How to price your product? It is possible to grow your business overnight by setting the perfect price. If you price your products or services too high, you won’t get the business, but if you price them too low, you’ll wish you hadn’t gotten the business.

In our experience, many businesses charge too little for their products or services. There are only two factors to consider when setting your price: value and profit.

The first important thing to remember is…

The range of prices that people willingly, even happily, pay for the same product or service can vary greatly from one supplier to the next. This is because people on the whole buy on value and NOT on price. So people will automatically value your product or service more if you charge higher, and vice versa.

If you charge too low, your prospects will automatically think your product or service can’t be that good. On the other hand, if you charge high prices, you’d better make sure your clients or customers receive excellent value from you—because that’s what they’ll expect.

Also read: Psychological Secrets to Optimize Your Sales Funnel

They all add considerable “value” to your product or service in the minds of your prospects and clients.

You can never determine your prices/fees; you must let your prospects and clients or customers make that decision for you.

Many of us decide our prices or fees and then expect our prospects and clients or customers to pay for them. There is a fundamental flaw with this process. You cannot determine how much people are prepared to pay; you need to first find out what people are prepared to pay and set your prices and fees accordingly.

This may surprise you, but you will make much more money and increase profits if you test your prices with your prospects and clients or customers. If you don’t do this, how can you gauge how much they are truly prepared to pay?  We’ll explain how easy this is to do shortly. Understand these principles and you’ll never go wrong when you start setting your prices/fees! 

So when setting prices, the first step is to find out the minimum price or fee you are prepared to charge. This is a critical figure because it determines a MINIMUM starting point. You must be clear that at this ‘lowest’ price you can still make money. Once you’ve determined this, you can then look at “how high” you can charge.

This figure is the minimum price you can charge and still have a successful business. You can now decide whether or not you want to raise this figure by increasing your profit margins (which is easy) or increasing your activity rate (which is not as easy).

Ok, now you know what your minimum price is—are you surprised? Hopefully not, but don’t worry. We’re now going to show you a simple and very effective way to set the ‘PERFECT PRICE’ for your product or service. 

Unfortunately, there is no accurate scientific method to achieve this; in fact, by far the best method is to test your prices or fees. You should in fact be already testing your prices at least two to three times a year anyway. If you don’t test, you could be losing thousands of pounds each week.

Also read: Sales vs Revenue: Are Sales and Revenue the Same?

So how do you test your prices/fees? Well, there are four easy and proven steps…

1) Decide on two additional price points

You already know your minimum price. You need to think of two more prices to test. Once again, there is no scientific method to this. As a benchmark we always suggest price increases of 20% and 40%; don’t ‘mess about’ with small increases like 5%. It’s not worth your effort.  Therefore, if your minimum product price is £500 you would test prices of £600 and £700.

2) Experiment with pricing

Try your minimum price on the first ten prospects, the first test price on the next ten prospects, and the second test price on the ten prospects after that. See what happens. Which price point works best? You might surprise yourself.

Also read: 10 Marketing Strategies Rooted in Human Psychology

3) Go with the price that works best

Once you’ve carried out your little test, make sure you go with the results. Remember that an increase of just 10% in your prices can result in an increase in profit of up to 40%.

The key to all this is PROFIT based on the lifetime customer value. At higher price points, you may or may not get more customers, but because of the increased margins, the higher price point may be much better overall.

4) Keep testing

Don’t settle for your new price. Keep testing. Twice a year is a good guide but don’t do it more than three times a year.