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Price is a very vital part of your formula for success in business and with your finances. Most people get confused or are conflicted about pricing their products or services. Set your price too high and people won’t buy. Set it too low, and you will go out of business or find yourself unable to really expand. Business owners and sales people are constantly hammered by the media, their customers, and even their staff with the notion that customers don’t have money, competitors have lower prices, and that the economy is weak so we must lower our prices.

The first response by most is that if we lower our price, we will be more competitive and sell more of our products. While a lower price may increase traffic or interest, a lower price almost never actually sells your product. Lower prices and promotions should be used to drive traffic and create interest but not to actually close a transaction. There is nothing wrong in using price to drive traffic but you have to know how to convert that traffic successfully and then figure out how to make up the lower prices with other sales.

One way to do this is through a second sale, an easier sale to make than the first. It offers the opportunity for more problem solving after the initial product is decided upon. If you bought a new cell phone and then a protective cover and an extra charger you know exactly how the second (and even the third, forth etc.) works.

Remember that while a lower price is the popular way to make a deal, it is never the reason someone buys anything. A purchase won’t happen until your potential customer is sold on the value of your offer and even more importantly, convinced that your offer would solve their problem. People do not buy products because of the price; they buy products with the hopes that it solves some problem.

I’m sure you recall a time where you saw a “special low price” for a product or service. Maybe you did more research and either passed on it because it didn’t solve a problem. Or maybe you bought it but only because the value of the product or service meant more than the money you parted with to get it. Value matters more! You can find a $10.00 shirt marked down from $100.00, if it’s not the right size or color or you simply don’t need it, there’s no value to you and you will not buy.

The key is to understand the value of what you have to offer it, believe in it fully and present it as a solution to a problem.