Mindful Mondays - Pricing (1): Changing Your Price Point
You need to understand that the right price is very much linked to the psychology of your clients and how they feel about your products, your brand and how they perceived your price point. This episode is about the few things you need to consider when you want to change your price point.
What is a price point? A price point is the average price range of your products. When you talk to BtoB buyers, your price point is usually one of their first questions. The price point helps the buyers and their client position your brand. So your price point help the buyers and clients know if your brand is for them from a price perspective, whether the price you are asking for matches with the perception of what your product is worth.
It is difficult and even dangerous for your business to change your price once you’ve started selling your products.
For the same product, if you suddenly increase significantly the price, your existing clients might just stop buying from you because they will perceive the price as too high for what they expect to pay.
Let’s say that you sell sweaters and you have been selling your sweaters at about $100, if suddenly instead of $100, your sweaters cost $150, well, some of your customers might think that they are not willing to pay that amount for that sweater and for the same amount they would rather buy a sweater from another brand, which in their mind is worth $150.
Did you notice that I did not say that your existing clients cannot afford your products anymore? they are not buying from you because they’ve bought your sweater at $100 before which it is the price that they perceived that is the right one for them. Not that they cannot spend $150 but because they perceive your sweaters worth $100. This is good news because it means that you can increase your price, and I can explain how you can increase your price point in a future episode.
What about a sudden decrease in your price?
And I’m not talking about sales or promotion here.
Well, that also might lead to lose some of your existing clients.
Why?
Again, it’s related to the psychology behind the price.
Say that your sweaters that you used to sell at $100, and now, you sell them at $50, for exactly the same product.
Sounds like a bargain for your customers, right?
Now that the price has been divided by 2, will your clients buy more of them?
Not quite, really. Why?
It might sound counterintuitive but there are so many reasons for that.
By dividing the price of your products by 2, you might harm your customers’ trust because they might think that they have been fooled by paying way too much for a product that is now worth half the price they have paid before.
They might also think that you have changed something in your sweater in order to sell it at a cheaper price, and without telling them the truth.
Or, even worse, they might believe that the price that they have paid, a $100, is a way for them to feel special because they bought a sweater that not everyone is willing to pay for, but now that it is at $50, many more people are willing to buy the same sweater and your existing clients would not feel so special anymore with your sweater.
You can see that either way, it is difficult to change your price point, whether it is increasing it or decreasing it.
Your existing clients, once they have bought your product, have associated your brand with a certain price point that is the RIGHT ONE in their mind. By increasing or decreasing significantly your price point, you might create a confusion in their perception of your brand.
So, when you launch your products, you have to think really carefully about your prices and who your products are for.
And when you need to or you want to change your price point, you need to think of the narrative that you will share with your clients to help them perceive your brand at your new price point.
I would love to hear from you and experience with changing your price point
You can reach out to me by sending an email podcast(at)themindfulfounder.com
Hope this has been helpful and that this episode has given you some interesting food for thought for your pricing strategy.
There will be many more Mindful Monday’s episodes on the subject of pricing.
Stay tuned and talk to you soon.
Bye bye
Host: Leekei Tang
Contact: hello (at) betterbusinessfounder.com
Music credits: Mister Sunny Face by Wayne Jones / Blue Skies by Silent Partner / Happy Ukulele by Scott Holmes