And in order to choose our prices for products or services,
we need to have some kind of gauge as to the relative value that those are
delivering and how it's perceived by our customers.
So that could be anything from specialized knowledge, right?
If you have to invest a lot of time and effort into gaining the knowledge that
you have, and then you're imparting that to your clients and customers,
they would otherwise have to spend that same amount of money to acquire that,
that you can just deliver in an hour or in an ebook or in a video call or a
program.
So that increases the value and therefore the price you can potentially charge
for those things. Uh, a simple story to illustrate this, you may have heard,
uh,
there was a cruise ship that's engine broke down and they were spending hours
and hours and thousands of dollars trying to figure out what was wrong with this
engine. They finally bring in an outside mechanic. He spends about five minutes,
uh, taps a couple things, and the engine fires right up.
And then they get the bill and they ask him, well, wait, why?
Why is this $10,000? You only spent five minutes doing this job.
And his response was, you're not paying me for the five minutes.
You're paying me for the years of experience and money I spent learning how to
fix it in only five minutes, right?
So that is what we're trying to get an estimate of.
What is the value you're actually delivering, uh, in a set amount of time?
The other factor is cost of convenience, right?
So people are willing to pay money to not have to do things or to not have to
spend their time doing things. That's why, you know,
Uber Eats and Amazon delivery are so popular. People value their time,
and if they value it high enough,
they may be willing to spend a little bit of money to not have to do something
so that they can spend time doing things that are more valuable to them.
So are you saving them time and effort and how much, right?
If you're helping someone achieve results in, let's say four months,
that would take them a year to get on their own, well,
you're saving them not only the eight extra months of time, but you know,
the mental struggle or time that they would've spent trying to figure out how to
write their own programs or researching nutrition to figure out, you know,
what their nutrition plan should look like. You know, you're,
you're basically saving them, you know,
months of time and effort that they can spend doing things that they're good at
or that they would rather do, like, spend time with their family,
go hang out with their friends. So the more knowledge you acquire,
the better and faster you can solve those problems.
The more valuable your time is, not only to you,
but to the people who are looking to request that time from you.
Also,
are you giving them beneficial knowledge that is not going to just benefit them,
you know, in that time period they're working with you, but down the road,
are you helping them, uh, acquire new educational knowledge that, you know,
maybe they can manage their lifestyle better? Maybe you teach them how to, uh,
you know, flexibly manage their nutrition,
all of those type of things that are adding additional value.
Make sure you're able to communicate the other potential, um, you know,
benefits that people are getting if they're, you know,
choosing to work with you in person.
It's not just I'm giving you a workout plan and a supplement plan and some
exercise videos, right? It's like I'm going to, you know, help you learn how to,
you know, meal plan or improve your sleep quality. You know,
those type of things. Uh, that adds value on top of just, you know,
the PDF that they get to go follow along in the gym.
The prices also help getting people invested, right? So if you know, you spend,
you know, $20 on a workout program and you don't do it, it's not a big deal,
right? If you spend $500 getting a workout plan and a nutrition plan,
you're much more likely to follow it because you have some skin in the game,
right? You don't want to just feel like you wasted $500. So using that, again,
coming back to the pricing psych, a little bit of pricing psychology,
price it enough that you're increasing the chance.
People are going to use what you give them get results. Because if so,
nobody uses it and doesn't get results, well,
maybe it doesn't look bad on you if,
you know they never post about it or they were just bought the money and took
off or paid you money and took off.
But if you have more people following your stuff and getting results,
obviously you can use that to your advantage, right?
You want people to not only follow it just so you can get feedback and maybe
fine tune your programming or the service you're providing, but again,
use that as leverage to potentially market your success in the future.
What is the relative value in the market? And this is a big one. What is,
what would your customers expect to pay for that particular product? Right?
There's obviously, if you're looking at something like a ma,
a business mastermind group,
people who are willing or looking to invest in a business mastermind are not,
are expecting to pay a lot more than, you know, $500.
They're expecting to pay several thousand dollars because they're expecting a
certain level of service and value from that product,
as opposed to, you know, someone looking for group coaching.
They're probably not looking to spend a thousand,
$2,000 for a group coaching plan.
They're looking to spend something on that lower end.
So understanding your target demographics, the type of product you are selling,
and then the, you know, kind of, uh,
industry expectation of what that product should be.
So this is where understanding your avatars and fine tuning that is a lot more
helpful. Uh, and then of course, you know,
your general market research looking at your, you know,
closest competitors in if you will,
we always want to make sure that the value we're providing is justifying the
price. We usually don't want to, you know,
charge a price that people don't feel like they got their money's worth.
If anything, we want to do the opposite. We want to over-deliver.
When we take this to an extreme, perhaps we even charge a price where we're
Not making any money or we'll even lose a little bit of money just on that one
sale. As a part of a sale strategy,
and this is something we'll get into shortly called a loss leader,
where we're essentially using a very low priced product just to get people in
the door to get their contact information, get them familiar with us,
give us an opportunity to start communicating with them, uh,
through things like, you know, email,
social media to get them more familiar with us, start adding value,
providing value to them,
and then hopefully we turn them into a repeat customer down the road,
and that is where we start to really see the value come back to us, right?
We increase that lifetime value of that customer by hoping they will buy another
product from us because our delivery of what they bought the first time was just
so good.