MBA1936 Why We Raised Prices

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When was the last time you raised your prices? Whether you sell products, services, coaching, courses? I'm serious. Ask yourself this question. How long has it been since you even visited the idea re examined your pricing, your plans, your packaging. The reason why I say this is because we actually took too long to raise our prices. We actually waited too long. We didn't change our pricing or plans for five years now. We did experiment with a few plans along the way, but we really did a lot of tests before launching our new plan. We'll talk about that in a moment. But the point I'm making is five years is a long time, especially if you're building a product or service that gets better over time. So say, for example, you offer an online online membership that has great materials, great video training, a thriving community that's growing every day. Every year that goes by, that business is adding more value to the customers. So what they're getting in exchange for what you are charging from day one is a whole lot more a year from now, two years from now, three years from now. So what they're getting for what they paid from day one is a whole lot more every year that goes by. And and business is all about an exchange of value. Now I want to really drill this home because it's so important. And once you get this, this makes this whole thing so much easier. Let's say, for example, you have a online training membership where I can jump in and I can learn all about your area of expertise. You have videos and you have articles and you have maybe like a forum. Let's say, for example, you charge $50 a month when you launch this membership. If I am happy to pay $50 for this membership for what it is from day one, every time you add to that actual membership, add more value, add more content, make the community better. Every time the value of what I'm getting increases, my willingness to pay should go up with that. So if I paid $50 for let's say X amount of value, then if X plus one value, I should be willing to pay more money. Same goes with as I add more value, x 2, x 3. This is how commerce works, right? We always pay for the value we receive. The problem a lot of entrepreneurs have is that they continually to improve the value of their product, but they forget to increase the price. Now a real fear, and it's founded in logic, okay, is if I increase the price, they might leave. And the truth is you will have customers that will leave. But it's not about individual customers. You have to build a business that scales, but a business that also is looking at the aggregate numbers. What do I mean by this? Let's say, for example, your business has 100 customers and each customer is paying $100. So you're making $10,000, right? Let's say you increase your prices to 200 a customer, 200amembership or whatever it is, and people leave. You don't have 100 customers anymore. In fact, you lose 30% of your customer base. And now you have 70 customers. But those 70 customers are now paying 200, but now you're getting 14,000 instead of 10. Less customers, but each customer is paying more. So your aggregate profit, your aggregate revenue is actually more. Even though you lost customers. That's really what you're looking for here. What's the sweet spot? How much can I charge fairly so people feel like they're getting a good value? This is why it's important to experiment with pricing and to be willing to change your prices because you might be leaving money on the table. Now I'm not saying you should increase prices just because you're leaving money on the table and you should be making as much money as possible. I know someone might be thinking, you know what, Mark? I don't really feel like I want to raise my prices. I don't need to make extra money or charge more for my customers. I kind of like being an affordable option and I can really understand that. I felt that in the past with my businesses too. But, but here's the reality. You need to make more money because you need to grow. You are not going to grow by doing the same thing over and over. In order for you to move and advance in your business, to level up in your business, you need money, right? You need to hire experts. You need to be able to improve the quality of your product or service by using higher quality services or vendors or products or ingredients or whatever it is if you want to get better and Better, it's going to cost you. And if you want to have a viable business, that cost needs to be covered somehow, let alone inflation, let alone the market, let alone the fact that it's just fair. You are giving them more, so you should charge more, and that's fair enough. The other thing I learned in this process of raising your prices is that people are not as price sensitive as you might imagine. When people need to get a job done, what I mean by job done, they need a product to fulfill some sort of goal. Whether it's to make them happy, or it's a gift, or to fulfill some sort of action for their business, or it's a service that helps them attain a goal. They're looking for an outcome. People are actually willing to pay more than you probably perceive to solve that problem. And the difference between your current price and your increased prices probably is not going to break the bank. It's not going to deter them from buying your product or service. Now, I understand that there are people that are in markets that are in highly competitive spaces like name brand retail. Like say, for example, you sell Oreo cookies on your E commerce site. There's so many stores that offer Oreo cookies, Walmart and your local supermarket and Amazon. And it's very competitive and it's a race to the bottom when it comes to price. I'm not talking about these types of businesses. I'm talking about the creator market. I'm talking about people that are creating software, writing books, creating courses, unique consulting, all that kind of stuff. Now, when we recently raised our prices with over an angel, we did a lot of research and like I said, we hired a lot of experts and consultants to take a look at our market and understand our customers. And what we realized is that our prices are really underpriced. We were really underpriced in the market. Compared to some of our contemporaries, we were actually offering a whole lot more than everybody else. And we were one of the cheapest in the market in terms of price. And it was actually hurting us more than it was helping us. Meaning the perceived value of our product was quite low because of the price. They see these other competitors and their prices are double and they're like, well, it can't be as good. In fact, we're better. And a lot has to do with that because we didn't change our prices or revisit our prices for so long. And the market changed and we didn't change with it. The other thing we did was we proved our theory and the advice of the experts with an experiment. We had four prices or four plans at webinar Ninja. And the first plan, the lowest plan, was $49. And we wanted to know, are people willing to sign up for a starting price for $99, not 49? So we just, as an experiment, chopped off that first plan, that $49 plan, to see if signups slowed down, if people stopped signing up, or we had less signups than before because the entry level price was not as low. What we learned is it didn't make a difference. People still signed up at the same rate. We experimented for a couple weeks, then four weeks, then six weeks. Still no change. That's when it was kind of proven to us that people really will accept our new pricing. New customers will accept our new pricing if we change it. Now we have a reoccurring model, meaning that people pay a price every month or every year to subscribe to our software. So we have current members that have current pricing. So we consulted with an expert, Patrick Campbell from profit. Well, should we grandfather these users? Should we keep their pricing so they don't experience a price bump so we don't disgruntle these customers? He took a look at our current number of customers, and he took a look at the available number of customers in the marketplace to find out how much of the market share do we actually have? How much would we be sacrificing, but more importantly, would be able to recoup those losses if they left? Are there enough customers in the marketplace that we haven't had yet? And ultimately, he advised us to grandfather our customers. Don't disgruntle them. It's not worth it. You have plenty of space in the marketplace to grab new customers. So all our current customers were grandfathered in. And we have kept that policy up for as long as we've been around. So if they had one plan and a price before we changed pricing, they kept that price. Of course, in the future, if they want to change their plan, they're going to have to choose one of our new plans and new prices. The other thing is that we not only change the pricing or increase our pricing, we also change the way we charge. We realize that in our market, the webinar market, the online events market, the online teaching market, there's not a lot of flexibility in the way you charge people and what they actually need. So we actually listen to our customers and say, hey, customers actually are looking for a set of features, and they want to have the flexibility to increase the attendance numbers on these webinars and pay a little bit more and then maybe they don't have such a big webinar and they want to go back to a smaller number of attendees. They don't feel like they need to jump plans or pay huge amounts more every time they need to do that. So we actually simplified our plans, created two paid plans that have their own set features and then within those plans we have a little slider where they can choose the number of attendees that they have or would like to have in their plan. This allows more flexibility and it actually encourages people to stay longer and to upgrade when they need. This gives them enough value for the price that they're paying, so they feel like it's fair. But also they're only paying for what they need. People feel satisfied when they work with a company that only charges them for what they need. One of the things that we did in this launch of new pricing is we communicated, communicated, communicated. We actually over communicated if you can do such a thing. We emailed our users, we spoke to them on webinars, we messaged them in the app letting them know, hey, we're raising prices. If you want to grab the old pricing, now's the time you're going to get grandfathered in. We actually did about a three month campaign leading up to the change of pricing to give everybody enough time and warning. And of course we communicated what's going to happen to their plans and they're going to get grandfathered in, what it means for them, all that kind of stuff. So there is no questions about it. We also trained our support team to know how to answer these questions if they ever were asked on email or a support chat. Oh, could this vintage store be any cuter? Right? And the best part, they accept Discover. Except Discover in a little place like this? I don't think so, Jennifer. Oh yeah, huh? Discover is accepted where I like to shop.

Come on, baby, get with the times. Right?

So we shouldn't get the parachute pants. These are making a comeback, I think. Discover is accepted at 99% of places.

That take credit cards nationwide.

Based on the February 2025 Nielsen report. To wrap up today's episode, it was a big step for us to raise prices. It wasn't easy. It took a lot of work. It took a lot of time, a lot of research. But we knew it was inevitable. We knew we had to do it. We had to level up our business. And yes, this may not be the best fit for everybody, but it's going to be enough of a fit for people. So that we can grow our business, hire great talent, improve the product and service for our users and for our customers and make them feel like, hey, we value you and we want to make it better every single month. And by the way, I'm not just telling this to you. I said these things to our customers on webinars in emails. Being as transparent as possible. Let them know, hey, we're doing this to help improve everything in the business so that you have a better experience for your business working with our software. Thank you so much for listening to the $100 MBA show. If you love what you hear, hit subscribe right now or follow or whatever that button says on the podcast app you choose to use. In tomorrow's episode, we discuss how to spend more time on what really matters in your business. The things that really move the needle, that really allow your business to take leaps and not baby steps. Hit subscribe so you don't miss that episode. Coming to you tomorrow. Before I go, I want to leave you with this Business is risky, okay? That first step you take when you start your business is risky. When you start accepting customers, it's risky. When you start putting your product out in the world where it can be judged is risky. You're going to continue to take risks in your business and the bigger you get, the more it feels risky. Because it's like I have more to lose. But you gotta keep doing that if you want to keep moving up. It's also incredibly risky not to do anything, okay? Not to take risks. These are the businesses. These are the people that get left behind. Thanks so much for listening and I'll check you in tomorrow's episode. Freeride Friday. I'll see you then. Take care.

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