MBA2151 Do You Need To Sell Products at Different Price Points?

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Hey, welcome to the Hundred Dollar MBA Show Business simplified every single day with our daily ten minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of Webinar Ninja, an innovative software company I started with my co founder back in 2014. And in today's lesson you will learn do you need to sell products at different price points? Some marketers call this a value ladder, meaning you offer different types of products at increasing prices. For example, you might offer a free book, the price $0, then a template for $10, then a live training for $100, then an online course for $500, then a coaching program for $5,000. Do you need to do this? Is this applicable for all kinds of businesses? Does it help you make more money or sales? Well that's what we get into. In today's lesson I'm going to break down this concept of offering products at different price points, when I recommend it, how to implement it, and when you just don't need it at all. Let's get into it. Let's get down to business.

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Edu the idea of the value ladder and offering products at different price points is not something new. We see it in the world around us. Apple, for example, offers a pair of AirPods for what, 200, $300. They also offer a watch for a little bit more money and an iPad mini and then an iPhone and then a laptop and then a desktop. You get the point. Many people get into the Apple ecosystem because they tried a product of theirs at a lower price point, enjoyed it, trusted the brand, and then the next time they needed something else that they offer like a new phone or a new laptop, they go back to Apple and grab. This concept is known as a trust builder. You're building trust with your customer by offering them an opportunity to try your products, your services at a lower price of entry. By the way, a lot of clothing lines do this as well. Old Navy is the low price point product of Gap and Gap is a low price point product of Banana Republic. So if you like Old Navy, then you're really going to love Gap and if you love Gap, you're really going to love Banana Republic. And obviously the prices go higher as the quality or the, the perceived quality is higher. So what about your business? Should you be doing this? What are the merits of this? What are the drawbacks of this? Many online businesses force their customers to go through the ladder in a particular order through a forced funnel. I don't think this is actually really good advice because you are going to get customers at different levels, at different stages in their journey and they may not want to go through the whole funnel. They may not want to go through all the steps. You, it doesn't mean you shouldn't have these steps or these price points, but you should allow people to pick and choose and then you can guide them along the way. Let me give you an example. Let's say you have a dance instructor and your core business is dance instruction. You teach dance online. Your first price point is $0. On your homepage you might have an opt in or a sign up that says hey, sign up for my newsletter or sign up for my Walt's Dancing cheat sheet. And then when they sign up for that cheat sheet in your email follow ups, you invite them to join you for maybe a two hour live class. That two hour live class might be a hundred dollars. Those who buy that class, you can then later on invite them to buy your full on course. And those who take that course, you can then invite them to your coaching program. Pretty common, right? But the trick here is you should allow them to enter at any point if they choose. Meaning on your website there should be a way for them to access all your products, whether it's in a navigation menu or something like that. Where they say hey, I'm actually interested in just going all in on the course. The only way to get to the course shouldn't have to be through the free opt in through the live course and then get the course. This is just my personal opinion, I should say even my professional opinion because I believe that brevity has value. Meaning that if you can get people to a result faster, there's a lot of value in that. So why make them go through that? Not everybody's a beginner that's going to your website. Now I'm a big believer that this model is really good if you're selling content, coaching, training, that type of thing. Because you have to build trust with the audience, especially because you're the teacher and they're going to be learning from you. So they need to kind of get used to your style and really start to really fall in love with what you have to offer as a teacher. I also think this is a great model for physical products. The example I gave for the Apple works with E commerce as well. This is also something that a lot of software products do. They have tiers to their pricing and they start with a free trial and then you can get started at the low price and it as you use the product more and your needs expand, you upgrade your plan. We do this with a webinar ninja our software. But there are types of businesses where this is really unnecessary and I call these businesses pull businesses. Meaning that there's so much pull for the product or service that you don't really need to go through this funnel. People are really desperate and really want what you have. This is usually in the high end market. This is usually higher priced products or services or events. For example, if you go to a fancy restaurant, one that's expensive, that is really well known, maybe has a star Michelin star. There's no like entry level, there's no like snack menu, right? Often there's a chef's menu where there's a set price. You're going to pay a few hundred dollars to have dinner. And this is because the Actual restaurant understands its target market. It understands that if they're going to be high end, they don't need to do that. In fact, it's actually quite annoying and distracting for their clientele. Their clientele are not looking at price, they're looking for quality, they're looking at reviews. They want to make sure that they're getting the best regardless of what it costs. The same thing goes with higher end events or retreats. Some people run incredible businesses that have events that are really desirable to the market. Their problem is not getting people at a lower price. Their problem is that they run out of spots so quickly and they don't have enough days in the year to run that many events. And they have a scale issue. With the businesses I mentioned earlier, like content and courses and coaching, you can scale these very easily. Getting hundreds and thousands of customers is no problem. But for higher end types of products that are highly desirable, there is a scale cap. A fancy restaurant only has a certain number of tables in their restaurant. There's only a certain number of days or nights in the year they're capped. So their ability to earn is going to have to go by raising prices and being exclusive.

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So to wrap up today's lesson, having a value ladder offering products at different price points are great for businesses that scale where your cost per customer scales. Well, what I mean by that is that when you create an online course, the cost of having one customer is pretty much the same as 10 or 20 or 100 or a thousand. You still have to host that course somewhere. You still have to put in the work to create that course. But for higher end products and services, there's a cost involved per unit, per customer. And it doesn't scale that friendly. And therefore they can't afford to have that value ladder. They have to go straight to the top and charge a premium for what they have. And people are willing to pay that premium. This is what they discover very early on. It's like, wow, people are willing to pay this much money, they raise the prices again. They're like oh wow, they're still willing to pay. It's an interesting business to run. There are risks involved. It's not for the faint hearted, but because of their margins, they do pretty well and are pretty recession proof. Well, there you have it. I hope today's lesson helped and I hope it got your mind around, you know, creating products at different price points as you're scaling your business and when it really is not necessary. If you love today's show, hit subscribe or follow on your favorite podcast app. Do that right now so you don't miss a beat. Also, by following or subscribing, you get access to over 2100 business lessons in our archives. Before you go, I want to leave you with this. If you're overwhelmed by creating all these different products at different price points so you can have that value ladder, just start with one your freemium right your opt in making it something compelling that people want to sign up for and then move up the ladder by doing, you know, like I said, a live course or a live masterclass. You can easily do this with our tool Webinar Ninja, where you can just charge people for a webinar. There's not that much preparation when you do it live. That's step two. Step three. Take some of that content and build out a full on course. You don't have to build every step of the way all at once. You can start with the first step, get your leads and then offer them something once you build the second step. Thank you so much for listening and I'll check you in tomorrow's episode Freeride Friday. I'll see you then. Take care.

At Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.