Pricing Mistakes and How to Avoid Them
September 5, 2023
Welcome back to Business Unfiltered with Mercer and Jeff Sauer today's topic is Pricing Mistakes and How to Avoid Them
0:00: Mercer defines what comes to mind for him when he hears a pricing mistake. Jeff talks about pricing mistakes, including not putting the pricing on the buy button, and how that can lead to communication issues. Pricing for services is based on an estimate of effort and the team trying to get a margin in there, and also trying to maximize the profit. When providing a service, it is more about bidding from a pricing perspective, not getting the product market fit right.
3:35: Pricing and the value of the product. There is a little bit of science and a lot of art when it comes to pricing. Part of the thinking behind pricing is what is the point of the product. The 47-hour course for the
measuremarketing.io brand is a low-ticket, high-quality lead that is involved with the brand. They discuss the importance of recurring revenue and recurring retainer model pricing, they don't like doing project work because they don't want to go back to the client for 10 times as much. And delve into the value-based pricing stuff, and how it covers up the mistakes that might be made.
7:10: Pricing the product. Selling the same service to a small business for $3,000 and to an enterprise for $30,000, because that is how they will buy it. How to handle stuff like that, because you don't want to feel like, you're selling to the wrong person, and they don't buy. From a service perspective, it is a lot more nuanced, because it is its value, its level of service, and it's what you can get away with. One of the big mistakes that people make is they think that it's the same service yet it's not. The biggest difference between a $3,000 service for a small business and a $30,000 services for an enterprise is the amount of back and forth to get the contract signed.
12:46: The difference between small business vs major business. 80% of the core product is the same, but the 20% that is different for small business vs major business is different. The small business trap. The challenge of working with an enterprise that is chaotic and siloed, and the importance of hiring someone who enjoys it. The definition of a small business, and why working with small businesses is a good way to make a faster impact.
16:29: Building a margin into your pricing. Pricing is a combination of three things that work together, the margin, the time and effort and the effort put in. The profit first mentality is a permanent banking solution to a problem that is a mental mental problem or a mental process. Jeff used to charge $500 an hour to do an audit. Now he was hearing no more often, he got ghosted way more at $10,000. The next evolution is to have someone follow a process and spend 80 hours doing something at five to $10 an hour.
20:50: Pricing and making mistakes. The importance of just getting started with pricing, and how it can help you find the sweet spot in what the reins of the market is going to bear for the service you're providing. How to get past the fear of charging too much or charging too little. The first step is to take what you got paid at your last salary job and divide it by 2000, multiply it by four, and add in the margins. If you want to have a profit and you want a margin, multiply that by effort and that's how you come up with your quote. The next time you do it increment by $500 or you know, 10 to 20% each time.
25:50: Pricing mistakes. When Mercer first started, he created a training video site for Wordpress to teach people how to do Wordpress. He also created a membership site in two hours. The moral of the story is when you're getting started, it's more important to get moving than to be right. The biggest pricing mistake is being afraid of making mistakes. Every time that you make a mistake is data, at the very least you are getting data. People are so afraid of failing that they sell themselves short in order to win, but those wins are just like eating a candy bar. Jeff shares his final thoughts on the topic of pricing mistakes and how to avoid them. Jeff encourages listeners to subscribe, leave a review and tell a friend what they've learned today and connect with him at Business Unfiltered.
Topics Covered In This Episode
- Understanding Pricing Mistakes: Jeff and Mercer delve into common pricing errors, emphasizing the clarity in price display and the pitfalls of misaligned product-market fit.
- Art and Science of Pricing: Pricing incorporates both artistic intuition and analytical thinking, exemplified by measuremarketing.io's 47-hour course strategy and the value-based pricing approach.
- Differential Pricing for Varied Clients: The nuances of offering similar services at different price points based on client size and the intricacies of client negotiations.
- Small vs. Major Business Dynamics: While the majority of product offerings remain consistent, there are distinct differences when catering to small businesses versus large enterprises. This includes challenges faced and the impact potential.
- Incorporating Profit Margins: Pricing is a confluence of margin, time, and effort considerations. Jeff's personal experiences with price adjustments underscore the importance of refining pricing strategies.
- Navigating and Learning from Pricing Mistakes: Emphasizing the growth mindset, the session underscores the importance of iterative pricing adjustments and viewing mistakes as learning opportunities. Jeff concludes with actionable takeaways for listeners and a call to engage further with "Business Unfiltered".