MBA2276 Q&A Wednesday: How do I price my first product?

Let me tell you about Intuit QuickBooks.

When I was starting out my business.

I remember sitting at my desk late at night not working on my business but cleaning up numbers, tracking and reconciling payments and wondering how this became my life. But once I automated the admin side of things of my finances, those nights had disappeared and I felt a whole lot better. Outdo it with intuit QuickBooks QuickBooks is the trusted end to end solution that businesses rely on for getting paid, managing finances, paying employees, finding new customers, and more. QuickBooks provides a team of AI agents and trusted experts, so doing it yourself no longer means doing it alone. Their payment agent gets you paid faster, their customer agent finds leads, follows up and secures more sales, and the accounting agent automates and categorizes transactions. Get your critical business jobs done with QuickBooks on the Intuit platform. Ready to save on new Tech? It's time for Dell Tech Day's annual sales event celebrating our customers with fantastic deals and benefits. Perks include Dell Rewards, free shipping, premium Support and more.

PCs like the Dell 14 with Intel Core Ultra processors will help you do more faster and with a premium suite.

Of monitors and accessories, you can upgrade your whole setup with amazing savings. Visit Dell.com deals.

Hey oh welcome to the $100 MBA show. No fluff, just the good stuff every single 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 Webinar Ninja, an independent software company. I started my co founder back in 2014 and today's episode is Q and A Wednesday. On Q and A Wednesdays I answer a question from one of you, one of our listeners. If you got a question you want to ask, go ahead and email me over@omar mba.net and we'll answer it right here on Q and A Wednesdays. Today's question is from Brian and Brian asks, hey Omar, just started my startup about four months ago. I'm about to put my first product on sale ever. It's a small software product today to make it easier for people to create content for social media. I have no idea how much to charge and would love your advice when it comes to pricing. My first product would be amazing if you could just point me in the right direction. Thanks so much for everything you do with the podcast Brian. Brian. We all have to go through this decision right Putting a price on our first product and many people go about this in different ways. I'm going to share with you what I believe is the best way to price your first product as a brand, as a business, as an entrepreneur. The whole thing about pricing is you want to make sure you don't leave too much money on the table, meaning you're not undercharging. And of course most people are worried about overcharging. Like if I ask too much for my product, it might be too expensive for people and people will decide not to buy. I want to encourage people to buy so most people lower their prices. That's not necessarily true and in fact it's often absolutely false. And I'll explain in today's episode. I'm going to give you some step by step strategies that you can implement to set your price, launch your product and hopefully make some money. So let's get into it. Let's get down to business. Today's episode is sponsored by NordPass Business. If you're a business owner, a team leader, a manager of any kind, you need to have NordPass business. NordPass business takes away all the frustration of all your logins and passwords and access details to all your online tools. It's super easy to use, it's incredibly safe. And not only can you store and access your online accounts from anywhere, you and your team can make payments and purchases without headaches with our amazing feature where team members can gain access to a company card securely and easily, NordPass business is so confident that you'll love it. They're giving you a three month free trial. Sign up and get started for free for three months. Just go to NordPass.com100mba and use code 100mba again, that's that's NordPass.com 100mba use code 100mba there's a few things we need to first talk about when it comes to pricing your first product, or pricing any product for that matter. The first thing is price is flexible, meaning it's not written in stone. If you set a price right now and you decide to change it later, it's okay. But you got to start somewhere. In a lot of ways, pricing is an experiment. You want to see what is the best price for your audience, for your product, for your offering. So it's going to take some changing, some tweaking. So don't think that this decision is irreversible. Whatever you decide to price your product, in fact, it's just the opposite. You're going to need to change it to see what's best. The second thing I want to talk about is how people buy at the end of the day people buy anything, whether it's a Snickers bar or a house or a car or a vacation or a pair of shoes, they buy because they value the product, they want it. If they perceive enough value in the product they decide to buy, that's the end of the story. And surprisingly, price actually has very little to do with the decision to buy. A lot of people think, well, if it's too expensive, they may not buy. Well, expensive compared to what? Compared to the value. The value. What they're getting out of this purchase, what they'll gain if it's well worth it at any price, people buy. This is why people buy Porsches. This is why people buy expensive houses. This is why people buy expensive clothing and accessories. It's because they see the value in it. So the more value you provide, the more you can demand when it comes to price. And that's something to keep in mind. Why? Because when you launch a new product, especially like a software product, it's in its first iteration, so it's going to start at a certain level of value. Now, I'm not saying this is low value, it could be very good value, very high value, but it's starting somewhere. And then as you improve the product, the value is going to increase and increase, increase, which means you should be increasing your pricing accordingly. This is what a lot of people for get to do, is that they don't change their pricing as they increase the value of their product. So let's get into how to price that product of yours. We're going to focus on what exactly are you providing? Okay, so in Brian's example, he has a software that helps people create content, media, videos, images for social media. So basically, this is a tool that's actually doing a job for them. How much is that job worth? That's really what we want to find out. This is what we want to find out to understand the value of this product. How much time is it? How much effort is it saving? What kind of results can I get through your product? Meaning if in the same time I usually can produce five pieces of content and your software will allow me to produce 30 pieces of content in the same amount of time? What's the difference of results of having 30 pieces of content out there on social media versus 5? This is some information that you need to provide. You got to do that research. Why? Because it really flexes the value of your product. Because really, at the end of the day, that's why they're buying your product, is so that they can grow Their social media following so they can grow their business so they can get customers. And if they can do it in a time efficient way, it's going to save them time, it's going to save them money because probably they have to hire somebody to do this. And if they can do more work in the same amount of time, this is a great benefit to them. So just think about what your product actually provides, what problem it really solves, and what is the end goal of your customer. I'll give you an example of my own business, Webinar Ninja. We have a software that allows people to run webinars, paid webinars, free webinars, automated live, all kinds of webinars, right? We also have a sister product called Course Ninja which allows people to run live and on demand courses. But really what we do is we help businesses grow. That's what we do. We help businesses grow with our tools. They grow through webinars by growing their email list, they grow through sales webinars by closing sales. They grow their revenue through selling courses. You get the point. We help businesses grow. What's the value of that? Of having a tool helping you grow and by how much? This is going to require our team to, you know, research, have some case studies, have some data to show the value of our product. And in most cases you can actually enumerate this value with some data, like a dollar amount. But in some cases you can't do that. Like a Gucci bag. Let's say I'm shopping for a Gucci handbag. It costs $700. Why $700? There's no ROI here directly, but there is an intangible ROI. How much is status and getting attention and feeling significant worth to people? Probably more than $700. People would pay that and then some to feel special. So what companies like this do to flex their value is show people of significance, people of importance, people that you look up to have these bags. And you could be like them too. If you buy this bag, you can feel important, you can feel special. So they don't really need to have a number behind it, but they can show you the value by showing you examp. That's their case study, so to speak. So this is how you really derive and come up with a price. And I like to have the 10x rule, meaning you should provide 10x value in comparison to the price. So if a product's value is $10,000, then the price of $1,000 is probably my cap because I want to make sure I'm giving extreme Value, overwhelming value. So it's a no brainer. So once you've kind of had an understanding of how much is this worth to people, use the 10x rule and divide it by 10 and at least it's a starting point. Now there's a caveat to this 10x rule. You got to make sure that there's a profit margin, meaning that you are making money, a healthy profit margin after your expenses. We're talking about total expenses of being able to provide this product. We're not talking per unit, we're talking about the. For example, how much does it cost for me to provide this service if it's a software to my customer, my marketing expenses, my team expenses, all that kind of stuff. I want to make sure that my expenses to deliver this product is less than how much I'm charging because I need to make a profit. Of course, when you're starting out, you should always go for a 2 for 1 profit margin at least. The best companies in the world have astronomical profit margins. 10 to 1, 20 to 1, 100 to 1. But you gotta start somewhere. So at least make sure you're at a 2 to 1 ratio so that you're making twice as much as it would have cost you to provide this value. Now, when it comes to physical products, retail, it's a little bit harder to do that because your cost of reproduction of a product doesn't go down as you scale, at least not significantly like software or courses or media. But it's somewhere to start and then you can start experimenting. And as you increase your value, you can increase your price. Now, notice I didn't say look at your competitors, see what their price is and try to play in the same ballpark. No, this is not a good way to set your prices because your product should be different from your competitors. It should provide a different amount of value. And in fact, often the most expensive option in a market or when people are comparing you to competitors, often gets the lion's share of the market share. Why? Because people are curious, why is this one so much more expensive than the other? There's got to be something different about this, got to maybe work better or provide better value. And in most cases it does. A good example of this is the iPhone. The iPhone is probably one of the more expensive smartphones out there, if not the most expensive. And they've had so much adoption over the years and have taken over the smartphone market because people are curious, is it better? Now, I'm not here to pick a fight with Android users, but people start to value Apple's phones because they see it's more expensive, there must be more value. I'm going to give it a try. So always based on value. Always start somewhere and adjust as you go. Today's episode is sponsored by NordPass Business. Whether you're a business owner, a manager or an administrator in your team, one of the biggest headaches is managing logins and passwords across all your tools online. What about sharing or getting access to the company card? Sharing the physical card in person can take too long and be too much of a delay, and sharing details over your group chat can be incredibly unsafe. Luckily, there's NordPass business that solves all the headaches. All your account and login details sorted easily and securely share the company card. NordPass business does that too. Me and my team absolutely love NordPass business because it's easy to use, it's convenient, and it fits easily within what we do already in our business. When somebody gets hired, I can easily give them access. When we say goodbye to a teammate, we can revoke access. It's so good. NordPass puts their money where their mouth is. They're giving away three free months. Yep, three free months of NordPass business with our special link and code. Just go to NordPassBusiness.com 100- MBA and use code 100 MBA. Go ahead and sign up now and grab this amazing deal while you can see NordPass business in action in your business. With three months for free, go to NordPassBusiness.com 100 MBA and use code 100 MBA.

Introducing Fidelity Trader plus the next generation of advanced trading from Fidelity. Customize your tools and charts and access them seamlessly across desktop, web and mobile. For faster trades anywhere you go, try the all new Fidelity Trader. Plus. Learn more about our most powerful trading platform yet@fidelity.com TraderPlus investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC Member NYSE SIPC.

Bob Evans Creamy Mac and cheese and buttery mashed potatoes are made for the moments you can't plan, like last minute school costumes, glitter explosions, or when little Liam brings three friends for dinner. No plan, no problem. Say hello to Plan B O B from Bob Evans because when you bring out the Bob, you can take comfort in knowing you'll always have something delicious on the table, no matter what the day brings. When you need comfort, bring out the Bob available now in your refrigerated section.

Now, there's one more thing I need to recommend to you. You're going to set your price. You're going to Put it on your website. You're going to advertise, this is my product. Your job on your website and your sales funnel in your emails and wherever you communicate your product to your customers. Social media, it doesn't matter. Your job is to communicate value, is to communicate what you actually provide, is to make sure you provide enough value for people to see, okay, this product is great. A lot of people shortchange themselves and don't really spend the time to describe all the great things their product does and what it could do for them. And then they wonder why nobody's buying. They're like, hey, this is great. Why are no one's buying because they don't know it's great. You have to convince them it's great. You got to show them everything. You got to educate them. And this means having detailed pages on your website, having videos, having comparison charts, blog posts, case studies. People love doing their homework when they're shopping. And when you give them enough information to make a decision and choose you, you make your life easier. You make it easier for them to say, yep, this is the product I want because it got all this stuff that I'm looking for that's going to solve my problems. But if you don't have that information on your site or in your materials, they're going to go somewhere else that does provide that information. You could be doing great stuff, you could be providing a great product, but you're just not telling them about it. And the interesting thing is, is that I find that this is endless. There's so much information that you can provide for ex. I run a webinar software, I run a course platform software and I can provide all the information, all the features and all the tools and all the things it does. But I can go deeper. How is Webinar Ninja a great software for coaches, for example? That's a whole blog post in itself. Well, what about how you can use it as a consultant? How can you use it as a software company trying to do demos? So as you can see, I'm catering my content and my information to suit the use case of a potential customer. Show value so people can say, yep.

This is what I want.

Let's give it a try. Brian, thank you so much for asking today's Q and A Wednesday's question. If you got a question you want to ask, just go ahead and email me at omar@100mba.net and I'll make sure to answer right here on the podcast. Speaking of the podcast, if you love today's episode, if you love any of our episodes, Hit subscribe, hit follow on your favorite podcast app and do us a huge solid by sharing it on social media. Go ahead and share it with your friends. Let people know that you listen to the $100 NBA show. Send them over to 100- MBA-NET so they can enjoy it as well. Thanks so much in advance for doing that. Before I go, I want to leave you with this One of my favorite resources of all time when it comes to pricing strategy is a website called profitwell profitwell.com which recently got bought out by a company called Paddle. We have an in depth extended interview with the founder of Profitwell, Patrick Campbell, so you can check that out in our back catalog. But Profitwell is all about pricing. It's all about how you can improve your pricing. Their blog is incredible also their YouTube channel is amazing too. They got some really fun and entertaining shows. One of my favorites is Pricing Page Teardowns, where they really critique all the different pricing pages on the market for big brands and businesses like Netflix and Zoom. They have a great YouTube channel as well. One of my favorite shows on that channel is called Pricing Page Teardowns where they critique the pricing pages of all the big players on the market. Big companies like Netflix and mailchimp and Salesforce. There's a lot of great content to devour when it comes to geeking out on pricing at ProfitWell and their YouTube channel. Thanks so much for listening and I'll check you in tomorrow's episode. I'll see you then. Take care.

Fidelity Active ETFs have the flexibility to shift and transform as markets do the same. So instead of just riding an index, they can seek to outperform it by adapting to market conditions and pursuing new opportunities as they emerge. And while you get the potential outperformance of an actively managed fund, you can still buy and sell it on your terms just like any other etf. Markets can change in real time. Make sure your ETF can too. Learn more@fidelity.com ActiveETFs before investing in any exchange traded fund, you should consider its investment objectives, risks, charges and expenses. Contact Fidelity for a prospectus, an offering circular, or if available, a summary prospectus containing this information. Read it carefully. While active ETFs offer the potential to outperform an index, these products may more significantly trail an index as compared with passive ETFs. ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Fidelity Brokerage Services, LLC Member nyse, SIPC.