It is rare that I find any company that has done any significant testing on their price structure. Or, if they have, it’s been years. More often, they kind of stick their head out of their prairie dog hole and look around at their competition, or who they perceive their competition to be, and sort of hit a midline pricing based on the “market.”
First of all, to base your pricing on your competition is to acquiesce to them. If you feel they’re your competition, then your prospects and customers will constantly be comparing you to them.
We’ve discussed your USP (Unique Selling Proposition) already. If you don’t have a powerful USP, then you’re agreeing to being nothing more than a commodity. So why should they choose you? Setting yourself apart from your competition is absolutely vital. When you do, YOU set the prices you want to receive, not what some vague market of copycats and wannabees have set for you. You become the leader in your market, not the follower.
With the Cash Flow Generator, we went through over 100 price point tests to arrive at our $49.95 pricing. We made more money at $49.95, and generated more leads (responses) than at $19.95, $29.97, 3 payments of $19.98 each, or any of the other price points we tested. We could have just gone with a nice, round $19.95 and assumed that was about what the market would pay. But we didn’t. We took the time to test and in doing so, paved the way for the longest-running profitable lead-generating infomercial in history.
Changing your market
The average real estate seminar in 1993 was $995 for three days or so. Some were more, some were less, but the industry as a whole had been stuck at just under a thousand dollars for over ten years.
One of our first strategies was to announce that our pricing was going up. Then we gave “limited time,” “before year-end,” “get the old price” offers, to create a sense of urgency.
Next we gave people “transportation allowances,” then “scholarships” to our seminars. All this time we were making 50% more than before, after taking the “bonus pricing” into account. And every 6 -12 months we would change our pricing again, and begin another round of bonus pricing… based on our “new” price!
Over the next four years we raised the bar – for the entire industry – to $4995, and had some seminars that were $10,000 and more. We had become the trend-setter in our business, and I’ve proven the concept again and again in wildly different markets.
Which would you rather be? The follower, just another commodity seller? Or the industry leader, the one others laugh at, then follow? Here’s a hint: There’s more money for the leader! In fact, the first of Ries & Trout’s famous “22 Immutable Laws of Marketing” states, “It’s better to be first, than it is to be better!” First, that is, in the mind of the public.