Residual Earner

7 Pricing Strategies – How To Price A Product

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One of the most important and one of the most critical questions you have to ask yourself as an industrialist is how much do you accuse of your make or your service. Now, when it comes to pricing it’s such an important decision because it feigns your sell. Done properly, pricing could also be a marketing strategy. So today, I’m gonna give you not one, not two, not five. Seven pricing programmes. So then from now on, you know exactly how you should price your commodity or your service. You see when you are not charging fairly, so let’s say, you toll too low, you’re not making a profit, you’re not making money. When you cost too high, then maybe you’re not getting customers, you’re not getting enough volume so you won’t grow. So there’s that penalize offset to really the freedom type of pricing strategy could change everything. Pricing strategy number one, toll to your competition. That wants to find out what your contestants are accusing and then maybe you charge kind of the same. Let’s say, they sell this product for $100, then you’ll say, “Okay, I’ll sell mine for too $100. ” Now, sometimes, I likewise realize entrepreneurs what they do is they would take the average prices of the, let’s say, three top adversaries, and then they would just add it together and subdivide it up.

That too, I’ve seen that before. Price to your contender. Now, there are some industries, in some cases, that might be okay. You want to be competitive, right? Extremely “if you’re in” a what I call, a commodity kind of a business. That means your purchasers, are shopping for the highest price. So by having a price that’s perhaps 5 %, 10% higher than everybody else within your industry that might be hurting you because your customer’s like, “Hey, you know what, you charge $100. “I talked to your competitor, “your competitor only indictments 90 or 95. ” Now, unless you’ve done your suitable sell or you know how to post yourself, that might be a difficult objection to overcome. So price to your rivalry. Now there’s a downside to this. That means you are always acting, right. You’re always responded to what your contestants are doing. They bump up their expenditure, you bump up your price. They lower their price, you lower your price. You’re always responded to what your competitors are doing. If you want to be a leader, ideally you want to play offence. We are intended to be the ones that are the result. We are intended to be the one that’s dictating the terms, prescribing the price in the markets so others follow versus you follow others. Does that make sense? Pricing strategy number two, the premium to pay the bills.I call this the break-even strategy. What it intends is you premium it fairly so that you merely break even. It covers your overhead, it envelops your expense. Well, that might be good in the beginning in some cases that you are may be entering a brand-new mart. You’re testing things. You’re saying, “Hey, you know what, “all I want to do is just to break even. “I exactly want to test the irrigates. “See how the marketplace reacts to my offer.” It’s possible. Or sometimes, you gotta use it very carefully, right.

Otherwise, you’ll go bankrupt doing this.’ Cause you’re not making a profit. Are you are pricing, using the break-even strategy to acquire a large volume of customers. Sometimes I call that the self-liquidating offers. Meaning this is for your low-ticket offer, on the front end. You toll it, simply want to break even. If I’m selling a bible, I don’t make money from selling the book, but it’s just to break even. That’s fine because that’s what a notebook expenses. It’s $20, right? So you sell the book, same expenditure. But you know all the profits, all the wealth comes from the follow-up offers. So you know all the profits, all the wealth comes from subsequently. The follow-up. What you offer to the customers who have bought your bible. That’s what we want to do. Is this making sense? Strategy number three, and that is a price to go. “It probably” one of the most common pricing simulations. A spate of parties does this. Lawyers, professionals, accountants use this a lot. They blame per hour or they accuse per date or bill per week or charge even per month. That’s kind of like a fee pose. Price to time. How many occasions am I spending on this particular task? How much age am I spending on this project, right? And that’s how I would bill. So they bill $20, $30, $50. Advocate, $100, $200, $500 per hour. Price to term. Now, this sit is very, very common but to me, personally, I think this model is getting out of date.As we are now transitioning from the job economy to what I call skill economy, now corporations and beings, they are paying for reactions. They much prefer to pay for develops. And here’s what I conceive. When you toll to the season, their own problems with that model is the relationship that you have between you and your buyer, that relationship is always, there’s a conflict of interest.

What I imply by that. Okay, let’s “re saying you” blame $50 per hour for what you do. Okay. And you bill them $50 per hour. And I know this is gonna take you 10 hours. And you bill them $500. Okay, that’s one thing. But let’s say you could get this done in eight hours. Now, be honest. Are you gonna bill them eight or 10 hours? Even if you were able to get it done in eight hours, or you’re gonna get it done within eight hours. Because the relationship is, the longer it takes for you to finish something, the more fund you do. Versus from the client’s perspective, I want to get this done as efficiently, as soon as possible. But yet, I’m paying for time.So how does this work? This is always, this is a conflict of interest. You want to make as much money as possible. They want you to get it done in as little time as possible. So premium to duration, and there’s a period and locate for this, but I don’t believe in that so much better anymore because the whole model back in the industrial age, the clock on and clock out. No. I don’t believe in that. Here’s what I believe in. No reward is excessive for success and almost any fee is too high for collapse. When your purchasers are paying you, they’re paying for results.When can we get this done? And shouldn’t they be rewarded if they can get it done in five hours instead of eight hours? If you can get it done faster, better, more effectively, why shouldn’t they be reinforced? Why would I get paid more for you to drag the projects longer? It meets no ability. But it is a very common model and still, a good deal of beings use it. If you want to use it that way, that’s fine, very. Price to epoch.

Pricing strategy number four cost to cost-plus. Now, this is very common in, let’s say in the construction business. So, on the surface, exceedingly logical. So this is gonna cost how much to get this project done? Let’s say this project gonna cost a million dollars? That’s the cost, right? And then you’ll precisely add a 10, 15% mark up on that. Let’s say I’m selling this item, it’s $10,000. I’m just gonna lend my mark up, my 15%, right. That’s fine, that’s one style to do it. Now you see this, again, very common in interior design and building and a lot of different industries. Now, what’s the problem with this model? It’s very a common framework. But the same thing with the price to term simulation, it’s something that has been around a long time, it’s logical but, again, they are getting paid based on spending more money. So if I’m a contractor, let’s say, and I know this project with materials and everything is gonna cost a million dollars. And I’m gonna pay my mark upon them, my 15%. 150 K. Now if there are ways that I could save money, if I can use textiles that are better but actually cost fewer and I get the whole thing done, perhaps $800,000.

Now, most contractors, not saying all, but most contractors will reflect, “Well, do I really want to get it done for $800 K “because now I make less money “doing the same amount of project? “Or is it in my kind of self-interest, best interest “to spend as much money as possible? ” From the client’s perspective, on the other hand, the more money that you deplete, the more expensive the materials, the more expensive the labour, the more fund that you make. From the client’s perspective, it’s the opposite. How do you get the best product, how do you get the best outcome for the least amount of money? Again, it’s a conflict of interest. But particularly, very common, rate to cost-plus. Now, let’s say if I am building a construct, I’m constructing an office. I can tell you that’s not the model I would strive for.I would do something that every quite different. For example, I would negotiate with the contractor, this is what Dan Lok would do, I would have a very clear budget and I would say, “Here’s the budget, right, let’s say a million dollars, ok” But here’s what I would do. Out of this million dollars, possibilities are you’re gonna perhaps 150 K. I’m more than happy to pay 150 K. But if you could save me fund, the two things I look for if you can get it done for $ 800 K, you’re smart, I’m gonna give you a bonus. I’m not gonna settle you $150, I’m gonna bribe you another $20,000, $30,000. Whatever it might be, depends on whatever the project is.

The second thing, KPI would have is, if you can get it done on time or even early, I’m gonna remunerate you another bonus for the research results that you raise. So now then we’re on the same page. Right, you follow what I’m saying? Now we’re on the same page. So you and I, we’re thinking about the same thing. We’re focused on the same thing. Have the same goal. To get it done, get the project done on time or early. You get seeks compensation for that. To get it done below the budget and save money, you’re getting seeks compensation for that. Do you see how that works? So the contractor that makes on this administer knows I am solutions focused. We’re on the same page. He doesn’t need to find ways to cut corners or try to mark up stuff, or materials and all that. No. It’s in his best interest to work on my behalf to lower the cost, to get a great product done but at a lower cost, timely manner.

That’s what I would do. But again, you are well aware, that’s one pricing example that’s out there. That’s pretty common. Pricing strategy multitude five, and that is a price to the carton. Now I like this one. I use this one a lot. It means that you are creating an offer. You’re creating a carton. And simply, let’s say the package, the total value is worth $ 10,000. And you only bill your customers $1,000 or $2,000. They’re merely compensating a fraction of what the entire ethic, the package is worth. I like this a lot. First of all, it makes the present alluring. Number two, if you want to increase the rate, all I need to do is how could I increase the value that I give? And I like to use a general rule of thumb and I’m giving that to you.I call that the one to 10. Meaning for, let’s say for an educational product, for $1,000 I accuse, I want to deliver at least $10,000 worth of value. If I want to charge $2,000, I want to deliver at least $20,000 worth of value. Now although some of those products, some of the bonuses it could be digital produces, right? That is instant access. It actually doesn’t expenditure a lot to deliver that appreciate which is great cause it’s scalable. But at the same time, the appraise is there. The price, it’s real value, this is how much it would expenditure if they buy it from different sources.

So that’s very powerful. So toll to the package. Just think about how you can apply this in your business. Versus really selling the widget, the commodity, the whatever that you’re selling, how can you pack in a way that is attractive? Let me give you another example. Let’s say you are selling website development. Instead of saying, “Hey, you know what, “I’m gonna charge you $100 an hour to design your website.” You see how that’s like, “well, how long it’s gonna make? “Well, it’s gonna take me, you are well aware, 100 hours.” “Okay, great, I’m gonna pay you 100 hours.” Versus package. So, this website development package we are going to design let’s say a 10-page website for you. And we’re gonna also set up a blog for you. And we’re gonna create also2 0 territory sheets for you. We are gonna create 30 email follow-ups for you so that you can convert those leads into marketings, right.

I alter contributes. So you see how it’s a container? Now the whole thing if you buy this, and you buy this and you buy this, you buy this and you buy this, all separately, it’s gonna be $50,000. I’m just making this up, $50,000. But if you buy the whole thing from us right now, as a sign on, as a patient today, it’s gonna be $20,000. Now whether you are establishing them that? So you may be thinking, “Well Dan isn’t I giving them a discount? “You’re not holding a rebate. You toll the packet. You know this is the package you put together and you furnish a more complete solution. So it’s more attractive.’ Cause you’re thinking on the client’s behalf. You’re thinking onward. Say, “Hey, you know what? “We could build a website, “but won’t you be needing some landing sheets down the road? “Won’t you be needing some emails down the road? “Won’t you be needing all these things? ” “Oh, I never thought of that.” So, why don’t we developed in partnership a box with cost distributed according to that? I like this prototype a lot. Pricing strategy counts six, and that is a price to sentiment. What kind of positions you have in the marketplace? If you’re the leading authority in your marketplace, you can charge a lot more money. Now, most people do a lot of sales but they don’t understand how to do sentiment. How do you berth yourself as the go-to person, the go-to brand for whatever it is that you do? Right? So let me give you an example. Let’s say when you understand the superpower of ply and challenge. So if you go to Clarity right now, you construe on the Clarity site, my hourly pace is $10,000 US per hour. 10 K.

Now, why would someone pay me 10 K? To consult with them on an hourly basis? That’s a great deal of money. Supply and requirement. Supply and demand. When you understand basic financials, if you have a lot of challenge, a good deal of involving and you have very little supply, and supply, in this case, is my time, we only have 24 hours a day. You can now charge a lot more money. Because there’s a finite extent of giving. You know there’s a lot of fee concoctions out there in the marketplace, very often a lot of demand, limited supply. So ask yourself how you could use this to your advantage. How could you create a lot more demand for what you do, what you offer, what you sell? And then what you want to do is you want to restrict the quantity. Merely like diamond manufacture. Do you know there’s actually a ton of diamonds that’s out there? But the diamond industry is smart enough, they know if they spate the market with so much supply, then the value of diamond would go down dramatically. So they inhibit the supply and they drive up the demand. In some contingencies, they manufacture the demand. So then diamonds are style more valuable. But be borne in mind, that spiced to positioning. That’s all that is. It’s a toll to orientation. Pricing strategy number seven, expenditure to value. This is my go-to. This is my favourite because that’s how I like to buy things as well. That’s how I like to pay for things as well. Price to value.

If I’m paying for answers, I would be more than happy to pay a payment for makes. I don’t care about go, I don’t care about effort, I care about ensues. So if it’s research projects and I pay a certain amount of money, the project comes done, I’m more than happy. But the cost to value means that there’s no ceiling to your income. So let me give an example. Let’s say you run a consulting house. You do business consulting. Instead of blaming the customer for, “I’m gonna charge you X amount of dollars per hour.” Not particularly urging, not extremely pulling because the client’s success or failure’s got nothing to do with you. If they actually get more develops, they make more receipt, they pay the same amount of money. If they get no answers, you still get paid. Well, that’s not good. That means your clients taking on all the risk and you are getting all the wages. Or, you can price it in such a way, rate to value. Let’s say your client is doing a million dollars a year in income right now, that’s the cornerstone. You’ll are now in and say, “You know what, I can assist you in. “I am the world’s best consultant for this particular topic. “I can help you get more auctions, “get more customers, get more receipt. “But whatever you’re doing right now, the one million, “we’re not gonna touch that, that’s the basis. “But let’s say in the next three years, “that through are concerned with me. “Now I’m gonna gave some methods in place. “I could help you go from one million “to five million dollars in the next three years. “We’re gonna increase your receipt by 500%, “that’s our goal, and that’s your goal.”From here to now.

“The one million we don’t count, but the four million “that I’ve been able to help you gain in the marketplace, “without me you wouldn’t have had that kind of growth. “Out of four million if I could help you do that, “would you be comfortable of me “a small percentage of that? ” It could be, I don’t know, 5 %, 10%, whatever the figure is. Only on the increase, the four million. See, now that’s the cost to value. Now, what if you could only help this patient to got to get three million? You get paid a little bit less, you get balanced a little bit less. Or you assist them to get to 10 million. You made it out of the common, right. It’s a home run. Great, you must pay more. See now, your interest and your client’s interest, it’s aligned. And also that means that there’s no ceiling to income. It too means your client knows you’re not gonna nickel and dime. You’re not gonna nickel and dime him. Meaning, “Oh, yeah, we did this much “and I’m gonna charge you, “I’m gonna debit you for another three hours of work.” That’s bullshit. We only care about the answers. If you could go from one million to five million doing this much work, the customer doesn’t care. You want to go from here there, you do this much work, the customer doesn’t care, either. So now you’re working smart.

Now you’re not getting paid based on time, you’re getting paid by what you bring, what importance you bring to their time. And maybe, instead of spending this much time, you only need to spend a couple of hours a week on the project. As long as you get the results. Or you can simply make an introduction, “Hey, you know what, your business doing hundreds of thousands of, “I have another client now, “that I know would be a perfect fit. “Why don’t you guys form a strategic alliance “and time some business in between? ” And you determine the prologue. And from there you brought under a duet extra million of revenue to their business. How much is that worth to this client? A lot. Has nothing to do with how much time you put into it. Has to do with this.

That’s priced to value. Do you see how it modifies the way you look at things? It modifies the mode that you deliver quality. It too deepens how fast you want to deliver value. You want to deliver value as much and as fast as possible. This is my favourite sit. Price to value. Now depends on what you sell. Comment below, let me know what pricing model you are using right now. What pricing strategy you are using right now. Now, there’s no black and white. Sometimes within my business, my meter, Clarity, $10,000 per hour. That’s priced to era. That’s fine. Price to situating, price to value. Maybe you do a hybrid mannequin, a mix of these models, these strategies. Or maybe the front end you price to, to break even. But then, or rate to your competitors. But then on the backend you have some other examples, maybe a price to value. That’s perfectly fine as well. But what I’m saying is, you want to spend some time on this. This shouldn’t be done so, just like, half-ass. This should be done awfully strategically.

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