Pricing Strategies - How to Price Your Product or Services For Maximum Profit // There's one simple thing that you can do to make more money. Can you guess what it is? Today I'm going to teach you how to price your product, or service for maximum profit.
RESOURCES & LINKS:
How To Undercut Your Competitors Price (And Still Make Money) [video]: https://youtu.be/TLTL8mzkVLE
You Are Pricing Your Product WRONG! How to Determine Optimal Price for Profit [video]: https://youtu.be/Tgnt7VUcvqw
The first tip I have for you is looking at your costs.
If you know your costs are X for your product or service, you got to charge more than that.
You don't want to be losing money per sale. Everyone's like, oh my god I'm going to beat my competitors. I'm going to take the Jeff Bezos route and not worry about margins.
Well, the reality is, unless you have a big pool of money to blow, you can't do that.
You need to make sure it's profitable, including shipping, services, returns, other things like customer service, you need to take everything into account into your price, not just how much it costs for your product or service, but also all the other things like your office space.
Once you include all of those things to run your business you'll figure out what you need to sell your product or service for, so you can make a profit.
You're not in business just for charity.
You need to make a profit and there's nothing wrong with that.
The second thing you need to do is understand your target customers.
What are your target customers looking for? How do they perceive value when they look at the price?
A good example of this is a company called Diamond Foundry. They have figured out how to make diamonds above land. They match all the characteristics of a diamond that you find in the earth and there's really no difference from it.
But they found they can do it much cheaper, by making it above land and created these machines to create the exact same composition as it does in the earth, to make a diamond.
And when they had really cheap, affordable prices, they found that their sales weren't doing well.
Can you guess why? It's because, everyone's like, oh this isn't the same thing, it's too cheap.
So the moment they increased their prices, people like, oh wow, the quality of this must be amazing.
Sure we'll buy it. There's no difference in the product, but people had the perceived value in their space, that higher price means better diamond.
You need to look at your space. It could be that a cheaper price means more sales. Or it could be, cheaper price means fewer sales, because the perceived value isn't there.
The third pricing strategy I have for you is anchoring.
There's a lot of companies that'll show the initial price of let's say $37 and you may get X, Y and Z, but for $47 you'll get X, Y and Z and also 1, 2 and 3 and also A, B and C, just for $10 more.
By using anchoring you'll find that very few people will choose a lower option, which you don't want them to choose, but the majority of the people use the higher option because you're getting so much more value for just a little bit more money.
And that'll increase your profitability, especially if those other things that you're adding in don't cost you much at all.
The fourth thing I want you to do is A/B test.
Using tools like Crazyegg, you can A/B test your pricing, not only to maximize your sales, but also to maximize your profitability.
Sometimes getting fewer sales means more profit. Sometimes getting more sales means more profit.
Using Crazyegg you can A/B test to figure out what's the right price that you should end up rolling out to generate the maximum amount of revenue and profit.
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