More is Better!
This past week, I was doing a little contingency consulting with a client and friend. Contingency consulting is when I offer an idea, explain how to implement it, and, when it works, receive a percentage of the profit. Some people hate this method of payment, because they cannot resist the temptation to take me up on the offer. However, when it works, they hate paying the fee, because it seems too easy for me to earn it. There is clearly something wrong with that kind of thinking, but that is a lesson for another day. The advice I gave them is the lesson for the day.
The client is in the info-marketing business and is doing an infomercial on a new product which is delivering great numbers. If you know anything about the info-marketing business, which uses a 30-minute infomercial to bring people to a seminar, then you know that the key to success is based on the numbers. What is the cost to get a person to your live event, and is your conversion ratio high enough to cover the cost of your marketing and hopefully make a little money on the front-end sale? Nowadays, most don’t make any money on the front-end sale, because costs are running too high.
At this time, I am not at liberty to disclose the product being offered in this case but it doesn’t matter. What I can tell you is that the product was being offered for $1995. What was the golden nugget that I gave the client for my fee?
Raise the price to $2995!
The truth of the matter is that, to the buyer of this product, there is no difference between $1995 and $2995; what the customer is buying is results. If they do not see results, they can get their money back. If they notice results, they will not care about the price of the product, because they will make more and achieve a return on their investment.
Most interesting is that, in this case, my real opinion was that the price of $2995 was also too low. The real price where they are likely to get the greatest return compared to the closing rate will be $4995. Time will tell, but this will be tested and proven in the real marketplace.
Most goods and services are priced too cheap, because manufacturers place themselves in the buyer’s seat and wonder what they would actually pay. The real answer is to price based on value, offer it with an irresistible money-back guarantee, and then deliver the promise. If you can’t deliver the promise, then get out of the business anyway. If you can, then the price doesn’t matter since you can prove value.
Please take a look at all of your products and services. Do they offer a higher value to your customer? Is there room to increase your price – not based on what someone else charges, but based on the value that you or your product delivers? If there is room, raise your price.
Never be afraid to test the upper limits of price. In the worst case, you may have to drop prices back down when you find the one that yields resistance. Also, let the market determine that resistance with real dollars; do not determine it based on what your spouse, business partner, or golf buddy thinks. Test and adjust price based on real facts voted on with real dollars by your customer, and you will be surprised at what you learn!