Akeel Jabbar explains why cheap prices hurt trust. A blind wine tasting showed people rated the same wine higher when told it cost more. He argues low prices signal low quality, while higher prices attract customers who stick around and perceive real value.
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When you think of a car like a Tesla, you may think of words like cool, fast, luxury, or most likely green and environmentally friendly. Why? Because there's a battery built into that with zero emissions. Now, how does it make you feel when you step into the car and you start driving around the city? You might feel like you're making a difference in this world because it's now cool to be green and environmentally friendly. environmentally friendly. The funny thing is, and the ironic thing is, if you were to step into a battery factory, it would make an oil and gas refinery, which has a bad perception, look like you walked into Willy Wonka's Chocolate Factory. Okay? So that's the funny thing when you compare a company that's green and efficient. Now, if you're driving a Lamborghini, you may think of words like fast and luxury as well. However, with now garage park Lamborghini videos, being recorded, other people's perception now is that that guy's trying to make up for something that he may lack somewhere else. Now, the point I'm trying to get at, the perception of value and pricing is directly related to how does that product make you feel, and that's what smart marketing is. My name is Akeel Jabbar. Welcome back to another episode of SaaS District. Now, the second point I want to make on this video is if something is too cheap, most people, what they'll think is that it's either bad quality, there's something wrong with it, or that it's a scam. Okay? And that's the problem with value and perception. And there's been a study where they actually did a wine tasting, okay, across about 20 different types of red wines. And what they did is they asked people to go across and judge and rate. They go in, they wouldn't give the name, they wouldn't give the price of any of the wines, and they would give us a sip. So they try one and rate it. What do they give it? 1 out of 10. Which one they liked the most, why they liked it, and they gave their opinion on that wine. And what they found was that the funny thing is that most people who did that blind test actually much preferred the cheaper bottle of wine, which I think was, I think about $12 or less. Now then they redid that experiment, okay, where they showed the price of each of those bottles of wine, exact same bottles of wine, and people for some reason rated that most expensive wines to be the best that they enjoyed the most. But the funny thing is they didn't actually enjoy it. They only enjoyed it because the price was higher. And that's the funny thing about pricing and the value of what you think you're getting and how it made them feel. So the point I'm trying to get across here is the final point is don't lower your prices. Okay? Up your game, give value, increase your price, and you'll find people will surprisingly look at you as a bigger player than you actually are. Okay? Another funny thing that happened, I don't know if you've noticed, but the dog food industry, if you look back about 50 years ago, And what was the price of dog food? Okay. Uh, compared to where it is today in 2020, the price of dog food and what people are spending on a per dollar, per kilo basis is almost over 100 times, uh, you know, accounting for inflation, all that. It's still over 100 times of what they're paying to feed their dog. Okay. Now if you look at the other side of it is The other variable is the lifespan of how long is your dog living, the age of how long dogs are living for. And if you go back 50 years, okay, and you measure it compared to today, it's exactly the same. Okay? They're not living longer. Dogs are not living longer. It doesn't matter if you're feeding them organic, you know, tofu or, you know, whatever it is you're cooking together and spending all your money to to making your dog healthier, they're going to live to be about the same age regardless of what you feed them. However, people feel internally much, much better that they're feeding their, their, their baby, their dog, much healthier food because it's organic, because it's higher priced, and they feel like they're doing better service for their dog by spending more. And that's the perception of value and pricing. So my first advice to you guys, if you have a company, you're looking to launch a company, or you have a low price company, a product or service, raise your prices. Okay? That's one of the first things we do when you look at SaaS companies is which we work with. The number one thing we look at when we first acquire the company is we look at raising and testing our prices because that's the easiest thing you can do. And what it does is it eliminates a lot of the people who you don't want to be customers. Okay? The people who are going to churn, who are going to be troublesome clients. Whereas if you increase your prices, you work with people who have budgets, who see the value of what you provide. And you see that historically when higher-end, higher-value products that are targeted for enterprise clients where you're charging thousands or hundreds of thousands of dollars per month or year, they usually stick around for a lot longer. Whereas if you focus with smaller businesses who have low budgets, who don't have a lot of money, you're going to see they're going to cancel and they're not going to see the value of what you're providing. So that's my recommendation. Go out there, raise your prices and see what happens. And I hope you enjoyed this video. If you guys liked it, make sure to like our video, subscribe to SaaS District, and let me know what have you done to help test out, or what changes have you made in your business on your pricing, and what results came out of that. All right, thanks again guys, and see you guys on the next video at SaaS District.
