How To Price Products | 8 Minute Guide

How to price a product. So I got a great question from one of my YouTube viewers, Eduardo. Love you guys. And Eduardo wrote in to say, "Hi Evan, I have a question for you. What happens if you found a product or service that people need and is extremely valuable but are having a hard time deciding how much to charge people for it? Thanks, Eduardo." So this is a great question and one that every entrepreneur has to go through when you're launching your product, your service. And I'm going to give you 3 tips. A lot of people will look at pricing based on your costs, right? You look at, well, it cost me $50 to make it, so I'm going to sell it for $100 and make this margin. It's the wrong way to look at it because you have to think about the value. First point is value. A customer cares about what value they're getting from it. If you're trying to sell me something, I don't care that it cost you $50. I may only look at it as a $40 product, and that's the maximum that I'm going to be able to spend on it. So your cost doesn't matter here for your pricing. Your pricing should look at the value that you're adding to your customer. How much value can you bring in there? The more value you're going to add, the more money you're going to make, the more you can charge for your product or service. Okay? Business, the, one of the most important rules is adding value. You want to make a lot of money quickly, you need to add a lot of value to your customer quickly. So think about how you can add more value, how you can make your customers' lives easier, and what what that time savings is worth to them, or what the extra bonus that they get from using your product or service is worth to them, then that's how you figure what you're going to charge. Okay? So think about value added instead of a cost-based way of pricing your product. Okay? Number 2 is your audience. You have to understand who your audience is and what their budget is. And there's 2 ways that companies usually go. It's either going after low low quantity but high price ticket, or big quantity and low price ticket. So you look at cars, okay? You have Ferrari, you have Honda. They're both selling cars, but they're selling to a different audience. Their audience have different budgets, and so they sell different vehicles to them. And it's not just about a different price point, it's a different car completely, right? When you buy a Ferrari versus a Honda Civic, you're getting a different car, okay? It's not the same car, and they understand who their audience is and what their budget is. So if you're selling to Ferrari, those guys are spending tons of money on it, but they're getting still value for their dollars, right? They're, they're buying because they feel like they're still getting good value. And then when you buy a Honda Civic, it's a completely different audience, but the people buy a Honda Civic, they're still feeling like they're getting value for it. So you're pricing it according to value, but understanding your target audience, and then you build your product or service to cater to that market. So you have to understand as a company which direction you're gonna go in. Do you wanna work with a few clients who are paying you good money and that's how you're gonna grow your business? Or do you wanna hit a ton of people, mass market this thing, and that reflects having a lower price point for your product or service? Number 3 is stage of business. You have to think about what stage of business you're at right now. Are you a pure startup or do you already have a reputation of being established? Because there is a bias against startup entrepreneurs because it's riskier. It's riskier dealing with startups. As a customer, it's harder to deal with a startup entrepreneur than it is a more established business. Why? You look at— so I don't know what you're selling. Say you're selling machines or equipment. If I buy from you, I want to make sure that you're still around in 5 years. I need somebody who's going to maintain my stuff. If my machine breaks down, I want someone to come and fix it or give me a replacement. If I'm worried that you're just starting, you're not going to be around in 5 years, then it makes it riskier for me to buy from you. Say you're selling a service, if you're a consultant as an example, I want to look at, well, who have you worked with before? What other companies like me have you helped? If the answer is nobody, you're just getting started, then it's risky for me, right? I'm probably going to say no. It's harder for me to get to that yes because you don't have the track record. So no matter what you're selling, there is a bias against the pure startups because you don't have that track record of experience. It's riskier for me to work with you than somebody else. So typically you'll find you'll find that there's a price reduction that comes with startup entrepreneurs. So you start by having a lower price because you need to get your name out there. You need to get a portfolio. You need to get some traction, some momentum to show that everything you say works actually works, right? So you have a lower price point, and then as you get more experience, as you get better, as you can add more value and demonstrate that, you can increase your prices. A big challenge though for a lot of entrepreneurs is we stay stuck at that low pricing. Too many entrepreneurs underprice themselves. And what I want you to do is think about how can you start increasing your pricing. Okay, you're adding a lot of value you're just not charging for. And test it. Test working with a 10% increase and another 10% increase and see where you're starting to get pushback from your customers. Because a lot of times the customers who can't afford to pay that little boost in revenue, those are not your ideal customers. They're not your best clients. They're the ones who give you the hardest, the hardest time. They don't refer business to you, they don't appreciate your value, and you work to make them happy and they're never happy. And they're not giving you a lot of money. Every entrepreneur almost can increase their prices and it will help their business. So test it, test it, start working with more ideal clients. If you're in the brand new startup stage, you don't have anything launched yet, then fine. It may even be free. Just for you to get some experience and build up a portfolio, build up a client list, get people giving you testimonials, but then start increasing your prices. Don't be afraid to constantly check and test your pricing to see where you can increase it to the point where you're getting feedback from your customers saying, hey, this is our limit. One quick example. So part of what I do is I work with brands. I work with brands who are trying to reach entrepreneurs. I'll create content for them, help them with their marketing campaigns. The very first one I did, they said, Evan, we want you to write a 300-word blog post for our site, we'll pay you $500 to do it, you can link back to your site. I'm like, I get a link back from a big site, they're gonna help promote me, and they're gonna pay me $500 to do it? I'm in! Why not? But I didn't just do what they asked for. I didn't just, just write that 300 words. I wrote 1,500 words, and I made a video, and I promoted it, and I did way more than anybody else that they hired. And I slowly started increasing my prices because I was adding a lot more value. So I wasn't just charging $500, now it's $2,500. You want me to write a blog post for your site, it's $2,500. That's what I charge. That's where I'm getting some, some resistance now from clients. So that's where I've gotten to, but I've increased my prices 5 times. I'm not just talking a small 10% increase, 5 times increase in the pricing because I added more value and I continuously increased it. It went from $500 to $2,500 over the course of about a year and a half by testing my prices. And I could still be that guy stuck at $500, where meanwhile I could be charging $2,500. And that's where a lot of you guys are. You're underpricing your products. So remember, pricing is important. Remember to think about charging based on value, the value that you're adding. Think about your demographic, your target audience, how much you can afford and what their budget is. And think about your stage of business And if you're just trying to attract clients to get started, or now if you're really trying to grow a big company and start making some serious revenues, don't be afraid to test your pricing. Believe. For those of you watching the video, please give it a thumbs up below. Let me know what you think. Leave a comment underneath. Ask me a question, I'll make a video response underneath. And if you like more videos, you want to see more like this, click on my face to subscribe to the channel. Thank you so much. I'll see you soon.