Pricing Strategy: WHY you NEED it And HOW to do BETTER

Foreign. Welcome to the Success School Podcast. I'm your host, Tim Frey, and today I'm talking to you guys about pricing and charging your worth. In today's episode, I'm going to be talking to you about how to pick a pricing strategy that works for you and your business. What a good and bad pricing strategy looks like, in my opinion. And then. And lastly, I'm going to tell you how I chopped off 80% of my revenue with a bad pricing strategy at one point in my career, and you definitely do not want to do that. So learn from my mistakes. I guess that's what this whole podcast is about. So what's going on in my life, guys? We actually got a new couch in the house. And I know this is not a riveting podcast story, but the story behind it is quite funny. So Steph went behind my back on this purchase. She literally comes home on a Sunday, and this is a danger. Do not give a woman like Steph a credit card. And she comes home and she says, I got a new couch. And I said, yeah, we literally just moved into this house. Ours is pretty new. And she said, no, it's for downstairs. I said, we don't use downstairs. And then she said, yes, it's actually for the dogs. So let the penny drop for you. If you know my wife, she does have expensive taste. So these kind of couches ain't cheap. She bought a $4,000 couch for our dogs. I love my dogs, but this is a little bit excessive stuff. And the telling you this story is because people make random purchasing and buying decisions. Like my wife, she bought this random couch for our dogs. And people make random decisions in their business all the time, like pricing. It's super random. And I'm here to give you some structure on it. So the first thing we need to do is work out what you're actually doing for your current pricing strategy. How to have a terrible pricing strategy. So there are four parts to this. First, one, charge what everyone else is charging in your niche or industry. Really common in the fitness space is that all competitors or people in a similar niche charge what each other charges. And the target market or avatar can't differentiate between the quality. People often look at pricing in terms of the person that charges the most as the highest quality. There is a value that is associated with that. Okay, but you don't start there. That you get there over time. You get there from being in the game for a while. The second way is you want to pick a random number because it sounds good. The third way is align numbers. So 1, 1, 1, 2, 2, 2, 3, 3, 3, 4, 4, 4, 5, 5, 5. The astrology numbers, the woo woo ones, the astro girl numbers, all these types of numbers are a terrible pricing strategy. You should never price your products after aligned numbers. And then the last one, which goes into our third point is picking numbers without any thought. There needs to be thought into everything you do in business. I get it. When you're first starting out, you kind of just charging what you think is right. But eventually you need to wise up and you need to get some strategy with your pricing. So how to get a great pricing strategy is you need to know where your offer or price sits in the market and then you need to price accordingly according to that. Then you need to know your financial goals and how this pricing strategy will help you achieve them, in particular around your business. And lastly, you need to know your costs. And charging a profit on top is an absolute primary and mandatory thing that you need to do. So you're either in one of these two, you've got a great pricing strategy or you've got a terrible one. Decide now and then know which one you're at because we're going to change that. Step two, what you guys are going to do, we're going to call this the homework phase. And on the homework phase, you're going to take a Google sheet. We're going to list out five columns. We're going to put five competitors. Actually your competitors though. Okay. Not who you think are competitors. Funny story with this is I recently hired an SEO company and they said, what are your five competitors? And I listed them out and then they said they're not your competitors. People that would be searching for you or the local area for what you're selling. It's not those people. So what I thought were actually my competitors were not my competitors. In a local business online, it could be a little bit different. But you need to know that they're actually your competitors and you guys have the same target market. Then in the next column, what do they offer? You want to list that out and then what they charge. So you've got your top five competitors versus you. So be six names total in each column and then you're going to know exactly where you sit in the market. If you want to charge more, you need to be better. Okay? There is no point being the most expensive option if you are not the best option. There is, like I said before, a certain degree of pricing or value that is associated with charging more. But personally, I've had some pretty terrible services that have been very expensive. Like I've paid eight to ten grand for specific services in the web space and they were awful. And I did think they were going to be much better because they were priced better. That was my perception of it. But if you're charging a lot, you need to deliver a lot. Step three is you want to set your goals. How much revenue do you want to make each month? Then you're going to use your Grand Slam offer and work out how many Grand Slam offers you would need to sell each month to meet your goals. If you haven't heard of the Grand Slam offer before, go back and check the previous episode. I do explain that in great depth. An example of this is your goal 10k month, then you sell a 1k coaching package. So you'd need to sell 10 clients per month. Is that doable for you or is it on a reoccurring basis when that's going to add up each month? Say we're getting a thousand dollars a month and you only need to sell 10 people once to make 10 grand a month consistently. Much easier way of doing it. But the whole point of Step three here, guys, is we want to set a goal. We want to work out how much exactly you need to sell each month to meet your financial goals. Step four we are going to review your Grand Slam offer from the previous episode and you're going to ask yourself three things. Do you need to charge more or charge less? Does anything need to change to meet your goals? And lastly, is your current pricing strategy a starting point or can you raise it over time? It's okay if it's a starting point, but gradually you're going to have to increase it as things prices, inflation, costs. Everything's going up. So prices do need to increase over time. There needs to be a minimum of a 50% profit margin on anything. Just a note on inflation, guys. Every year the value of your money decreases with inflation, AKA purchasing power. So you need to raise your prices. I was at the local IGA the other day and a bag of chips was $9.96. Think about that like a bag of crisps or chips or whatever you want to call it, wherever you're listening from 9.96 is ridiculous. So have your business prices increased with inflation or they've just made the same because actually you'll be losing money if you don't increase your prices. So I just wanted to get into a story. This is actually how I lost a ton of money post Covid. So we Had a government mandate that we could only train nine people in my gym at any one time. And we came back post Covid and we had way too many members. There was. It was literally physically impossible to fit as many members as we had in the gym. So we had to go for a price increase. We increased the price by 30%, which is a big jump. I get it. I lost 192 members in seven days, which is crazy. Anyone in the fitness industry listening to that story would be freaking out. 192 people in seven days. We went from doing super well per week to making I think 3k per week over the next 12 months. We actually, we cut our lowest value product as well. So we had a $55 a week membership. We cut that and then the minimum from there was 79. So it was, it was quite a jump in price, which, you know, I can understand if money was an issue for them. But over the next 12 months, we were able to build the business back up with the right clients charging the most in our area, which has built a pretty incredible business. A couple of years later, I had to take a few steps back to take a few steps forward. In my business, sometimes this is the way it goes. It is not an onward trajectory moving forward and then going vertical or going forward at all times. In business, sometimes you need to go back backwards to go forward. Sometimes you need to make some mistakes to go forward. I don't regret anything from that period. Obviously losing 192 members in seven days is not ideal and I wouldn't recommend doing that. In terms of pricing increases, I would generally do them over time now, but I'd probably only do them for about 10% each time as an absolute maximum. You'll piss less people off that way. But you know, if you haven't done one in a while, it's something I would consider. So my final action items here, guys, is pick the right pricing strategy for you. Research your competition, choose your financial goals and review your offers. And are they going to work with your goals on the next episode? Guys, we're talking about customer journey. And lastly, guys, just some housekeeping. If you're new here, subscribe and follow the show. Share with someone who could find this valuable. The way we grow is word of mouth. And then lastly, leave a rating would be much appreciated.