Don't Use YOUR Number System In Pricing

What a great post. Being in business for myself this is one of the most important lessons I had to learn. I sold my first website for $500, which was a lot of money to me at the time. Since then my prices steadily went up. Not by much but for a long time I was happy with getting $1000 for a site.

Then one day I was watching a video by Mike Koenigs who made a reference to Dan Kennedy that when something like this.

"In any business deal you will get as much money as you are comfortable asking for and can keep a straight face."

This has such a profound impact on me that the next potential client I pitched I jacked my price up by a grand....and it worked!

Two days later I got another lead jacked the price up by $500 again. I was riding the confidence wave and was comfortable asking $2500 but not quite $3000. Needless to say I got this one too.

Going with the post, these would be MY numbers. Thinking back I know I could have gotten more money from almost all the client I have had. Every time, I pitched them with the number I was comfortable with.

What I take away from this post is that even though I like my numbers. I have no problem building websites for thousands of dollars. I could be getting more if I pay attention to their numbers. If I know that THEIR numbers are high, I will be more comfortable asking for a lot of money and keeping a straight face.

PPC-Coach,

Right on comments! This is absolutely correct. In fact, businesses with bigger numbers don't even consider your services valid or valuable unless you charge "bigger numbers."

It's quite amazing sometimes. A friend of mine provides an energy conservation service that we'd normally sell for a hundred thousand or two at best in a large institutional setting.

The actual wholesale cost of each unit installed on each breaker is about $500. Even the diagnostic equipment we used in installation only cost $35,000. We also had other costs for bigger jobs, like engineering reviews, overhead, electrician and technician expense, etc. We obviously had expertise and proprietary knowledge, but consider the following.

The pricing model was not based on cost or even expertise, but the resulting value provided. So if we can save a business $100,000 a year, we charged 25% of the savings. But this is multiplied by two to five years!

He once was talking with a government facility about this service for a large number of buildings, but if his price wasn't in the millions, he couldn't even bid. So he increased his price accordingly.

You see, many larger scale enterprises don't expect an immediate return on investment (ROI). It's not believable to them. My friend had to show a two to five year ROI with most businesses and institutions. The government wanted to see a ten year ROI.

He could have shown a two year ROI, but they would not have considered it a valid bid. This was standard operating procedure based on their experience and standards. Amazing.

Obviously, this pricing and scenario was based on quantifiable results. We could show actual charts and demonstrate value. But why can't you? You can use statistics to show the typical results of what you're offering. You can get testimonials for proof. If you have none, use industry norms.

You can even get testimonials from the guy's WSO you bought. This is what his model produced and this is what you do. You don't present it that way. But if your testimonials are questioned you can say these are the results of my affiliates using this system. Sell the system, not your experience (unless you have some of course).

Always consider who you're doing business with and what is the end or perceived value. When you're building a website, you're not building a website. You are building virtual real estate that millions of people may visit. This is their corporate image and impression. It's their virtual headquarters.

How much did they invest or spend on their physical facilities? They selected the best location and improvements to present the image they desired. They expect the building to provide a certain image and statement of their worth.

So, if you quote $395 they may consider it a cheap lunch. If you quote $1,995 to $4,995 they may consider this something to give their attention to. Believe me. There are companies who charge $50,000 to do what you can do for a few hundred. And they get it.

If your service can really produce them hundreds of thousands of dollars, then why would you sell it for a few hundred. It must NOT be very valuable or you don't believe what you say. As the title of this thread says, do not use your number system.

So start with considering these "higher numbers" of your prospect AND what the end value or benefit is.

What's going to impress his friends? A guy doing a $395 internet marketing job, or a $20,000 a year SEO or PPC guy who's generating tons of traffic.

Always have a pricing strategy and back-up plan ready. I remember one prospect who practically cussed me out because their perceived value of what I was offering was nothing (their "numbers"). And they had originally called me. Unfortunately, I couldn't diagnose or discover his "numbers" before the quote.

In contrast, another client, who I did get paid from, responded quite differently to the same service and offer. When I quoted him he looked at me stunned with mouth open and literally said, "Is that all?"

To which I immediately responded, "What about that other area you were concerned about?" So we then added some other services, which didn't really cost me a whole lot extra to include. This end price brought him up to where he felt quite comfortable. I was feeling quite comfortable as well.

If it's hard to know who you're dealing with, then you need to provide tier pricing. One strategy is to offer a single service for a set fee, but also offer a higher bundled package and/or monthly recurring services contract.

One study showed that when a three or multiple tiered pricing was presented, the vast majority of business owners chose the mid to upper range scale. They didn't choose the highest nor the lowest most often, but did select the upper range.

Always offer a higher-priced premium upgrade, too. You'll find a few takers each year. You include higher perceived value items that don't really cost that much to provide, but really build value. Consider the typical bonus packages offered. Some people buy your product just for the bonus. They may already have your product, but want something you just threw in.

If they are sold on what your offering, they want the most value. Never apologize for your pricing. Quote it, look them in the eye and shut up. Or you can just slide it across the table and say, "We just need your approval to get started." Then listen and observe for their response. That's all you need to know how to proceed. Sometimes you'll be quite shocked. Enough to stimulate a happy day...or year.

You can't win them all, but the one's you do will be quite satisfying for all concerned.

Price your profits accordingly.