Your Pricing Should Be Free or Ultra Expensive (And What To Do If It’s Stuck In The Middle)
In a world where companies try to nickel and dime each other to death, “price” almost always becomes a race to the sides.
You are either expensive, luxury, premium, or you are bulk, cheap, value pack.
Anything that sits in the middle of its given category ends up feeling like something for no one.
But when you price for your Superconsumers, instead of all consumers, you change the way people value what they value — and the way your product is valued.
Most Companies Think About Price In One Of Two Ways
The first way is cost plus.
“What does it cost to make what we offer, what profit do we want to make, and what price can we get away with?” This is a very self-centered way of pricing. It’s an important consideration to include, but it shouldn’t be the driver of your pricing strategy.
The second way most companies price is benchmarking versus competitors.
This is a completely reasonable and worthwhile question to ask, but the answer tends to lead down the insane road of comparisons. If most other “competitors” price themselves at $X, companies assume their best path forward is to price their product or service similarly to $X.
The logic here is two-fold:
- Competitors have already done the hard work of figuring out what customers are willing to pay, and you would be smart to follow in their footsteps.
- If it costs you $50 to make a product, then charging $75 or $100 “seems reasonable.”
But, as I share in the mini-book The 8 Category Levers, these are the biggest mistakes you can make when pricing your product or service.
Instead, you need to ask two radically different questions:
- How much value does my category create, especially for my Superconsumers?
- How much value is created or destroyed by the way I price, specifically “who I charge,” “when I charge,” “where I charge,” and “why I charge?”