Magic pricing numbers can be a trap. See why in the transcript below.
Welcome to the Business Numbers podcast. I’m your host, Ben McAdam. I’m a profits coach, virtual CFO, and entrepreneur, and I’ve created this podcast to help you grow your business profits and understand your business numbers without judgement, and without burying you in a whole bunch of jargon that you don’t need. Just actionable tips and case studies to help you grow your business. For show notes, go to the website businessnumberspodcast.com.
This episode is inspired by a client who has prices that are multiple of 1000. I won’t tell you exactly what they are. I’d say they’re 2000, or 3000, or 4000, but maybe for you you are stuck on a price of like $997 or $97. And by “stuck” I mean that the price sounds so cool or you’ve been told to price ending in a seven or a round hundred, and now you don’t know what price to increase it to. If you go from 2000 to 3000 that feels like a big jump. If you go from 97 to 197 that feels like a big jump. Even 97 to 147 feels like a big jump. Just to go to a nice seven kind of a number.
It feels like a big jump and you don’t think your clients or potential clients will go for a jump that big, so you put off the price rise. Or you’ll think about it some more another day, or “Oh no, there’s this important fire in my business I’ve gotta work on, instead of doing a price rise.”. That may or may not have been a personal experience, but I’ve seen it with a lot of clients too. And so you put off a price rise and 3-5 years goes past. Meanwhile, inflation eats into your margins and your clients get more and more used to paying that amount, or your customers tell all their friends, “Oh, I bought this awesome thing from your business and it’s only X dollars.”.
I’ve run whole workshops on raising prices, but let’s keep this episode short and just focus on getting unstuck from these types of numbers. The big takeaway here is that people don’t really care that much about the end in a seven thing or the round hundred thing with pricing. It gave you some certainty and confidence when you first set your prices or you last raised them. And that’s not a bad thing, you know, it does require some “throwing a dart with a blindfold on” to pick your pricing. It’s like it could be 197, it could be 198, it could be 198 and 10 cents. It could be 1000, it could be 1100. It’s like, you’ve gotta pick something. And these frameworks of ended_in_a_seven or make_it_a_round hundred, these frameworks help you make that grey area decision.
So I’m not really knocking those. I’m just letting you know it’s not really much of a needle mover in your business.
Your pricing is the last thing that should really influence the sale. There’s so much more marketing and sales stuff that you do before someone finds out the price that will have a much bigger impact than whether it’s $97 or $98 or $92.50. It’s not really that much of a needle mover. It’s not the end of the world. It basically is what I’m saying to move away from. And I said this as someone who once had a business where our lowest tier price was $69 a month. We got rid of that one. There was 69, 99 so we were in love with ending in a nine.
Anyway, eventually we discovered, as you will, it’s not the end of the world to move away from it. But remember you can actually test this and see for yourself. As always with price rises, you can test privately and then adjust your approach based on the feedback that you get. So rather than announcing your price rise, and press release, and sending to all the major newspapers, and television stations, and all over the social medias with viral posts, you can test your prices on the next sales call, or you can adjust your pricing pages on the website and see what happens.
Or if people go to reorder, you can say, “Hey, just letting you know our prices have gone up” and see what happens. A lot of people will grumble if you tell them, “Hey, the price has gone up”, they’re gonna try and have a little grumble and try and get away with it, but you might find you’re in the magical situation where people go, “Yeah, you were kind of undercharging me for a while. I felt guilty, but I didn’t really feel like I should say anything about it.”.
So remember: test privately just based on feedback and you’ll probably see that if it’s $97 or $98 or 107 vs 97, or instead of a thousand, it can be 1400 and 59 cents. You can always test.
Anyway, before I get carried away with price rise advice, let’s leave it with a quick reminder to not get stuck on the particular numbers in your prices and not let that get in the way of necessary price rises.
I hope this was helpful. If you have questions you can get in touch at businessnumberspodcast.com or you can also get in touch on my main website and find more useful articles there: Profitscollective.com.
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