story in play amongst startup founders where they make some price change from a theme of self-attachment to the business rather than a place from sound business strategy.

Detaching yourself from your business and becoming aware of where your personal insecurities intrude on your business strategy is the #1 thing you should be working on in order to become more confident in your pricing.

Have You Addressed The Unknowns?

Sometimes your mindset around pricing goes haywire because of the unknown. Maybe you just haven’t done all the math to be confident in your numbers.

If you’ve done the typical cost and markup analysis on your prices, but are still feeling iffy — the top step I see business owners overlook is the current and future operational costs of their business.

Sure, you may have a 50% profit margin right now when you don’t have any team members and you’re shipping product out of your home office, but will your profit margin look the same when you need to hire a salesperson and customer service team? Or when you need to start renting a space for inventory?

It’s likely that your profit margin will decrease considerably — in this scenario, are your prices still high enough to cover these new expenses and provide a healthy profit margin?

If you loved this, I send weekly action plans every Friday to help startups like yours grow their business. Sign up here if that’s your jam.

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