MBA1269 Do The Price Increase Experiment

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Visit Dell.com deals. Hey, welcome to the $100 MBA Show Business Insights served to you hot and fresh every day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the $100 MBA, a complete business training and community online. And in today's episode I'm going to challenge you. I'm going to offer you to take the price increase experiment. Many of our listeners are looking for ways to increase the revenue to make more profit. They've tried ads, they tried partnerships, but they just need a little bit more profitability. And one of the easiest and fastest ways to do this is to increase your prices. Many of us are very sensitive to this because we believe that it's going to discourage customers and many people are going to decide not to buy from you or continue to buy from you. But this is mostly in your head. You don't know that for a fact. You need to experiment when it comes to price. You might be surprised at how much people are willing to pay for your service because of all the value you convey and the value that you offer. So in today's episode, I'm going to lay out an experiment for you. A detailed plan on how and how much to increase your prices, analyze your results and See if it's working or not. Price can change. You need to experiment to know what's the best for your business. I'm going to mention all the tools you'll need and how to do it. So let's get into it. Let's get down to business. Okay, let's take the pricing experiment. We're going to experiment with pricing in your business. I want you to choose a product. I want you to choose a service, whatever you offer. If you offer multiple products, like an E commerce store, take a category of products and put it through this experiment. So number one, you need to know your numbers, how much money you're making, how many sales you're making, how much money you're losing through refunds or churn cancellations. So I recommend, just so you can get started with something easy and free, check out ProfitWell. ProfitWell is a great metric tool to allow you to track your revenue. This is at least going to give us a baseline so we know where we're starting so we know if the experiment is working or not, so we can track our results. So check out ProfitWell. You can sign up and you can integrate your payment processor with them. Next, choose the product, choose a service, choose the category of products that you're going to be increasing pricing with. And we're going to increase the price between 10 and 20%. That is up to you. Why 10 to 20%? Because it's a significant amount for you to see a difference in revenue, but not so significant for your customers that really feel too much of a pain. If Your course is 500 doll and you're gonna increase by 10%, that's $50. 550. If you increase by 20%, that's another $100. That's $600. Not a huge difference. 500 and $600 kind of lives in the same place in your head. But again, we're gonna see for ourselves and we're gonna see what we're looking for here. Now remember, what we're trying to do here is which price is more profitable, your original price or your increased price. When I say profitable, let's say you have that online course, that's $500. You increase it by 20%, it's $600. Now this last month you got 10 sales, so you made $5,000 on that course. And then the next month you made nine sales. You might say, hey, that's less sales. But hey, you made more money because each sale is $600. 600 times nine is 5,400. So we're looking at total revenue with the increase of price. So you're going to choose an increase, something between 10 and 20%. It's up to you, whatever you feel comfortable. If you're, you know, feeling bold and you feel like you could do 20%, go ahead and do that. You're feeling conservative, go 10. But you're going to have to choose one, choose something. You're going to increase your prices to test things out. Again, you can do this in a category of your products, that you can do one of your products, one of your services. The point here is that we're going to test out price and the threshold of where we can go next. We're going to communicate to our customers that have already bought the product or are on a monthly plan of that product, of that, of that price point that their price won't change. You're going to grandfather in their old price. Let's say, for example, you have a membership site, it's $35 a month. You're going to increase it, let's say, to $40 a month. You're going to email all your current members and say, hey, this new price is not for you, it's for new customers, new memberships. Your price is grandfathered. In that way you don't disgruntle any current paying customers. Now you're going to let the month run. You're going to let the month run with this price. Keep doing with the things that you do in your business, to market, to sell, to make things happen. A little tip. If you like to make a some sort of promotion, this is a good excuse to promote. So before you raise the price, say hey, next week we're raising the price from 35 to $40 for a membership. So if you want to grab the old price, do it now. That's a great reason to email your list of people that are not members. It's a tangible, real deadline for them to really sign up and get started. Maybe some of them have been wanting to start but really haven't had a good time. This is a good time now because hey, I'll be saving some money. Let me go for it. There will be people that will miss out and be like, oh man, I missed that deadline. They will still sign up. You'll be surprised because hey, I'm still interested in this program. I want this product, I'll pay the little extra money. So you're going to run your experiment for a month. You're going to wait until the end of the month and you're going to look at your numbers, go to ProfitWell, see how much money you've made that month in total for that product. And you're going to compare total revenue. Doesn't matter if you have less sales, as long as they have more revenue, that means this is a better price for you. Why? Because if you have less customers but you're making more money, it's less cost for you to, you know, maintain those customers. To serve less customers, it's going to cost you less money, but you're making more money from each customer. Now, if sales were somewhere close and it wasn't like a whopping difference where you know you made much more money, that's still a better price. Why? Because again, low cost maintenance, you're not going to be maintaining that many customers. Less cost for you. You're making just as much money with less customers. That's a benefit. Keep that price. If for some reason you need to retract your price and go back to the original price because you know it was a dismal sales and you know there's a huge drastic difference, I would say if there's more than the percentage of increase, so say for example, there's a 20% difference, maybe 20% less in total revenue and you increase your prices by 20%, then yeah, I would say maybe we can reverse back the, and go back to the drawing board. At that point, email all your customers that are not customers yet and say, hey, if you're interested, we've discounted our plan back to the original price. I want you to challenge yourself and go through this experiment. You might find that, hey, you're making more money and you might have the question, hey, what if I increase it again? And the point here is that you want to see the breaking point. You want to see, hey, okay, now is the point where I'm not making as much money in total. I'm not making as much revenue in total. So what I'm trying to do here is see where the best price is. And the only way to do it is to experiment, is to actually increase it and see how things go.

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To wrap up today's episode on the price increase Challenge. You gotta take this leap. You gotta try this out. You owe it to your business. You owe it to your profitability. You owe it to the growth of your business to give it a try. Price needs to be tested. And if you get positive results, you can do this with other parts of your business, other products, other services. If you haven't revisited your pricing and it's been a few years, you definitely need to do this. You've gotten better. Your service has gotten better. Your products have gotten better. You are better. So your value needs to be aligned with your price and vice versa. Thank you so much for listening. That wraps up today's episode. If you love what you hear, hit subscribe right now. By hitting subscribe, you get all our episodes automatically to your device when we publish. That way you never miss a beat. We're on Spotify, Apple Podcasts, Stitcher, Radio, Overcast, Himalaya, all the podcast apps. And before I go, I want to leave you with this. It's hard to do scary things like changing your pricing, but part of business is getting used to that feeling, doing things when you feel a little bit afraid. It's kind of like snowboarding. When you first snowboard, it's terrifying. But once you get the hang of it, you start to learn the basics. You start to take a little bit more risks, you start to try different things, and you start to have a lot of fun. And you get a lot out of it because you're pushing yourself. You're stretching yourself. So do that today. Thank you so much. I'll check you in tomorrow's episode. Q and A Wednesday. I'll see you then. Take care. Of.

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