Let’s say you want to make an extra million bucks this year. Cool, right? Well, here’s how it breaks down: you’d have to sell 20,000 copies of your product at $50. Or you could sell 2000 copies at $500. Better yet, you could push out 200 copies at $5000. It’s a lot easier to deal with 200 customers than 20,000. If you boil down some of the biggest profit windfalls I’ve had in business, it comes down to selling premium products – and services at premium prices. Before the “how,” let’s discuss the “why.”
- More Profits: When you sell at higher prices, you make more profits – no surprise there. Very few companies have been able to sustain a “low price” position in the marketplace. Sears couldn’t, K-Mart couldn’t, and now it remains to be seen how Wal-Mart does with that position.
- Better Customers: Price qualifies your customers more than you might realize. The customers who spend significant amounts of money are, surprisingly, easier to deal with and less demanding. What’s more, your customers will be more compliant and actually do what you tell them to do. Think about the last time you gave free advice to someone. What happened? Nothing. But if you’d made them pay you for consulting, they would have taken it to heart.
- Psychology of Price Works in Your Favor: We’ve always been taught “you get what you pay for.” It’s not uncommon for a prospective customer to discount a product because it’s “too cheap.” If the price isn’t in line with what people expect, they suspect something’s wrong. You also gain instant respect and recognition with higher prices. Of course, you better have the goods to back it up.
- More Value: Ultimately, the value you provide will dictate the profits you receive from customers. Having high-profit products with high margins allows you more wiggle room while delivering sensational value. Not only can you throw in high-value extras, but you can afford to deliver truly unique, unadvertised bonuses and follow-ups.
- Some Buyers Won’t Buy Low-Priced Items: It sounds crazy, but some customers are only premium buyers. If you gave them a discount, it would actually decrease their response. Plus, some customers are only comfortable buying in the high-end range.
- Create Big Paydays: It’s much easier to hit big paydays by only having to sell to a handful of customers. If you have a group of customers who respect and appreciate you, you can simply create a high-value proposition and have them pay for whatever new item you’re offering.
- You Will Own the Marketplace: With high-priced products, you have the room to give affiliates such a significant commission that you’ll see a feeding frenzy of activity. Plus, you can spend more on your own to acquire a customer. This is huge! If I’m in the same marketplace and I’m competing against someone who has a $100 product at the end of their sales funnel and I have a $10,000 offering, there’s virtually no contest.
The fact is that the business owner who can spend the most to acquire a customer will win, period. And now, for the “how”:
- Step 1: Brainstorm: Find a trusted advisor, work with your team, or just grab a legal pad and start coming up with answers – it doesn’t matter how crazy they are, just write them all down. In fact, the rules of brainstorming should be used:
- Rule #1 – No criticism allowed (turn off your left brain).
- Rule #2 – The wilder, the better – everything is possible.
- Rule #3 – Think in terms of quantity.
- Rule #4 – Jump off and “plus” others’ ideas to create a snowball effect.
You want to start with a blank slate and ask questions like these:
- “How can I provide 10 times the value to my customers?”
- “What can I do that will absolutely amaze them?”
- “How can I get my customers the end result they want on a silver platter?”
- “How can I do it for them?”
- Step 2: Your Thinking: People are usually too slow to raise prices, and it’s more about confidence and self-image than the actual value delivered. We all have self-images and if you aren’t charging a premium, it usually has more to do with what’s between your ears than the actual marketplace. This brings me to my next point: never allow your competition to set your prices. There will be always a very profitable spot for businesses at the premium scale who deliver what are perceived as exceptional products and value.
- Step 3: Targeting the Right Marketplace: Another mistake I see a lot is going after markets who cannot afford to pay premium prices. There’s no reason you can’t have another division of your business go after customers who’ve already shown they’ll pay premium prices for products/services.
Keep in mind, though, that psychology is the best sell. People often buy solely on the basis that a product is going away, is only offered to a select group, or simply makes them feel good inside. Application processes are often good for this same thing in the sense that they enhance and showcase the exclusive nature of the product, allow you to screen people buying the product, and get people to sell themselves on your product.
The only thing stopping you from increasing the price of your product is you. By adding even a few of these elements to your marketing strategy, you’ll be pleasantly surprised at how easily you can double or triple your prices (and profit), while still providing an exceptional value to customers.
Yanik Silver has built multiple successful online businesses, one of which is MaverickMBA.com, even though he still considers himself a “techno dunce.” He has successfully bootstrapped 8 different product and service ideas, hitting the million-dollar sales mark from scratch without funding, taking on debt, or even having a real business plan. His newest book, “Maverick Startup,” is available from Entrepreneur Press.