Back to PodcastBut I Wouldn’t Pay For That In this episode, I’m talking to you about pricing. How do you price your products or services, programs or memberships, courses, and all the other things that you may be selling? Download as an MP3 by right clicking here and choosing “save as.” RSS feed for Marketing Your Business Big Ideas The backstory [0:20] This came up in a conversation I had with my little sister, Faye. Faye is starting a great little company called The Doodlebug Company. She’s taken this concept of creating amazing coloring posters for kids, which was initially a passion project she did for Christmas and birthday gifts. But since then, a lot of people started asking her to create one for their kids. And as her brother, I have been encouraging her to turn this into a membership. She has been selling them one off up until this point, and she sold over 300, so when she started getting close to turning it into a membership, we got talking about pricing. I asked, “Faye, how much are you charging for these things?” And when she told me the price, my jaw literally hit the floor. I said, “Faye, you’re way undercharging,” and Faye said, “No, with the cost of everything, and then I charge a little bit more.” I then told Faye that we don’t price our products based on what it costs and then add a little more. That’s not an effective way to price things. You are NOT your customer [2:32] Too often I see entrepreneurs way undercharging what they should be because there’s a mental block that’s preventing them from seeing the true value of what they have. Sometimes we’ve got to get through our own misconceptions of the value of what we are creating and charging. And we’ve got to get clear on the true value that it provides for the end user. Whenever you’re looking at charging something, first and foremost, remember you are not always your customer. You may start out that way, like many times great business ideas are started because you’re scratching your own itch. That was the case for me with my first software company, WishList Member, and now that’s what we’re doing again with Searchie.io. But it’s not always the case. I was trying to explain the same concept to my friend Clay and his brother Josh. They are one of those guys who can fix anything. I sent them a Facebook post I saw months ago from a gentleman called Marshall Wayne. He was talking about how during COVID last year, he had fallen on some hard times, and instead of getting down on himself, he started to get proactive and look for ways to make some money. So he made a post advertising his services for doing odd jobs for people. Slowly, he started to see that a lot of the odd jobs he was being hired for were hanging and mounting TVs. He thought that maybe he should specialize in this, become known for something specific, so he created a website and started running specifically targeted ads to a geographic region for this particular service. His business took off, and he was generating over $7,000 a month very quickly just by offering services for hanging TVs. I sent this to Clay and Josh as a perfect example. They could easily do something like this because they are so good at what they do. Clay has told me in the past, “But you could just look up on YouTube and figure out how to do that.” And he’s right, he could do that but he’s not his customer. There are people like me, it doesn’t matter how many times I watch YouTube videos, I’m never going to get it right. I just want to pay somebody to do it for me because I know if I get in there, I’m going to screw up the wall and the TV, and it would be an absolute disaster. The other side of things is that people buy products, services, memberships for different reasons. I don’t know if you’ve ever gone to the grocery store and analyzed this, but looking at how products are positioned, how they’re selling, I remember seeing pomegranates around Christmas. You could buy them individually for $2 or $3 each, or you could get a bag of pomegranate seeds, the stuff to eat, for $7. If you looked at it, you were actually getting less in the bag, but you’re paying twice as much. Logically, why would you pay twice as much for less? And the answer is convenience. Remember, you are not always your customer, so the way you think may not be the way your customers think. Focus on the value of what you provide [9:37] Number two, focus on the value of what you are providing. This is what I was saying to my sister, Faye. “The price you charge is not just a little more than the cost of what it cost to deliver the product. That’s not how you price your membership, or your products and services.” The price is based on the value of what you’re providing to that end customer. So, when it comes to my sister and these incredible full-sized poster coloring sheets, you know what the value is for me as a parent? My kids are having something that they can dive into that’s going to give me an hour or two of peace and quiet, it’s productive and creative. It’s not them sitting in front of a screen. Not only that but it makes for an awesome gift because it’s customized, tailored, and personal. So, when you’re pricing your programs, I don’t ever want you to think, “Okay, what does it cost me? It cost me $7 to deliver that, and create this, and deliver this, therefore I should charge $10 or $12 or whatever.” No, no, no. It’s not your cost plus a little bit more. Think about the value. How is someone’s life going to be better as a result of your product or service? That’s what you’ve got to focus on. Start low but raise it up [11:42] Number three, you can start low but raise it up. So many times entrepreneurs will not even make an offer because they don’t know what to charge. If that’s the case for you, start low but raise the price up as you go. In the beginning, what’s more valuable to you as a business owner is not so much the money. What’s most valuable to you, are satisfied, happy customers that are using what you’re offering and experiencing some type of progress, some benefit in their life. The stories of people benefiting from you and your offer are more valuable to your business long-term than any short-term revenue you generate. So, in the beginning, start low. Get as many people in just for the stories, but then there’s a shift that’s got to happen because you don’t want to keep your price low for the sake of keeping it low. You want to raise the price so that you can invest more in the business, invest in marketing and get your offer in front of more people. Let me give an example. Back in the day, I was business partners with Michael Hyatt. We launched Platform University, a membership site. We started it at $20, immediately raised it to $25. Then we went from $25 a month to $30 a month. Then, from $30 a month to $37 a month, and from $37 a month to $47 a month. We didn’t start at $47, we started at $20 but over time we raised our price, and each time we raised our price there was a built-in promotion. That promotion allows you to begin to generate more revenue in the business, to have more resources to invest back in the business, to make the products better, to make the experience better, to invest in a team, to be able to invest in marketing, to get what you have in front of more people. The business benefits tremendously because you now have more resources to help more people. Memorable Quotes “People buy for different reasons. You have to remember that you are not always your customer so the way you think may not be the way that your customers think.” – Stu McLaren “The price is not based on what it cost you and then a little bit more. The price is based on the value of what you’re providing to that end customer.” – Stu McLaren Resources Episode 133 – Make Your Price Feel Like a No Brainer The Doodle Bug Company on Instagram Rate & Review the Podcast Reviews for the podcast on iTunes and greatly appreciated! They help us build awareness for the show, which in turn allows us to bring value to more listeners like you. Not only that, but they help us better understand what matters the most to you so that we can constantly improve. If you received value from this episode, it would mean the world if you could take a moment and leave your honest rating and review. You can do that by clicking here.