How Your Product Pricing Can Kill You

Product pricing is critical. Most marketers make their most jumbo mistakes when it comes to the pricing of their products or services. You should never set your product pricing up based on your cost of your product or service. Your cost should never even be much of a factor at all. What is most important is that you are charging the maximum amount your market is willing to pay you.

As an example of how the mistake of under-pricing can hurt you, allow me to tell about one of my own experiences. Back in 1996, I found a programmer who was selling a software program for only $49.95 to the opportunity seeker market. Well, based on my own testing of his market, I knew that his customers would be just as willing to pay $350.00 as $49.95 for his software. I know this sounds hard to believe but it's true. I had done the testing and my tests were 100% conclusive that it would be just as easy to get these people to pay $350.00 for a copy of this software.

So I told him I could quadruple his profits over-night for him. When I told him I could do it by raising his price to $350.00 for the software he almost laughed at me. He told me there is no way his customers would all be willing to spend four or five times as much money for that same software. He said you'd at least have to add several new features to the software in order to justify that kind of large price tag. I told him: "No, you won't have to add any features. You'll be able to get $350.00 for every copy of your software and you won't have to change the software one bit. You won't have to change anything but the price.

Again, I was very sure about this because my extensive testing already proved to me that the customers in this market would have no problem paying the extra money.

Although this programmer was reluctant to even try this pricing experiment, he finally decided that it couldn't hurt anything to up the price for a week or two. So just to prove me wrong, he did it. And guess what. It's now almost eight years later and he's charging up to $499.00 for his software and getting it! He's been getting it ever since I told him back in 96. Remember, this is the same software he was charging $49 for.

At first, back in 1996 when he first started raking in orders at that big price tag of $350.00, he told me he felt guilty about taking so much money from his customers even though they seemed perfectly willing to pay it. Don't ever let guilt run your business. Be tough. There is no room for weakness in business.

If you're going to be a business man/woman, you're going to have to get past your feelings of compassion, sympathy, empathy, and guilt! If you're wrapped in all these different types of emotions toward your customers then you're in the wrong business. You should get involved in volunteer work or fundraisers. I'm not trying to imply there's anything wrong with volunteer work or fundraisers. I wish there were more of them out there, but that's just not my preferred occupation.

I'm in the business of putting myself in situations that have a high likelihood of bringing in serious cash. High product pricing is how I do it.

The bottom line is this: Test out exactly how much your target market is willing to spend. It would be a big mistake to guess at this. Just test it! You should even know how much is too much for your target market. Then go just below that amount as your selling price.

There is also that great myth that most people still believe must be true. The myth is this: The most expensive product is probably the very best quality. Do you ever notice how often times when people tell you about something they just bought, they'll brag about how expensive it was. People try to show that they bought the very best by saying "I bought the best home theatre the store had. It's a $10,000 entertainment system."

It's that famous idea that more expensive means better. Then this same person will go brag to friends by saying "Man you've got to check out my $10,000 home theatre system!" And their friends will definitely want to see it because they believe in this principle that high priced stuff is the best! Things don't always work this way but you should just remember that a big price tag can often times capture peoples attention just because it appears to be the best on the market.

Another trick you can use to get your target market to be more comfortable spending bigger dollars on your bigger price tags is to add more value to your product or service that your competitors don't provide. Even if your product pricing is basically the exact same thing that as what your competitors are offering, you can make yours appear much more valuable. How do you do this?

Simple, just add more customer service, tech support, special knowledge/literature, related bonus items, or anything else that shows your customers that they'll get better use out of your product because of your extreme knowledge of the industry that you're going to pass along to them.

On the opposite site of the spectrum, don't make your prices too low. If you're selling a marketing software program and including several thousand targeted fresh leads but your price is $9.95, it now sounds like it's cheapo junk and not worth much. At $9.95 it just has a cheap sound to it all of the sudden. But if it were priced at $49.95 it suddenly sounds like a more serious and valuable product. So don't make your prices too cheap in hopes that you'll sell mass quantities of your product and that you'll beat all your competitors. The opposite is likely to happen. The fact that your competitors are charging four times more money than you can easily create the illusion that they have a better product than you. And the amazing thing is that you'll often sell less product at $9.95 than at $49.95

Yah, I know it sounds impossible but if you ask any professional marketer who's been successfully selling products for years, you'll find out it's absolutely true. There are many cases where you'll sell twice as much product just by charging a higher price which changes the image of your product and creates the illusion of a more valuable product. If you need help with the pricing of your products or services, just talk to me about it. Choosing good product pricing points is one of my many secret hidden talents.

Since I review business opportunities and internet gurus all day for a living, you can guess I know which ones work and which ones don't. Click here to see how I make my money.