September 3, 2025 • 26 mins
Pricing might be the most powerful yet underutilized profit lever in your business toolkit. In this eye-opening conversation with Per Sjöfors, "The Price Whisperer," we uncover why most businesses leave substantial money on the table through ineffective pricing strategies.
Per reveals the shocking mathematics behind pricing power: while a 1% increase in sales volume typically yields a 3.5% profit increase, and a 1% cost reduction generates about 5.5% more profit, a mere 1% price increase can boost profitability by a staggering 11.3%. Despite this leverage, most companies rely on guesswork, cost-plus formulas, or competitor matching—approaches that severely limit profit potential.
Drawing from his experience running multiple companies and conducting pricing research across approximately 5,000 products and services, Per debunks common pricing myths and introduces a scientific approach anyone can implement. He shares a practical method for solopreneurs and small businesses to determine their optimal price range: interview at least 25 prospects and ask two specific questions about price thresholds. This approach works equally well across B2B and B2C contexts because pricing psychology follows similar patterns regardless of market type.
The conversation also explores behavioral economics principles showing why pricing too low can actually decrease sales by creating perceptions of poor quality. Even retail giants like Walmart have shifted away from purely price-focused messaging after seeing declining sales when customers associated low prices with inferior products.
Whether you're a podcaster monetizing your platform, a consultant valuing your expertise, or a business owner setting product prices, this episode provides actionable insights to transform your pricing strategy and significantly boost your profitability. As Per reminds us in his parting wisdom: "You can always increase prices. If it doesn't work, you can always revert."
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Carl (00:04):
Welcome to Communication Connection Community the
podcaster's podcast.
This podcast takes a deep diveinto modern day communication
strategies in the podcastingspace.
We chat with interesting peoplewho make the podcasting and
speaking spaces exciting andvibrant.
We also dive into thepodcasting community with news
(00:24):
updates, latest trends andtopics from this ever-evolving
space.
So strap in, it's going to beone amazing ride.
Let's dive into today's episode.
Per, aka the Price Whisperer,is a thought leader and author
(00:45):
in everything pricing and howcompanies can use pricing to
drive higher growth, salesvolume and profits.
He's a sought-after speaker forvarious conferences, appears
regularly on podcasts andbusiness radio shows and gets
routinely quoted in thefinancial and business press,
and we're so thrilled to havehim joining us today.
Per, welcome to the podcast.
Per (01:05):
Carl it's a pleasure to be here.
Carl (01:08):
I'm stoked to find out about pricing.
I think it's something that, asbusiness owners, at some point
we struggle with it.
How do you do this pricingthing?
And quite often, we undervalueour services, and I know
podcasters undervalue a lot ofthe things that they do as well,
especially if they're offeringservices directly from their
podcast.
I want to ask you, though howdid you get into this field?
(01:29):
What led you to where you aretoday
?
Per (01:31):
First of all, you have absolutely
right that people say this isvery important, and I think that
is because many business ownersand so forth simply doesn't
know that there are better waysto set prices than what they
currently do and I'll get tothat in a second.
But to answer your question,the reason I'm doing what I'm
(01:52):
doing is that I had a chance torun a couple of companies in
Europe and then eventually I wasrecruited to move here to the
US in the mid-90s and Iestablished and ran a division
of a fairly large public companyand again headhunted several
times to several other CEO jobs.
And in all of these instanceswe did experiments with pricing
(02:14):
and some of those experimentswere very successful, meaning
that next quarter revenues areup by 25% or so.
Others were complete duds 25%or so.
Others were complete duds, andwhat I'd learned in business
school was so academic andtheoretical that it didn't help
us to understand why someexperiments worked and some
pricing experiment didn't workat all.
(02:35):
So when it was time for me toset out on my own, I decided to
develop a process to make surethat every pricing experiment is
successful, and that process,in short, consists of
understanding that everything acompany does affects how you can
set prices, how your marketingworks, how your sales works, how
(02:59):
you present yourself, how youpresent prices by themselves
affects how those prices couldbe set.
So everything you do in acompany affects the ability to
price.
Carl (03:12):
You said something very interesting off the top and you
mentioned business school, so Iwant to just jump off that for a
minute there.
Do you think part of thechallenge when it comes to
setting prices?
We live in a time where a lotof people are looking at
self-employment as anopportunity to get out of the
(03:33):
rat race, so to speak, and dotheir own thing.
They haven't necessarily hadthat formal business training or
spent years going to universityto learn business.
Do you think that's maybe partof the challenge?
Is that there's maybe aeducation that hasn't happened,
that maybe should happen orshould have happened in that
space.
Per (03:52):
Honestly, business school is highly overrated.
And, first of all, if you lookat, there's statistics out there
saying that about one third ofAmerican CEOs have an MBA and
and obviously two-thirds don't,so at least the value I got was
terminology and a bit of process, but pricing was something that
(04:15):
it was like two hours on aTuesday afternoon.
Honestly, I don't remember, butthere was very little of it.
Honestly, I don't remember, butthere was very little of it.
And this is sad because pricinghas higher leverage on a
company's profitability thananything else you do in a
company.
And in fact, there is a verysimple calculation anybody can
(04:37):
do and that is if you look atany company's profitability, it
comes from only three variablesit is the total cost of the
operation, it is the total salesof whatever the company is
selling and it's the price ofwhatever it's selling.
Very simple and for an averagecompany and of course no company
(05:00):
is average but for an averagecompany, if you do a thought
experiment and you want tochange one of those 1%, what
will happen is that, again, forthat average company, if you can
increase your sales volume with1%, profitability goes up with
3.5%.
If you can reduce your cost by1%, profitability goes up with
(05:25):
5.5%.
But if you can increase yourprice or decrease your
discounting, profitability goesout with 11.3%, sort of related
to that, I do something that Icall the 1% challenge, and that
challenge is simply have youever failed to change something?
(05:46):
1%, of course not.
It's so small.
And the other thing to considerin that is that profits is what
drives every company.
If you don't have profits,eventually your company is
either going to die or it'sgoing to shut down, or it's
going to be sold to somebody.
Your company is either going todie or it's going to shut down,
(06:07):
or it's going to be sold tosomebody.
Now some companies are verylucky because they have
investors that are willing tospend oodles of money for years
and years before the companybecomes profitable.
But that's a luxury that very,very few companies have.
Better profitability means youhave more resource in your
company for more marketing, formore product development, for
(06:28):
more sales activities, even moremoney to hire better and more
expensive people.
So profits is the key andcompanies who can increase their
profitability.
They don't just put all theirprofits in a bank account, they
actually do something with them.
That's why pricing is such animportant portion of this
(06:52):
because it has that highestleverage on profitability.
Carl (06:56):
So why is it then that companies
make these mistakes when itcomes to pricing?
What's the catalyst here?
Per (07:04):
Well, let me tell you a story about that.
I had this conversation with acompany, the CEO of this.
It's a SaaS company.
They do contract management insome form or shape.
I can't remember exactly howthey do it, but the conversation
I had with the CEO was likethis.
He said I've decided that theprice should be $165 a user a
(07:31):
month.
And then he continued sayingbut maybe it should have been
$99.
Or maybe it should have been$250.
I don't know, but $165 justfelt good.
Is that the best way of pricing?
Absolutely, I'm thinking no.
You're thinking no is the rightanswer.
(07:52):
And this was maybe even 10years ago.
I had this conversation and Ijust recently looked at the
company's website and it was thesame website as it was 10 years
ago.
Wow.
So I make the assumption thatthe company has not been a
raving success.
Carl (08:14):
So, in saying that, then, is it that the company's
individuals or companies don'tknow how to price?
What are some strategies, then,that people need to know when
they're embarking on pricingtheir services or pricing their
products, barking on pricingtheir services or pricing their
products?
Per (08:31):
Well, if we look at the main ways of pricing is just
what this CEO I just mentioned.
They just guess, guess or gutfeel or whatever you want to
call it, and that, of course, isnot a good way.
Another not so good way is touse cost plus, so a company
(08:52):
calculate their costs and thenthey slap on the margin, and
that cost plus margin can eitherbe something that their board
have said we have to have thisas a minimum margin or sometimes
they even say we have a margincorridor, which means that there
is a minimum margin but thereis also a maximum margin.
(09:16):
Why would you want a maximummargin?
You want to be able to have ashigh margin as you can.
But there's more to that,because almost every company has
some products or services thatare commodity or commodity-like
and they need to be sold on lowprice.
Because a commodity is beingsold on low price but the same
(09:41):
company almost always have someproducts or services that are
unique in some way, and when youhave a unique product or
service, you have pricing power.
So if you then have the samemargin for those commodity
products, they're going to betoo.
Have a unique product orservice, you have pricing power.
So if you then have the samemargin, for those commodity
products they're going to be tooexpensive and for the unique
products they're going to be toocheap.
(10:01):
So that's one of the issueswith cost plus.
And another very common way anda mistake to price is to look at
competition.
Common way and a mistake toprice is to look at competition.
And fine, if you have yourcompetitors, if they have prices
(10:22):
on their website in some formor shape, you can get a hint of
what the price should be.
But you don't know if they'rechanging their prices eight
times a day.
You don't know what specialdeals they've been making,
special bundles, specialdiscounts.
You don't know if the websiteis geotagged so that, depending
on where you come in from, priceis going to be different.
(10:45):
You don't know that if youclick away and then come back,
the price is going to be thesame or different.
So that is not a good way ofyou still don't know exactly
what they're charging.
When you start by pricing tocompetition like that, that is
often the first step into thecommoditization death spiral,
(11:07):
because you start pricing asyour competitors, as you think
you can, and then you startusing the same marketing
messages and the same featuresets.
And then you're a competitorsorry, a commodity and
commodities sold on the lowestprices possible and related to
this pegging price to acompetitor.
(11:29):
If you sell to customers thisis most likely more B2B
customers without yourcompetitors having their prices
on the website.
There are people out there whosay we price to the market.
What does that mean?
If the prices aren't visible,what is the market price?
Or they send out theirsalespeople and say they will
(11:52):
take the best price they can get.
Well, we all know thatsalespeople are going to come in
with the absolute lowest pricethey can because they think that
that is the quickest way ofgetting a sale and getting their
commission.
It sounds like the path to goodpricing is an art or a science.
Would you say or define it asbeing one of those two things?
(12:14):
It is science, it's not art atall, and I mentioned in the
beginning that I developed aprocess to make sure that every
pricing experiment is successfuland that is based on going out
to a company's marketplace andunderstand from something called
pricing research, which is avery different kind of online
(12:36):
market research, and understandfrom that the exact prices that
that market is willing to payfor a product or service, and
then further understanding how acompany's customer targeting
affects how they can set prices,how the company's customer
targeting affects how they canset prices, how the company's
what features and benefits of aproduct or service that drives
(13:01):
the ability to price for highersales volume and higher profits.
How the different marketingchannels and marketing messages
and sales methodologies andsales channels and so forth all
affect the ability to set pricesfor maximum sales volume and
maximum profitability.
Carl (13:23):
So can every company improve their pricing, then Are
there opportunities there.
Per (13:27):
We've had something like 800 or so client engagements.
We've had something like 800 orso client engagements and that
then leading to conducting thisprocess I just mentioned for
somewhere, I would guess, about5,000 different products or
services and during that time,less than half a dozen of times,
(13:49):
we have found that thecompany's existing price was the
right price.
Carl (13:56):
Wow, so they're spot on then.
Per (14:00):
Yeah, they were spot on, and many times those were
companies with multiple productsor multiple services, and three
of their six products may havebeen overpriced, two of them
were underpriced and one wasspot on.
Carl (14:16):
What are some tips or strategies, then, that people
can start applying to betterprice their products and
services?
Per (14:36):
customers or from buyers, I should say what made them buy
and what specific value they seewith a company's product or
service.
And if you're a small companyor if you're just starting out,
there's actually a way you cando this without using service
providers like my company.
And what you will do in thiscase is that you will identify
at least 25 prospects.
(14:58):
Now, those are not your, it'snot friends and family, it is
not your existing prospects, itis not your existing customers,
and what you'll do is that yougo to these people and you
describe your product or yourservice, and you do this without
(15:20):
using any names, so it's sortof anonymous.
And then you ask that prospect.
Two questions, questions, andthe first question is now Mr
Prospect, when you understandour product or service, what is
a price for this that is so low?
(15:42):
You think that we are overpromising and going to under
deliver and for that reason youwouldn't buy.
And then you continue with onemore question and you say and
now, Mr Prospect, let's look atthis from the flip side.
Assuming now that we are underpromising and going to massively
(16:07):
over deliver, what is still aprice that is so high that you
would not buy our product orservice.
Then you take the average ofthose two points and when you've
done that, you suddenly have arange of price.
It should not be below thatprice and it should not be above
(16:30):
that price.
Below that price and it shouldnot be above that price and you
then probably want to priceyourselves towards the high end
of that range.
And when you ask these questionsfrom these 25 people, there's
going to be outliers.
There's going to be people tosay that yeah, I'm happy to buy
(16:53):
this pen for a million bucks.
Those should be just eliminated, obviously.
So it should be 25 people thatare within a reasonable range of
what the product or service is.
If you're a startup, if youcan't find those 25, you have
bigger problems than pricing.
Carl (17:15):
You need to get those 25.
Per (17:17):
At least 25.
I mean, more is better and ifthis is a process that works,
you can continue with the samequestions and add some
information about these people.
Some information about thesepeople, and when you have like
75 of those, you can startseeing, maybe, differences.
(17:39):
If this is a consumer product,you may see maybe that females
have a different willingness orrange I should say that are
different than men or that agemake a difference in that range.
Or if it's B2B, maybe the sizeof a company or the industry
start to make a difference, orthe title of the person, and
(18:04):
then you can start honing in onfocusing your business on where
you can have the highestpossible sales volume at the
most profitable prices.
Carl (18:16):
I was going to ask you if it mattered whether or not a
company was B2B or B2C when itcomes to pricing Is the problem?
Per (18:22):
No, it doesn't.
I mean, how do you do this?
If you're a B2C, well, you roamyour local Starbucks and you go
to people.
Can I ask you two questions?
Maybe two out of 10 will sayyes, right.
And if it's B2B, maybe this issomething you reach out on
(18:43):
LinkedIn to people.
Can I ask you two questions?
Carl (18:47):
Does it make a difference with pricing if you're a
solopreneur, or are theprinciples again?
Are the principles still thesame, regardless of the company
size?
Per (18:59):
It is always the same, always.
This was first established inthe early 1900s, in B2B sales
actually, where there was agentleman called Torsten Veblen.
He was one of the leadingintellectuals at the time and he
(19:19):
discovered that if you priceyour office supplies too low,
your sales volume is not goingto be as high as if you price
them higher.
That is something that inbehavioral economics very
interesting stuff to read about.
But behavioral economics saysthat price sets an expectation
(19:41):
of quality and benefit and ifthe price is too low we're not
going to buy it because we don'tthink it's going to be any good
.
And we've all been there, right.
We hold something in our hands,physically or metaphysically,
and we say I want to buy this,but at this price it's so cheap
it can't possibly be any good.
Carl (20:03):
Unless cheap is what you're looking for, in which
case you're going to buy itStill to a point.
Per (20:11):
It was kind of interesting still to a point.
It was kind of interesting manyyears ago when Walmart had this
.
They had this tagline of lowerprices, all lower prices, right,
and that eventually became soefficient in convincing people
potential buyers that what theywere selling were not very good
(20:32):
quality.
So they were starting to see adecline in same-store sales and
what happened as a result ofthat was a rebranding and a new
tagline which is something ofLive Better I can't really
remember which is what they usetoday and once they've changed
that tagline from being purelylow prices, same-store sales
(20:58):
start to recover.
Carl (21:00):
Wow.
So even the companies who arehistorically known for lower
prices recognize that, if theyemphasize that, that it can have
a negative impact on theirsales.
Per (21:15):
And also a long time ago I had a conversation with the CEO
of one of the dollar stores andhe said we have to deliver good
quality despite our low prices,because otherwise people won't
come back.
Carl (21:36):
So I had another question how much of pricing can also be
based on experience?
Thinking of myself, for example, I base a certain degree of my
pricing on 25 years experiencein media and communications.
And so when you buy from me,when you buy into my services,
you're not just buying a podcasteditor, you're buying my
(21:57):
experience.
How much of that should befactored in or is factored in?
How much of that is factoredinto pricing?
Per (22:03):
Well, your experience is going to be relevant for a
certain portion of yourmarketplace.
It's going to be irrelevant foranother portion of your
marketplace.
That means that, for those thatsee your experience as relevant
, enable you to charge higherprices because they see value in
(22:24):
your experience.
The trick, then, and go back tothose interviews I mentioned.
The trick, then, is to doenough of those and maybe 75 is
sort of a minimum number andunderstand what is the profile
of those that sees yourexperience as a particular value
(22:50):
, so that you can target thoseas potential customers.
Carl (22:55):
And those two questions still apply?
Per (22:58):
Absolutely yeah, and phraseology here is enormously
important.
It has to be said the way Isaid it.
You cannot go and ask peoplewhat are you willing to pay?
Because they will lowball?
Are you willing to pay Becausethey will lowball?
You have to say now, when youunderstand my product or service
(23:19):
and also in your case, whatmakes me specifically different.
What is a price where you thinkwe are going to over-promise
and under-deliver and for thatreason you would not buy?
What is a price where you thinkwe will under promise and
maximally over deliver and yetit's so expensive you still
(23:43):
don't want to buy it or cannotbuy it.
Carl (23:45):
So the wording becomes very important, as is a lot of
things.
If you're not positioningyourself accordingly, you're not
going to attract the rightaudience to begin with, so that
becomes very important.
Per, this has been an amazingconversation.
Today I want to give you theopportunity to draw people to
the book.
It's an amazing book, so sharewith people where they can find
(24:07):
it.
Per (24:08):
Yeah, the book here is called the Price Whisperer, just
as my moniker.
The subtitle is more important.
The subtitle says A HolisticApproach to Pricing Power and
you will find the book.
You will find me, my company,my YouTube channel and all
(24:28):
different things by justGoogling the Price Whisperer,
because I got a wacky name.
If nothing else, and if youGoogle that, you should get
about 10 million hits or so.
Carl (24:40):
And we're going to put the links in the show Per notes
Sjofors anyhow, for all of thatinformation.
But if you are heading out andyou're not able to write any of
this information down, you justneed to remember the Price
Whisperer and you will find pairshow force pair.
It's been an amazingconversation.
Before I turn you loose, though, I want to give you the
opportunity to give the finalthought.
Per (25:02):
Well, final Carl, when it comes to pricing, you can always
increase prices, Always.
If it doesn't work, you canalways revert.
That's how simple it is.
If it works well, increase themagain.
It's not scientific in any way,but you can always try.
But obviously you need tomonitor your sales volume very,
(25:25):
very closely and obviously thereis going to be eventually
something called a price wallwhere you cannot increase your
prices any further.
Carl (25:36):
I think that's a great place to leave it Dom Carillo
Forrest, thank you so Nathanmuch for being my guest today.
carlspeaks.
(26:17):
.
c
Per (25:41):
Thank you, Cole.
It's been a pleasure and I hopethe audience got some nuggets
of information here theyappreciate, and thank you for
joining us today.
Carl (25:49):
Special thanks to our producer and production lead,
dom Coriglio, our music guru,nathan Simon, and the person who
works the arms all of our arms,actually my trusty assistant,
stephanie Gaffour.
If you like what you heardtoday, leave us a comment and a
review and be sure to share itwith your friends.
If you don't like what youheard, please share it with your
enemies.
Oh, and if you have asuggestion of someone who you
(26:12):
think would make an amazingguest on the show, let us know
about it.
Drop us an email, askcarl atcarlspeaksca.
Don't forget to follow us onLinkedIn and Twitter as well.
You'll find all those links inthe show notes, and if you're
ready to take the plunge andjoin the over 3 million people
who have said yes to podcasting,let's have a conversation.
We'll show you the simplest wayto get into the podcasting
(26:34):
space, because, after all, we'repodcast.
Solutions made simple.
We'll catch you next time.
Welcome to Communication Connection Community the
podcaster's podcast.
This podcast takes a deep diveinto modern day communication
strategies in the podcastingspace.
We chat with interesting peoplewho make the podcasting and
speaking spaces exciting andvibrant.
We also dive into thepodcasting community with news
(00:24):
updates, latest trends andtopics from this ever-evolving
space.
So strap in, it's going to beone amazing ride.
Let's dive into today's episode.
Per, aka the Price Whisperer,is a thought leader and author
(00:45):
in everything pricing and howcompanies can use pricing to
drive higher growth, salesvolume and profits.
He's a sought-after speaker forvarious conferences, appears
regularly on podcasts andbusiness radio shows and gets
routinely quoted in thefinancial and business press,
and we're so thrilled to havehim joining us today.
Per, welcome to the podcast.
Per (01:05):
Carl it's a pleasure to be here.
Carl (01:08):
I'm stoked to find out about pricing.
I think it's something that, asbusiness owners, at some point
we struggle with it.
How do you do this pricingthing?
And quite often, we undervalueour services, and I know
podcasters undervalue a lot ofthe things that they do as well,
especially if they're offeringservices directly from their
podcast.
I want to ask you, though howdid you get into this field?
(01:29):
What led you to where you aretoday
?
Per (01:31):
First of all, you have absolutely
right that people say this isvery important, and I think that
is because many business ownersand so forth simply doesn't
know that there are better waysto set prices than what they
currently do and I'll get tothat in a second.
But to answer your question,the reason I'm doing what I'm
(01:52):
doing is that I had a chance torun a couple of companies in
Europe and then eventually I wasrecruited to move here to the
US in the mid-90s and Iestablished and ran a division
of a fairly large public companyand again headhunted several
times to several other CEO jobs.
And in all of these instanceswe did experiments with pricing
(02:14):
and some of those experimentswere very successful, meaning
that next quarter revenues areup by 25% or so.
Others were complete duds 25%or so.
Others were complete duds, andwhat I'd learned in business
school was so academic andtheoretical that it didn't help
us to understand why someexperiments worked and some
pricing experiment didn't workat all.
(02:35):
So when it was time for me toset out on my own, I decided to
develop a process to make surethat every pricing experiment is
successful, and that process,in short, consists of
understanding that everything acompany does affects how you can
set prices, how your marketingworks, how your sales works, how
(02:59):
you present yourself, how youpresent prices by themselves
affects how those prices couldbe set.
So everything you do in acompany affects the ability to
price.
Carl (03:12):
You said something very interesting off the top and you
mentioned business school, so Iwant to just jump off that for a
minute there.
Do you think part of thechallenge when it comes to
setting prices?
We live in a time where a lotof people are looking at
self-employment as anopportunity to get out of the
(03:33):
rat race, so to speak, and dotheir own thing.
They haven't necessarily hadthat formal business training or
spent years going to universityto learn business.
Do you think that's maybe partof the challenge?
Is that there's maybe aeducation that hasn't happened,
that maybe should happen orshould have happened in that
space.
Per (03:52):
Honestly, business school is highly overrated.
And, first of all, if you lookat, there's statistics out there
saying that about one third ofAmerican CEOs have an MBA and
and obviously two-thirds don't,so at least the value I got was
terminology and a bit of process, but pricing was something that
(04:15):
it was like two hours on aTuesday afternoon.
Honestly, I don't remember, butthere was very little of it.
Honestly, I don't remember, butthere was very little of it.
And this is sad because pricinghas higher leverage on a
company's profitability thananything else you do in a
company.
And in fact, there is a verysimple calculation anybody can
(04:37):
do and that is if you look atany company's profitability, it
comes from only three variablesit is the total cost of the
operation, it is the total salesof whatever the company is
selling and it's the price ofwhatever it's selling.
Very simple and for an averagecompany and of course no company
(05:00):
is average but for an averagecompany, if you do a thought
experiment and you want tochange one of those 1%, what
will happen is that, again, forthat average company, if you can
increase your sales volume with1%, profitability goes up with
3.5%.
If you can reduce your cost by1%, profitability goes up with
(05:25):
5.5%.
But if you can increase yourprice or decrease your
discounting, profitability goesout with 11.3%, sort of related
to that, I do something that Icall the 1% challenge, and that
challenge is simply have youever failed to change something?
(05:46):
1%, of course not.
It's so small.
And the other thing to considerin that is that profits is what
drives every company.
If you don't have profits,eventually your company is
either going to die or it'sgoing to shut down, or it's
going to be sold to somebody.
Your company is either going todie or it's going to shut down,
(06:07):
or it's going to be sold tosomebody.
Now some companies are verylucky because they have
investors that are willing tospend oodles of money for years
and years before the companybecomes profitable.
But that's a luxury that very,very few companies have.
Better profitability means youhave more resource in your
company for more marketing, formore product development, for
(06:28):
more sales activities, even moremoney to hire better and more
expensive people.
So profits is the key andcompanies who can increase their
profitability.
They don't just put all theirprofits in a bank account, they
actually do something with them.
That's why pricing is such animportant portion of this
(06:52):
because it has that highestleverage on profitability.
Carl (06:56):
So why is it then that companies
make these mistakes when itcomes to pricing?
What's the catalyst here?
Per (07:04):
Well, let me tell you a story about that.
I had this conversation with acompany, the CEO of this.
It's a SaaS company.
They do contract management insome form or shape.
I can't remember exactly howthey do it, but the conversation
I had with the CEO was likethis.
He said I've decided that theprice should be $165 a user a
(07:31):
month.
And then he continued sayingbut maybe it should have been
$99.
Or maybe it should have been$250.
I don't know, but $165 justfelt good.
Is that the best way of pricing?
Absolutely, I'm thinking no.
You're thinking no is the rightanswer.
(07:52):
And this was maybe even 10years ago.
I had this conversation and Ijust recently looked at the
company's website and it was thesame website as it was 10 years
ago.
Wow.
So I make the assumption thatthe company has not been a
raving success.
Carl (08:14):
So, in saying that, then, is it that the company's
individuals or companies don'tknow how to price?
What are some strategies, then,that people need to know when
they're embarking on pricingtheir services or pricing their
products, barking on pricingtheir services or pricing their
products?
Per (08:31):
Well, if we look at the main ways of pricing is just
what this CEO I just mentioned.
They just guess, guess or gutfeel or whatever you want to
call it, and that, of course, isnot a good way.
Another not so good way is touse cost plus, so a company
(08:52):
calculate their costs and thenthey slap on the margin, and
that cost plus margin can eitherbe something that their board
have said we have to have thisas a minimum margin or sometimes
they even say we have a margincorridor, which means that there
is a minimum margin but thereis also a maximum margin.
(09:16):
Why would you want a maximummargin?
You want to be able to have ashigh margin as you can.
But there's more to that,because almost every company has
some products or services thatare commodity or commodity-like
and they need to be sold on lowprice.
Because a commodity is beingsold on low price but the same
(09:41):
company almost always have someproducts or services that are
unique in some way, and when youhave a unique product or
service, you have pricing power.
So if you then have the samemargin for those commodity
products, they're going to betoo.
Have a unique product orservice, you have pricing power.
So if you then have the samemargin, for those commodity
products they're going to be tooexpensive and for the unique
products they're going to be toocheap.
(10:01):
So that's one of the issueswith cost plus.
And another very common way anda mistake to price is to look at
competition.
Common way and a mistake toprice is to look at competition.
And fine, if you have yourcompetitors, if they have prices
(10:22):
on their website in some formor shape, you can get a hint of
what the price should be.
But you don't know if they'rechanging their prices eight
times a day.
You don't know what specialdeals they've been making,
special bundles, specialdiscounts.
You don't know if the websiteis geotagged so that, depending
on where you come in from, priceis going to be different.
(10:45):
You don't know that if youclick away and then come back,
the price is going to be thesame or different.
So that is not a good way ofyou still don't know exactly
what they're charging.
When you start by pricing tocompetition like that, that is
often the first step into thecommoditization death spiral,
(11:07):
because you start pricing asyour competitors, as you think
you can, and then you startusing the same marketing
messages and the same featuresets.
And then you're a competitorsorry, a commodity and
commodities sold on the lowestprices possible and related to
this pegging price to acompetitor.
(11:29):
If you sell to customers thisis most likely more B2B
customers without yourcompetitors having their prices
on the website.
There are people out there whosay we price to the market.
What does that mean?
If the prices aren't visible,what is the market price?
Or they send out theirsalespeople and say they will
(11:52):
take the best price they can get.
Well, we all know thatsalespeople are going to come in
with the absolute lowest pricethey can because they think that
that is the quickest way ofgetting a sale and getting their
commission.
It sounds like the path to goodpricing is an art or a science.
Would you say or define it asbeing one of those two things?
(12:14):
It is science, it's not art atall, and I mentioned in the
beginning that I developed aprocess to make sure that every
pricing experiment is successfuland that is based on going out
to a company's marketplace andunderstand from something called
pricing research, which is avery different kind of online
(12:36):
market research, and understandfrom that the exact prices that
that market is willing to payfor a product or service, and
then further understanding how acompany's customer targeting
affects how they can set prices,how the company's customer
targeting affects how they canset prices, how the company's
what features and benefits of aproduct or service that drives
(13:01):
the ability to price for highersales volume and higher profits.
How the different marketingchannels and marketing messages
and sales methodologies andsales channels and so forth all
affect the ability to set pricesfor maximum sales volume and
maximum profitability.
Carl (13:23):
So can every company improve their pricing, then Are
there opportunities there.
Per (13:27):
We've had something like 800 or so client engagements.
We've had something like 800 orso client engagements and that
then leading to conducting thisprocess I just mentioned for
somewhere, I would guess, about5,000 different products or
services and during that time,less than half a dozen of times,
(13:49):
we have found that thecompany's existing price was the
right price.
Carl (13:56):
Wow, so they're spot on then.
Per (14:00):
Yeah, they were spot on, and many times those were
companies with multiple productsor multiple services, and three
of their six products may havebeen overpriced, two of them
were underpriced and one wasspot on.
Carl (14:16):
What are some tips or strategies, then, that people
can start applying to betterprice their products and
services?
Per (14:36):
customers or from buyers, I should say what made them buy
and what specific value they seewith a company's product or
service.
And if you're a small companyor if you're just starting out,
there's actually a way you cando this without using service
providers like my company.
And what you will do in thiscase is that you will identify
at least 25 prospects.
(14:58):
Now, those are not your, it'snot friends and family, it is
not your existing prospects, itis not your existing customers,
and what you'll do is that yougo to these people and you
describe your product or yourservice, and you do this without
(15:20):
using any names, so it's sortof anonymous.
And then you ask that prospect.
Two questions, questions, andthe first question is now Mr
Prospect, when you understandour product or service, what is
a price for this that is so low?
(15:42):
You think that we are overpromising and going to under
deliver and for that reason youwouldn't buy.
And then you continue with onemore question and you say and
now, Mr Prospect, let's look atthis from the flip side.
Assuming now that we are underpromising and going to massively
(16:07):
over deliver, what is still aprice that is so high that you
would not buy our product orservice.
Then you take the average ofthose two points and when you've
done that, you suddenly have arange of price.
It should not be below thatprice and it should not be above
(16:30):
that price.
Below that price and it shouldnot be above that price and you
then probably want to priceyourselves towards the high end
of that range.
And when you ask these questionsfrom these 25 people, there's
going to be outliers.
There's going to be people tosay that yeah, I'm happy to buy
(16:53):
this pen for a million bucks.
Those should be just eliminated, obviously.
So it should be 25 people thatare within a reasonable range of
what the product or service is.
If you're a startup, if youcan't find those 25, you have
bigger problems than pricing.
Carl (17:15):
You need to get those 25.
Per (17:17):
At least 25.
I mean, more is better and ifthis is a process that works,
you can continue with the samequestions and add some
information about these people.
Some information about thesepeople, and when you have like
75 of those, you can startseeing, maybe, differences.
(17:39):
If this is a consumer product,you may see maybe that females
have a different willingness orrange I should say that are
different than men or that agemake a difference in that range.
Or if it's B2B, maybe the sizeof a company or the industry
start to make a difference, orthe title of the person, and
(18:04):
then you can start honing in onfocusing your business on where
you can have the highestpossible sales volume at the
most profitable prices.
Carl (18:16):
I was going to ask you if it mattered whether or not a
company was B2B or B2C when itcomes to pricing Is the problem?
Per (18:22):
No, it doesn't.
I mean, how do you do this?
If you're a B2C, well, you roamyour local Starbucks and you go
to people.
Can I ask you two questions?
Maybe two out of 10 will sayyes, right.
And if it's B2B, maybe this issomething you reach out on
(18:43):
LinkedIn to people.
Can I ask you two questions?
Carl (18:47):
Does it make a difference with pricing if you're a
solopreneur, or are theprinciples again?
Are the principles still thesame, regardless of the company
size?
Per (18:59):
It is always the same, always.
This was first established inthe early 1900s, in B2B sales
actually, where there was agentleman called Torsten Veblen.
He was one of the leadingintellectuals at the time and he
(19:19):
discovered that if you priceyour office supplies too low,
your sales volume is not goingto be as high as if you price
them higher.
That is something that inbehavioral economics very
interesting stuff to read about.
But behavioral economics saysthat price sets an expectation
(19:41):
of quality and benefit and ifthe price is too low we're not
going to buy it because we don'tthink it's going to be any good
.
And we've all been there, right.
We hold something in our hands,physically or metaphysically,
and we say I want to buy this,but at this price it's so cheap
it can't possibly be any good.
Carl (20:03):
Unless cheap is what you're looking for, in which
case you're going to buy itStill to a point.
Per (20:11):
It was kind of interesting still to a point.
It was kind of interesting manyyears ago when Walmart had this
.
They had this tagline of lowerprices, all lower prices, right,
and that eventually became soefficient in convincing people
potential buyers that what theywere selling were not very good
(20:32):
quality.
So they were starting to see adecline in same-store sales and
what happened as a result ofthat was a rebranding and a new
tagline which is something ofLive Better I can't really
remember which is what they usetoday and once they've changed
that tagline from being purelylow prices, same-store sales
(20:58):
start to recover.
Carl (21:00):
Wow.
So even the companies who arehistorically known for lower
prices recognize that, if theyemphasize that, that it can have
a negative impact on theirsales.
Per (21:15):
And also a long time ago I had a conversation with the CEO
of one of the dollar stores andhe said we have to deliver good
quality despite our low prices,because otherwise people won't
come back.
Carl (21:36):
So I had another question how much of pricing can also be
based on experience?
Thinking of myself, for example, I base a certain degree of my
pricing on 25 years experiencein media and communications.
And so when you buy from me,when you buy into my services,
you're not just buying a podcasteditor, you're buying my
(21:57):
experience.
How much of that should befactored in or is factored in?
How much of that is factoredinto pricing?
Per (22:03):
Well, your experience is going to be relevant for a
certain portion of yourmarketplace.
It's going to be irrelevant foranother portion of your
marketplace.
That means that, for those thatsee your experience as relevant
, enable you to charge higherprices because they see value in
(22:24):
your experience.
The trick, then, and go back tothose interviews I mentioned.
The trick, then, is to doenough of those and maybe 75 is
sort of a minimum number andunderstand what is the profile
of those that sees yourexperience as a particular value
(22:50):
, so that you can target thoseas potential customers.
Carl (22:55):
And those two questions still apply?
Per (22:58):
Absolutely yeah, and phraseology here is enormously
important.
It has to be said the way Isaid it.
You cannot go and ask peoplewhat are you willing to pay?
Because they will lowball?
Are you willing to pay Becausethey will lowball?
You have to say now, when youunderstand my product or service
(23:19):
and also in your case, whatmakes me specifically different.
What is a price where you thinkwe are going to over-promise
and under-deliver and for thatreason you would not buy?
What is a price where you thinkwe will under promise and
maximally over deliver and yetit's so expensive you still
(23:43):
don't want to buy it or cannotbuy it.
Carl (23:45):
So the wording becomes very important, as is a lot of
things.
If you're not positioningyourself accordingly, you're not
going to attract the rightaudience to begin with, so that
becomes very important.
Per, this has been an amazingconversation.
Today I want to give you theopportunity to draw people to
the book.
It's an amazing book, so sharewith people where they can find
(24:07):
it.
Per (24:08):
Yeah, the book here is called the Price Whisperer, just
as my moniker.
The subtitle is more important.
The subtitle says A HolisticApproach to Pricing Power and
you will find the book.
You will find me, my company,my YouTube channel and all
(24:28):
different things by justGoogling the Price Whisperer,
because I got a wacky name.
If nothing else, and if youGoogle that, you should get
about 10 million hits or so.
Carl (24:40):
And we're going to put the links in the show Per notes
Sjofors anyhow, for all of thatinformation.
But if you are heading out andyou're not able to write any of
this information down, you justneed to remember the Price
Whisperer and you will find pairshow force pair.
It's been an amazingconversation.
Before I turn you loose, though, I want to give you the
opportunity to give the finalthought.
Per (25:02):
Well, final Carl, when it comes to pricing, you can always
increase prices, Always.
If it doesn't work, you canalways revert.
That's how simple it is.
If it works well, increase themagain.
It's not scientific in any way,but you can always try.
But obviously you need tomonitor your sales volume very,
(25:25):
very closely and obviously thereis going to be eventually
something called a price wallwhere you cannot increase your
prices any further.
Carl (25:36):
I think that's a great place to leave it Dom Carillo
Forrest, thank you so Nathanmuch for being my guest today.
carlspeaks.
(26:17):
.
c
Per (25:41):
Thank you, Cole.
It's been a pleasure and I hopethe audience got some nuggets
of information here theyappreciate, and thank you for
joining us today.
Carl (25:49):
Special thanks to our producer and production lead,
dom Coriglio, our music guru,nathan Simon, and the person who
works the arms all of our arms,actually my trusty assistant,
stephanie Gaffour.
If you like what you heardtoday, leave us a comment and a
review and be sure to share itwith your friends.
If you don't like what youheard, please share it with your
enemies.
Oh, and if you have asuggestion of someone who you
(26:12):
think would make an amazingguest on the show, let us know
about it.
Drop us an email, askcarl atcarlspeaksca.
Don't forget to follow us onLinkedIn and Twitter as well.
You'll find all those links inthe show notes, and if you're
ready to take the plunge andjoin the over 3 million people
who have said yes to podcasting,let's have a conversation.
We'll show you the simplest wayto get into the podcasting
(26:34):
space, because, after all, we'repodcast.
Solutions made simple.
We'll catch you next time.
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