MBA1262 Is it OK to Lower Your Prices? + Free Ride Friday!

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Visit Dell.com hey, today is Free Ride Friday, so make sure you hang on to the end of the episode to hear who won this week's Free ride. Every Friday we give away a lifetime membership to one of our programs. This month we're giving away ezcourse, our 30 day course on how to build your own online course. It retails for $500 over at EasyCourse Co, but you can win it for free. All you got to do is leave us an ITUNES rating and review and you enter our weekly random draw. It's that simple. Just listen in on Friday to see if you won and when you enter the draw, leaving us a review you automatically enter for every week until you win. It's our way to say thanks for showing us love on itunes. All right, let's jump into today's episode. Hey O. Welcome to the $100 MBA Show. Pumping good business in your ears every day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenhol. I'm also the co founder of the $100 MBA, a complete business training and community online. And in today's lesson you will learn Is it okay to lower your prices? Price is a very, very touchy subject. A lot of people have questions about this and a lot of people are sensitive to the fact that sometimes they want to lower their prices and maybe they feel like they price their product too high. The trend seems that prices always go up, but what about lowering them? Is that ever an option? Is it ever okay? Well, that's what we talk about in today's episode. In Fact, today I'm going to give you some examples of some companies that actually started with some really high prices and then offered some lower price options later on. There's a reason why businesses will do this, and I'll share why. I'll also share when lowering your prices is not okay. We got a lot to cover in today's episode, so let's get into it. Let's get down to business. Prices, prices, prices. A lot of people want to know if their prices are too high, too low, should they change them? That's what we're going to be talking about today, particularly if it's okay to lower your prices. Now, most people, people, when they start their business, they're experimenting with prices. And sometimes they price their product incorrectly. Now, mind you, most of the time people price their products too low and have to raise them. But today we're going to talk about how sometimes you price your product high on purpose, or maybe even it was high by accident and you need to adjust. So let's get to that one first. Sometimes when you're trying out a business, you're trying out your actual marketplace, you'll put a price and then realize, you know what, I'm making the barrier of entry too high and it's not enough for me to get traction. So I gotta lower the price a little bit. And it could just be 10 bucks. It might be a few dollars, it might be, you know, a little bit more. But the point is that you're experimenting and that's totally fine. You can do that. But there are many businesses that do this on purpose. They actually start out with higher prices. The business that comes to hand or comes to mind is Wistia. Wistia is a video hosting platform and it's like a vimeo, but for businesses. We love Wistia. Big proponents of Wistia. We use Wistia in our business. We've had people from Wistia give guest lessons here on the show. We had Chris Levine give a great lesson on video production. But Wistia started out with some really expensive plans. I mean, I remember their plan started at $100 a month, which is quite pricey for a video platform. Now, the reason why they did that, I read a blog post about it when they explained it, is that they wanted to be as profitable as possible at the start. They want to make high profit margins and bring in the right clients that are interested in what they're trying to do. They said they can always lower prices, but raising prices is always super sensitive. And they were okay with not having extreme growth at the beginning. They wanted to have, you know, a slow growth or a steady growth and really fine tune the product and a good way to kind of adjust the tap or make sure that it's not like a huge stream of growth or customers is to higher prices. It's going to filter people. People are going to say, you know what, this competitor is cheaper. I'm going to go with the cheaper one. But by raising prices, it makes people think, hey, maybe there's more value here. And that really is the key here is when you raise prices, when you have a high price now you're actually including value in the conversation. People are saying, well, it's got to be high for a reason. Let's take a look at the value. People have that thought pattern or think about that when the prices are low. Think about it. If you see something that's, you know, quite low in price, you're like, oh, cool, great deal. You don't even think about what kind of value they're gonna give me. Is this actually worth my money? Who cares if it's cheap if you're not gonna use it? So when you have a high price, people start thinking about value. Wow, that's expensive. But let's take a look what it does. What does this thing do? Why am I gonna pay this much money? Oh, wow, there's a lot of value here. This thing is great. That's a different conversation. And Whisty did this on purpose to put value first. And then once they really perfected their product to a point where they're like, okay, let's bring in some more customers, let's introduce some lower tier pricing. So they started offering plans for $50 a month. So they essentially lowered their prices or they actually offered lower prices. I should say they offered lower prices or they lowered the barrier of entry. I really like this idea. When you're introducing a new product in the market, a new concept in the market. Wisti was kind of new back then. There's no kind of search engine for videos for Wistia. These are all private videos. It's just you're posting it with them for fast buffering. Actually, no buffering. A great player, a great experience. You know, Vimeo kind of has like a arts following and people can search for videos there. Sort of like the, the arty version of YouTube. And YouTube's you know, financial model is totally different. They, you know, make money on ads and not on the hosting. So Wisty wanted to kind of introduce their product in a new way and they wanted to validate the idea with some really value first conversations and get the right customers first. So once they established that, you know, lowering prices or offering lower prices was on the table. Now we are doing this, we're experimenting with this in our business webinar Ninja, where we have higher price tiers, but now we're going to offer a lower price tier to certain people to experiment to see if people are willing to do this. Now one of the ways to experiment is to offer only the lower priced tiers to people that are, you know, maybe emailing customer service and saying, hey, love your product, but it's a little bit out of my price range. I really can't afford this every month. So you can offer, hey, we have a lower tier that's going to offer a little bit less and it's for this price. And you can experiment how many people convert and you can see if this price point, if this lower price point is actually worth you offering. And you can actually automate this with a cancellation process where you can offer, hey, how about a lower price if they choose cost as the reason why they're canceling. And again, it's an experiment and we're really looking forward to seeing the results. But we didn't just resort to the lower price at the start because we have a lot of costs involved and we want to make sure that we're covering costs and we have enough room to grow with our profits. So I don't want to encourage you to lower prices, just a sick to offer a lower price, but to see if it makes dollars and cents for your business. If somebody's going to cancel anyway, leave your platform and it's solely because of price, then maybe you can say, hey, we're experimenting a new plan. Here's this plan. This is the price are you willing to pay? They might say no. If they say no, then you know that that's not really gonna solve the problem. You're just out of their market and that's the answer you get. But if they say yes, then that's just low hanging fruit and that's just great business you can grab and hold onto that customer. Now, we didn't talk about discounts and offers. This is totally okay. Of course, if you want to experiment with offers and discounts and things like that, I am more and more becoming less inclined to offer discounts or encourage people to offer discounts because again, you're not shifting the conversation from value or to value instead of price. So this is something you need to negotiate with yourself and your team and see if it's worth giving discounts. But it does encourage people to sign up, especially if it makes sense for your business financially. And a good way to experiment is only just to offer for the first month or the first year or for whatever and not forever the discounts just for one purchase. That way you earn that customer, they're in your system and you can continue to earn their business. But when we're talking about lowering prices in general, when it comes to products, you can always experiment, but only do it if it's going to keep your business profitable. If you're going to lose money off this because the expenses do not do it, you got to do the math, do the numbers. I can't stress this enough. Now, when it comes to services, lowering your prices in terms of your hourly rate, this is a slippery slope. And as you continue to grow, as you continue to get experience, your prices should go higher. Because you're a better designer, a better photographer, you're a better, you know, artist or whatever you are, you should be raising your prices because you're giving them more more experience, more skills as you grow.

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To wrap up today's lesson, pricing is a tricky one, but the best way to solve it is through experimentation and temporary Lowering prices is a good way for you to learn things. Of course, put value first. And I love the concept of having prices high at the beginning and then lowering to offer different tiers. Keep that high price for that plan or that package, but then offer smaller offerings later on. All right, that wraps up today's lesson, but today's episode's not over. It's free ride Friday. Let's see who won this week's free ride. And the winner is the foot doctor from Australia. Really? That's the handle, the foot doctor. The foot doctor says consistently awesome. Five stars. Every episode is awesome. But more importantly, every episode gives you actionable content. Content you can immediately implement in your business. It's a must listen podcast. Well, thank you, the foot doctor. Your mission is to email me at omar100mba.net so I can hook you up with the free ride to ezcourse. If you want to win a free ride, just leave us an itunes rating and review and you enter our weekly random draw. It's that simple. Alright guys, before I go, I want to leave you with this business is dynamic. The market changes, you change, your product changes, your customer changes. You have to constantly experiment to see what works today. Because what worked yesterday may not work today or in the future. So make sure you do that with pricing. For the most part it's going to be raising your prices, but sometimes you may want to offer something that's a little bit lower to cater for certain needs. All right, thank you so much for listening. I'll check you in Monday's episode. I'll see you then. Take care.

What do the steam engine, electricity and AI have in common? They don't just change how we work, they they transform entire economies. Where the Internet Lives is an award winning podcast from Google about the unseen world of data centers. This season we're going inside the AI revolution. From farmers using AI to analyze soil data, to researchers discovering new medicines, a new era of AI innovation is here. Listen to where the Internet lives. Wherever you get your podcasts.