Having sold over $100,000,000 worth of products, services, software and consulting, I’ve learned that one of the most effective business strategies is premium pricing.
- The higher your profit margin, the more you can invest to acquire and serve your customers.
- It’s more sustainable. Premium-priced products are the least affected during a recession.
- It’s less crowded. While there is always a business who is willing to go lower on price, most businesses rarely go higher.
- The more someone pays, the more likely they are to pay attention.
Here are some easy ways you can achieve premium pricing.
Secret #1: Add An Extra Payment
Say you’ve proven you can sell your product for $99. A simple test is to change your offer to two payments of $99. About 10% of the time, your conversions will stay the same. This is because most business owners underprice their goods.
What if it doesn’t work? Just change it back. Your risk is a tiny bit of time and slight dip in conversion for more than doubling your profits.
Occasionally, by turning a one-pay into a two-pay, your conversion rates will go up. When you underprice your product, you run the risk of repelling people who would otherwise buy, because a low-priced product is often perceived as inferior.
Secret #2: Shorten Payment Cycles
Let’s say you sell a client service for $2,000 for a year. What would happen if you changed it to $2,000 for six months? Or three months? You might be surprised at how little this will affect your conversion rate.
The hardest part about selling is convincing someone to spend any money with you. However, once someone has psychologically decided to invest with you, the difference between three months or one year of something is marginal.
When you first created and launched your offer, you worked hard to get everything in place to sell it. You developed sales materials, tested different angles, improved the product over time and fine-tuned your systems. Yet, you probably kept the price the same. While you likely couldn’t have started with selling your service at $2,000 for only three months, a lot has changed.
Try it out. If it doesn’t work out, no big deal. It’s a tiny amount of risk to double or triple your profits.
Secret #3: Free Can Be The Most Profitable Strategy Of All
My company sold over $25,000,000 worth of a “How to Sell Physical Products on Amazon” training program by giving away every resource we developed for free.
These resources included software, sourcing and procurement services, one on one consulting, group coaching and more. However, you couldn’t buy any of these resources. You could only get them when you went through our affiliate link to purchase another company’s $3,500 program.
Since we made $1,750 per sale referred, we could easily invest hundreds of dollars into serving each and every customer.
Because you couldn’t buy our resources, this created an air of exclusivity. Exclusivity drives premium-priced sales. People want what they can’t have. We could simultaneously sell a high-priced product and use the word free, which is one of the most powerful words in advertising.
There is no such thing as high or low prices, just good deals and bad ones.
Secret #4: Add A Dramatic, Conditional Guarantee
When you have a premium price, you have a larger profit margin. Consider investing some of that into your guarantee.
A simple dramatic guarantee template I use:
“If you do these [#] things and document it, and don’t achieve [specific outcome], not only will I give you your money back, I’ll give you double your money back.”
Make it hard, but not impossible, to accomplish.
Without a guarantee, say you sell $1,000,000, all of which you keep. With the dramatic guarantee, you double conversions, but 10% of your clients redeem your guarantee. You’ve sold $2,000,000, gave back $200,000 and cleared $1,800,000.
Dramatic guarantees usually don’t work with low or mid-priced solutions. It’s seen as desperate. However, when you have a premium-priced product, you can confidently state that because you’re so sure of how well your product will perform, you can do something most other businesses can’t… offer a better than money back guarantee.
Secret #5: Specialize
In 2011, we created software—a WordPress backup tool. We certainly weren’t the first. However, we were the most expensive. The result? We sold over 15,000 units.
How? We went after a different market with a different appeal. The previous software vendors focused on bloggers and backing up your content. We went after internet marketers, showing how “cloning” sites can increase revenue.
Web designer? Clone and slightly tweak your layouts to serve more clients quicker. Niche marketer? Create a “master” niche site setup once, then deploy it over and over again for each new site.
By adding in pre-sales education (through webinars) and by focusing on a new market with a specific message and being the only solution for that market, we could charge a far greater price and sell more units simultaneously.
On average, 1% of a market spends 50% of its dollars. By looking for and creating custom solutions to appeal to that 1%, you can sell a lot more because you’re creating something more specific to the needs of that market segment.