Ah the perfect pricing strategy.

That’s when both you & your customer make maximum profit. Huh, customers making a profit? That’s right, people buy when they see more use value in the goods or services that you’re selling, than the price you’re asking. The MORE, is their profit.

When a prospective customer is exposed to your advertising & sales message, one of the things they do is mentally calculate their profit potential. The greater the delta between what they perceive as their profit potential, & the price, the more likely the sale. Of course they are also “shopping” for the highest margin, & the lowest risk of actually achieving that profit, post sale. You can see why your sales message is so important.

So far, so good, but how do you know what constitutes the perfect pricing strategy? Price too low, and you could be leaving more money on the table than you’d like with each transaction. You could even be discouraging some sales with your price, because people do subconsciously associate price with quality. Is a Mercedes really worth three times as much as a Ford?

But price too high, and sales suffer.

The relationship between price, sales volume, & profit is a critically important question for any business.

“The Math is Striking”

To illustrate this point, let’s say you’re selling a Whoville Map & Attraction Guide (Dr. Seuss turns 100 this year you know) for $10 bucks a crack. Reducing the price by 10% decreases your profit margin by a whopping 50%! Therefore, sales must more than double for the price reduction to pay.

On the other hand, if raising the price by 10% had no impact on sales, you’re profit margin just went from 20% to over 27%! Of course pricing theory is more complex than that, but you get the idea. Download a crash course that gives a very simple, easy to follow outline of accepted pricing theory, & some fresh ideas too.

Keep your wallet in your pocket though. It’s a gift!

Needless to say, the highness, or the lowness, of your pricing has a dramatic impact on your sales conversion, and your profit margin. Split test a wide variety of different prices for your product, & you’ll see major swings in conversion. But split testing also reveals some other very interesting quirks of human nature when it comes to the perception of price.

Here are a few examples.

“Pricing Psychology”

Humans buy first on emotion, then on logic. What if I believed that the Whoville Map & Attraction guide that you’re selling would make me look smart on a date? Would I be open to the suggestion that it costs something meaningfully less than $10, if you offered it to me for $9.99?

Humor aside, the answer is oddly enough yes. That 1-cent can have a significant impact according to tests conducted by The Professional Pricing Society. What about $9.95? Four times the impact? Nope, just 4 cents (a full 2%) less margin for you.

Some other findings.

Above $10, .99 is perceived as “greedy”. Better to go with .95 or .75. Above $100? Better to stick with whole numbers.

“The Value of Bundling”

Everyone loves to feel like they are getting something for nothing. Again, the rational mind knows that there is no such thing. But once we become passionate about wanting something, we are more than happy to justify our indulgence by letting ourselves believe it.

The self-talk goes something like this. “Hey I know this is a major purchase, & I really hadn’t budgeted for it, but I’d have to be nuts not to grab these no cost extras”.

Studies prove that a bundle of goods will often make more money than where the items are sold separately, even with lower margins, largely due to this perception.

“Ancient Pricing Secret”

In 1922, Henry Ford said, “Any customer can have a car painted any color they like, as long as it’s black”. At the time, he had a strangle hold on the car market.

How did Alfred Sloan (GM) overtake him in less than a decade, & never look back? By asking customers how they felt.

“Price your product, based on the value your market PERCEIVES, IMMEDIATELY after being exposed to your sales message”. Read that again.

Learn how to quickly, easily, & scientifically let your market determine your perfect pricing strategy with this nifty little pricing tool from Ken Evoy.

It lays it all out for you in easy to interpret charts, graphs, & tables.

Before long the relationships between perceived value, sales volume, & margin, become an open book.

Eureka! Your perfect pricing strategy.

Funnel the money your competitors are flushing down the drain with “cost plus margin”, and “whatever the market will bear” pricing into YOUR bank account!