Boost your bottom line by taking the guesswork out of pricing By: Sean Bailey and Joven Rasgo IS IT TIME TO RAISE PRICES?

 Don’t go by your gut  Entrepreneurs pricing too low  Price reflects Value UNDERLYING THEMES

 “Basically, I’d throw a price out there and see what they’d take”  Always set his price too low.  Based prices off of a “similar product”  Customers felt he was providing a superior service  Corporate Clients didn’t take him seriously

 Objective Value Range  Most you can rationally charge for a product  Least you could rationally charge for a product.  Break-even point  Perceived Value  What a person actually is willing to spend  Are you willing to walk for a beer if its lower priced? TYPES OF VALUE

 Initially priced at $50  Dropped to $25  Owner unsatisfied “From our point of view, we’re charging only a fraction of the value we provide.”  Has not created enough perceived value to justify the higher price  How would you raise the price back to $50/month? LADDERS.COM

 Revenue grew 54% in $8 million  Competes with wine  Premium beer- $14 750ml wine bottle  Hosts “beer dinners”  Attracts early adopters to spread the word  Makes sure that there is not enough to satisfy the demand.  Scarce products demand a higher price  Wipes away reference price DOGFISH HEAD CRAFT BREWERY

 Similar product to Microsoft  Offered at $795 a year, boosted to $995 a year.  Next 12 months increased to $2,295 a year.  “We can push it higher”  Customers asked him to push it higher  “…[not] very expensive. How are you going to make any money?” SCOPE IT

 Back door pricing  Eliminate discounts, change terms and conditions  Charge for add-on services  Keep price the same but reduce product or service  If done correctly, consumers won’t realize the difference  Wipe away the reference point WAYS TO PRICE HIKE

 25% increase in price  No customers jumped ship  Used to close 80% of bids  Now closes 40% of bids, much better margins  Allows the owner to relax FIRE EYE CONCLUSION

 Do your due diligence when developing your pricing strategy  Avoid a price war  Avoid snowballing discounts  PRICE REFLECTS VALUE  Price can open up new doors TAKEAWAYS

 Who provides more value for their customers: PC’s or Mac? Why?  Why would you pay for a job site if you could just use others for free? QUESTIONS

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