Pricing Your Product, The Value-Offering Way

Pricing your product or service properly is a crucial skill in the life of any entrepreneur. You should be constantly calibrating the relationship between the amount of value you are giving your customers with the amount of money you are actually charging them. Now, there are many schools of thought about exactly how to accomplish this, from maximizing profits and advertising dollars to recurring payments, and so on. I encourage you to research these competing theories for your own knowledge at some point down the road, but for this article, I’m more interested in using real life examples from my own business and personal experience.

Pricing Your Product For The Long-Term

Now there are several different mindsets I’ve developed around pricing. I’ve had to rethink my own beliefs around this particular part of entrepreneurship in order to strike a balance between getting the best results for my clients while actually still making a bit of good money along the way.

Over time, I’ve used several different pricing models. I used to charge $50 for a one-hour coaching session. For a while, this was great; most of the clients were extremely happy, gave me excellent testimonials, provided good referrals, and in general were very satisfied with level of service I was giving them. However, when I followed up with them a month or so afterwards, most of them weren’t really implementing the advice I had been paid to give them.

Then, I increased the price to $100 an hour. Still, very satisfied customers, everyone seemed to be getting their money’s worth. As you can imagine, if you work 10 hours a day with 10 clients, you make $1,000 in a single day.

But, I wanted to focus more on the results. I wanted to focus on giving more long-term value for my clients. I wanted to make sure that I have a business focused on increasing the quality of my own clients’ lifestyles, rather than just taking cash from people’s pockets. So, I decided to change my pricing strategy.

Recurring Payments Keep YOU (The Business Owner) Accountable

I decided to lower my price by a lot, but to have it paid on a recurring basis. With this, I am forced to keep delivering high quality product rather than just making windfall profits and disappearing into the night, so to speak. By implementing a recurring payment strategy with a lower price point, I actually don’t make a profit in the first 3 months of working with a client. But, in the long-term, I cultivate not only a consistent set of circumstances for making money but actually build a healthy and profitable relationship for the company with the customer over a longer period of time. It’s more sustainable.

Think of the bigger picture. You want people who really want your service for the long-term and more specifically people who really implement. An example would be when I created a mastermind comprised of people who pay me on a recurring basis at a very low fee. The vast majority of folks in the mastermind are already implementing hardcore, and more than half of them are already getting results.

The Value The Customer Receives Indicates The Value You’re Offering

This is the way that it should be. This is a long-term pricing strategy. This is a pricing strategy that is used by businesses all over the world. Furthermore, I would highly encourage you to follow this business model. It keeps you pushing yourself and others, and it constantly keeps you accountable to improve your product. When you combine recurring payment plans with a mastermind or an interconnected community of clients, you increase the talents and opportunities for everybody involved in the ultimate vision you have for your business.

So, in my business, my KPI (or key indicator of performance) is basically how much money my clients are making, how much business my clients are getting, and how are they progressing in their current business dealings. The way I look at business is that if you hire someone to build a house, you expect that house to be built. When that house is built, you can see the physical results of the labor and planning associated with it. If it’s good, you recommend the builder to a friend, and that person you’ve worked with to build that house gets more business while you get to live in a quality home. Everybody’s happy. This is how your product or service should operate.

Tip: Increase The Value You’re Offering To Increase Your Profits

Why wouldn’t there be marketing like this? Why wouldn’t there be information products of the value-offering variety at every corner? Why wouldn’t this be like this online? It’s perfectly possible. With this in mind, I like to apply this pricing strategy ONLY if I increase the value of the product or service I’m offering. In other words, if I increase the value of my product by 2 or 3 times, only then can I increase the value of the pricing by 20-30%.

Why wouldn’t you? Everything’s value has increased – the product, the level of your own investment, and the customer’s satisfaction. On the other hand, if your client isn’t happy, he or she can leave after a month. But remember – that means you didn’t do your job correctly. You didn’t select the right client, you didn’t select the right product, and you probably need to step up your game. In fact, this kind of pricing is how you find out if you need to step up your game; furthermore it shows in plain order how to step up your game.

A Note On Human Nature

An alternative to this is just charging a thousand dollars straight up front. Now, you already have the $1,000 you wanted the whole time. Do you expect your excitement to deliver high-quality work to be increased after you got all the cash you were working for? Doubtful. Your mentality will likely change to, “Well, I already HAVE this one thousand dollars, so I might as well deliver a LITTLE less than I would if I was paid month-to-month at a lower rate”. It’s just human nature.

If the one thousand dollars was split up after a month-to-month basis and you stop delivering after month two, the money dries up. Everyone just leaves. So recurring payments help keep your discipline and value-giving skills in check. Think about it.

I encourage everyone to consider implementing more recurring based payments in their business. It increases the likelihood of altruistic motives, it still makes money, and it also holds you accountable as business leader as much as it holds the customer accountable as a consumer of your product or service.