November 29, 2021 • 18 mins
Learning how pricing mistakes might be affecting your bottom line and what to do about them. Pierce Brantley breaks down some of the common pricing mistakes small businesses make and how adjust for them. He takes his wisdom from Peter Drucker, the time-tested thought leader on business strategy. He also shares some insight on ways to make your pricing more attractive to the consumer. Buckle up for a nerdy, math-based episode and see if you might fall into one these price-setting sins.
This episode covers the topics of pricing strategy, marketing strategy, consumer pricing, competitive analysis, Peter Drucker, stewardship, and business management.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Pierce Brantley (00:04):
Welcome to Lunch Break a special weekly series of the
Eternal Entrepreneur that gives youbite sized pieces of wisdom on how to
build a function of faith and business.
Each episode unpacks, a short, actionabletopic you can put into practice this week.
Let's get into it.
Well, hello and welcome back.
Thank you for joiningus for the lunch break.
I am Pierce Brandley co-hostof the eternal entrepreneur.
(00:28):
How is everybody doing?
I hope everyone is fat and happy full ofTurkey and dressing and cranberry sauce.
I know I have completely justabandoned my diet for deeper waters
of gravy and mashed potatoes.
And I'm not upset about it.
I'm not upset about it.
One, one iota.
(00:51):
However, in preparing for Thanksgiving.
I noticed something and you allprobably noticed something as well.
And it set the Turkeywas too dang expensive.
In fact, everything from gas to,uh, powdered, mashed potatoes,
everything, the cost of everythinghas just gone up through the roof.
(01:13):
And that got me thinking, Iimagine in your own businesses,
the costs of operating here.
Have gone up as well, and that mighthave even impacted how you approach.
Your pricing.
And so I thought it'd be fun to do justkind of a quick sort of breakdown on
(01:34):
strategies and mistakes that happenwhen we approach pricing as a small
business and what we can do about them.
So we're going to go through three majormistakes that businesses make in pricing,
their products, and then a couple easy.
Tactical strategies that you canuse to kind of tweak it once,
(01:57):
you know what those mistakes are.
Sound good.
Okay.
Well stay awake.
Fight that Turkey coma let's get started.
So these three mistakes, thesethree pricing steaks were
pioneered by Peter Drucker.
Peter Drucker is afantastic business model.
And well, though, he's passed a lot ofhis wisdom still kind of rests with us.
(02:22):
And one of the great thingshe explored was pricing.
So the first pricingmistake he identified.
These actually come from alarger body of work called the
five deadly sins of business.
The first mistake is feature.
Pricing.
So what is feature based pricingfeature based pricing is basically
where you continually add featuresor benefits to your service.
(02:47):
And therefore you logicallyincrease the price.
So let's say you're a widget maker, right?
You have five features and the nextquarter you have six features in the
next quarter, you have seven and so on.
And so on every time you add a newfeature, you add a new price because
while you have more features in thecompetition, the problem is the consumer.
Doesn't see.
(03:08):
See it this way, nor do they care.
There has to be a value to cost ratio.
That's important.
And normally it's small business ownersor CEOs who kind of get stuck in this
chapter thinking, but we have more thingsassociated with our service or product.
Therefore it's worth more.
(03:28):
That's not true because you're notnecessarily just selling a product, right.
You're actually concernedwith capturing a market.
And so capturing.
Is your most kind of, uh, forwardthinking forward leading strategy,
the price of the actual service as itrelates to value is sort of secondary
in that if you wouldn't add 50 cents tosomething every single time you add a,
(03:52):
like a, like a new feature of some kind.
So Drucker's sort ofreference for this was Xerox.
Xerox had new technology at the time.
They were very pioneeringcompany at the time.
But what they kept doing was theywould pile on features and they
kept on raising the price of theproduct over and over and over again.
And what happened you can imagineis that competition came in with a
(04:17):
cheaper price that wasn't based offthe number of features, undercut them.
And because.
As we know the laws of innovationkind of went into play.
They were able to beat Xeroxand Xerox, you know, no one
even thinks of Xerox anymore.
So that is feature based pricing.
Stay away from it, focus more on,on capturing the market second
(04:40):
charging what the market will be.
So this is the mistake that I probablymade the most when I was first
starting off as an entrepreneur.
In fact, I can remember, I used tokind of have a platform that talked
about brand strategy, brand alignment,marketing, all of that fun stuff.
And one of the things I would talkabout often on that without even knowing
(05:02):
who Jucker was, is you need to chargewhat the market can bear, whatever it
can handle, whatever can shoulder, youput that yoke on it, and you will make
sure the market carries it for you.
And the problem with this one.
And it does work.
The problem is from acompetitive strategy.
(05:24):
It won't work for long because aswe just kind of alluded to earlier,
inflation is always a thing, changesand pricing dynamics based off of
availability of resources or, um, lowend disruption coming into a marketplace.
All of these different factors impact.
Your price.
(05:45):
And so if you're just purely chargingwhat the market will bear so that you
can maximize profit, then what's goingto happen is someone is going to be
able to come in and beat you eventually.
And so just go into that top in price,just because someone will pay for it
and someone will always pay for it.
Isn't a good long-term strategybecause it ignores competition.
(06:10):
And I'm not saying we shouldobsess about competition.
Purely from like a, uh, I don'tknow, even like a cognitive bias
perspective, but, but you should bethinking about it from the options
that consumers have from price.
Don't assume that they'll just paymore, uh, because maybe you have a
better brand or a better perceived,you know, uh, price to value ratio.
(06:33):
Uh, you need to price yourselfcompetitively, um, that can still
be the higher end of things, but itshouldn't be ultimately whatever.
Someone can or a companyor market can totally bear.
It needs to be in context of all theoptions that are available to consumers.
So that requires pricing, research,market research, secondary and competitive
research to basically tweak that price tobe a premium option, but not a overbearing
(07:01):
option just for the sake of profit.
Okay.
We got it.
Now last, certainly not leastthis is a fun, a tongue twister.
Don't make the mistake of usingcost driven pricing instead
do price driven, costing.
So don't do cost driven pricing,do price driven, costing.
(07:23):
What does that mean?
If you are a practical CEO, practicalentrepreneur, very pragmatic type person.
This one is going to be kind of.
To wrap your head around, orat least be hard to swallow.
I have no doubt.
You can wrap your head around it.
Cost driven pricing effectively says,go figure out what the cost of goods
(07:43):
are or the cost of giving a serviceis, and then add margin on top of it.
So, you know, if your widgetcosts $5, you know, increase it
by 30%, if your services are.
You know, $600 an hour, you know,blended then add another, you
(08:04):
know, 25% or 10% on top of that.
This is a mistake ultimately.
And the reason is because it's,while it's, it's going to give you a
profit, at least in the short-term, atleast in terms of the math, again, it
does not take into context that yourbusiness lives within the ecosystem
(08:24):
of options that are available.
To the consumer, even if you don'tparticularly think you have competition
and he worked from this model, eventuallysomeone will enter your market.
And because it's purely markup based, soto speak, you're going to get undercut,
or someone's gonna be able to offer morevalue at the same price because you're not
(08:46):
taking into context, the total landscapeof options that the consumer has.
So this is good math, but bad marketing.
So Drucker's advice in thisis to do priced based costing.
So if you're familiar with thebook, uh, I can't remember his
name now, but it's profit first.
(09:07):
This is sort of similarto the profit first model.
You need to set a price that is appealingto the consumer arbitrarily without
thinking about your costs, by the way.
So.
Let's say your widgets costs $9 or $10.
And then you typically markthat up, you know, 30%.
(09:29):
So you're somewhere in the $13to 1499 range, depending on how
you kind of boil everything down.
So that is an exampleof what you should not.
What you should do.
However, say what is most attractiveto the consumer and, uh, you do in your
own research, you figure out that 7 99.
(09:52):
Or $8 net range is the most attractivething to consumer that puts the impetus on
you, the business owner to go figure outhow to get your costs down, or possibly
take a loss on what you're selling andthen make up that loss on other items.
So maybe your, your main productends up becoming a loss leader,
you know, in exchange for like addon services that are reoccurring.
(10:16):
The point is your product.
Live in isolation.
Therefore the price of your product shouldbe based off of incentive to the consumer
and the driving needs of the consumer.
Not purely on the math thatmakes your business profit.
(10:38):
This requires you to be more innovativeas a company, more creative as a company.
And we'll really challenge, I think yourexecutive team or those who are involved
in kind of getting something out thereto think through what a price should be.
So again, the three mistakes thatwe're making pricing, our feature
based pricing, where we just increasedpricing based off the number of
(11:00):
features, consumers don't care.
Don't give them a widget with 10 thingswhen maybe they only want five, uh,
charging what the market will bear.
Eventually someone will undercutyou because you're continually
pushing the roof on what is positive.
And then cost driven pricing, whichessentially is just math based markup.
(11:21):
Again, it's good.
In terms of operations, it's bad interms of really understanding what
is attractive to your consumer,you'll get beat eventually, even if.
You know, looking that way right now.
So those are the threemistakes real quick.
I want to jump into a strategy thatyou can use to kind of, once you
understand which price you should be,setting, how to make it more appealing.
(11:47):
Now.
No doubt.
You're familiar with.
Tactic, uh, because you've probablyconsumed things based off of it.
However, I want you to think about howit can be applied to your business.
And this is called charm based pricing.
Now there is a litany, there is unendingdifferent ways to think about pricing
strategy, and that really requires anin-depth, you know, study of your business
(12:11):
in the market to get that exactly right.
However, one of the easiestthings you can do is charm based.
And charm based pricing, particularly inthe west is where we change the number
to be more appealing to the consumer,completely arbitrarily to the costing and
(12:32):
the actual sort of profit, because whatwe're most concerned about at this point,
once we have our profits and our costswork out is not the profit of the cost.
It's the appeal to the consumer.
So advertising and marketing.
Right.
Are there whole own sort ofsegment of your business?
(12:52):
However, pricing appeal needs to kindof fall underneath that category.
Meaning your cost, your operationalcosts, your blended rates, your profit
margins, all that type of stuff.
Sit in one bucket and they shouldn't have.
Tell you what your priceshould be for your product.
They might inform the actuals.
(13:12):
They might inform the, the,uh, the, the black lines and
the red lines, so to speak.
But the pricing psychology is what tellsthe consumer that you have something
of value to them for their money.
And so it needs to be aseparate conversation.
So time-based pricing iswhere you change the number.
(13:35):
To be appealing to the consumer.
Most oftentimes it's with ending ina nine and then using smaller numbers
towards the end of the pricing.
So what's incredible aboutthis type of stuff is that you
can actually charge more for.
And that's because consumers, whenthey're looking purely at price appeal,
(13:56):
they're making an emotional decisionbased off of how they feel about making a
purchase, not how much it actually costs.
And this is true, not just of departmentstores and, you know, fast food.
It's true of your business as well,because they're ultimately just trying
to make the best decision for themselves.
And you live in an information economy.
Price check things.
(14:17):
So you need to give yourselfthe best chance of winning by
making appealing looking numbers.
So let's say that you find outbased off of doing price-driven
costing that, you know, you shouldbe selling your product for $11.
And then, uh, you know, andmaybe previously you were
(14:39):
selling it for, I dunno, $8.
So that's great.
You're getting a little bit of markupnow, obviously, if you were to just
compare the two numbers, arbitrarily eightnumbers is less than a leaven dollars.
However, if you charged$14 and 99 cents versus.
(15:02):
$12 and 50 cents or $8 and 67 cents.
Something like that.
The $14 and 69 cents or 99 cents.
I can't remember what I said is goingto be more appealing to the consumer.
And that's because of the way thenumbers go down initially and then end
(15:26):
in a number they feel comfortable with.
So.
What's great about the strategyis one, it's a marketing tool
that really genuinely works.
And then second of all, you canactually get more for your item or
your service purely out of, um, thatpricing charm working, even as you go
(15:51):
up the scale in terms of costs to the.
So they've done tons of studies on this.
They've done like blind studieswhere, you know, they had people
buy the same, uh, the same shirt,three different times, or at three
different options to buy their shirt.
And consumers would typically pay,even though they knew exactly what the
price was, they would pay more money.
(16:14):
For the shirt purely based offof the way the number ended.
And they've tested this over and over andover and over again in different formats.
And it pretty much holds true.
At least in the west, we get aninternational sales, that stuff
can be kind of blurry, but partlybetween grooming and the way we
have it, like a base 10 system,the numbers are super pretty.
(16:37):
So, okay.
I'm beating the deadnumber horse at this point.
The other side of priceChon based pricing is this.
If you have a truly premium luxuryproduct and you want people to feel
as if they're buying a premium luxuryproduct, then what you do is make sure
(16:59):
that your numbers end in zero and.
It doesn't matter if it's $10 or $150or a thousand dollars, whatever CLE is,
feel like bigger numbers, even $10 feelslike more than 1299 because of the zero.
It's just psychology in the west.
(17:19):
So if you want something to feel morepremium and, you know, from research
that someone will pay it, then do that.
It's also a good strategy.
If you are in a competitive landscapewhere there are lots of premium options
and you feel like your brand has gooddifferentiation, what you can do is use
(17:39):
this to kind of push that perceptionacross the line just a little bit more.
And people will feel as if they aregetting something to higher end for
their money, even if it's not necessarilytrue, or even if the competition
kind of, you know, levels everything.
Okay.
My friends, I'm assuming youhaven't been completely put to sleep
between the Turkey and the math.
(18:02):
If you're still awake and youstill want to apply this, go do
some analysis on your business.
You will benefit from it.
Massive.
And I just think that'sreally good stewardship.
Okay.
My friends have a great week anddon't forget to think you turn away.
Thank you for listening.
If you enjoyed the show, do me afavor and leave a quick review.
When you do it helps otherentrepreneurs find this content and
(18:23):
benefit from it to see next week.
Welcome to Lunch Break a special weekly series of the
Eternal Entrepreneur that gives youbite sized pieces of wisdom on how to
build a function of faith and business.
Each episode unpacks, a short, actionabletopic you can put into practice this week.
Let's get into it.
Well, hello and welcome back.
Thank you for joiningus for the lunch break.
I am Pierce Brandley co-hostof the eternal entrepreneur.
(00:28):
How is everybody doing?
I hope everyone is fat and happy full ofTurkey and dressing and cranberry sauce.
I know I have completely justabandoned my diet for deeper waters
of gravy and mashed potatoes.
And I'm not upset about it.
I'm not upset about it.
One, one iota.
(00:51):
However, in preparing for Thanksgiving.
I noticed something and you allprobably noticed something as well.
And it set the Turkeywas too dang expensive.
In fact, everything from gas to,uh, powdered, mashed potatoes,
everything, the cost of everythinghas just gone up through the roof.
(01:13):
And that got me thinking, Iimagine in your own businesses,
the costs of operating here.
Have gone up as well, and that mighthave even impacted how you approach.
Your pricing.
And so I thought it'd be fun to do justkind of a quick sort of breakdown on
(01:34):
strategies and mistakes that happenwhen we approach pricing as a small
business and what we can do about them.
So we're going to go through three majormistakes that businesses make in pricing,
their products, and then a couple easy.
Tactical strategies that you canuse to kind of tweak it once,
(01:57):
you know what those mistakes are.
Sound good.
Okay.
Well stay awake.
Fight that Turkey coma let's get started.
So these three mistakes, thesethree pricing steaks were
pioneered by Peter Drucker.
Peter Drucker is afantastic business model.
And well, though, he's passed a lot ofhis wisdom still kind of rests with us.
(02:22):
And one of the great thingshe explored was pricing.
So the first pricingmistake he identified.
These actually come from alarger body of work called the
five deadly sins of business.
The first mistake is feature.
Pricing.
So what is feature based pricingfeature based pricing is basically
where you continually add featuresor benefits to your service.
(02:47):
And therefore you logicallyincrease the price.
So let's say you're a widget maker, right?
You have five features and the nextquarter you have six features in the
next quarter, you have seven and so on.
And so on every time you add a newfeature, you add a new price because
while you have more features in thecompetition, the problem is the consumer.
Doesn't see.
(03:08):
See it this way, nor do they care.
There has to be a value to cost ratio.
That's important.
And normally it's small business ownersor CEOs who kind of get stuck in this
chapter thinking, but we have more thingsassociated with our service or product.
Therefore it's worth more.
(03:28):
That's not true because you're notnecessarily just selling a product, right.
You're actually concernedwith capturing a market.
And so capturing.
Is your most kind of, uh, forwardthinking forward leading strategy,
the price of the actual service as itrelates to value is sort of secondary
in that if you wouldn't add 50 cents tosomething every single time you add a,
(03:52):
like a, like a new feature of some kind.
So Drucker's sort ofreference for this was Xerox.
Xerox had new technology at the time.
They were very pioneeringcompany at the time.
But what they kept doing was theywould pile on features and they
kept on raising the price of theproduct over and over and over again.
And what happened you can imagineis that competition came in with a
(04:17):
cheaper price that wasn't based offthe number of features, undercut them.
And because.
As we know the laws of innovationkind of went into play.
They were able to beat Xeroxand Xerox, you know, no one
even thinks of Xerox anymore.
So that is feature based pricing.
Stay away from it, focus more on,on capturing the market second
(04:40):
charging what the market will be.
So this is the mistake that I probablymade the most when I was first
starting off as an entrepreneur.
In fact, I can remember, I used tokind of have a platform that talked
about brand strategy, brand alignment,marketing, all of that fun stuff.
And one of the things I would talkabout often on that without even knowing
(05:02):
who Jucker was, is you need to chargewhat the market can bear, whatever it
can handle, whatever can shoulder, youput that yoke on it, and you will make
sure the market carries it for you.
And the problem with this one.
And it does work.
The problem is from acompetitive strategy.
(05:24):
It won't work for long because aswe just kind of alluded to earlier,
inflation is always a thing, changesand pricing dynamics based off of
availability of resources or, um, lowend disruption coming into a marketplace.
All of these different factors impact.
Your price.
(05:45):
And so if you're just purely chargingwhat the market will bear so that you
can maximize profit, then what's goingto happen is someone is going to be
able to come in and beat you eventually.
And so just go into that top in price,just because someone will pay for it
and someone will always pay for it.
Isn't a good long-term strategybecause it ignores competition.
(06:10):
And I'm not saying we shouldobsess about competition.
Purely from like a, uh, I don'tknow, even like a cognitive bias
perspective, but, but you should bethinking about it from the options
that consumers have from price.
Don't assume that they'll just paymore, uh, because maybe you have a
better brand or a better perceived,you know, uh, price to value ratio.
(06:33):
Uh, you need to price yourselfcompetitively, um, that can still
be the higher end of things, but itshouldn't be ultimately whatever.
Someone can or a companyor market can totally bear.
It needs to be in context of all theoptions that are available to consumers.
So that requires pricing, research,market research, secondary and competitive
research to basically tweak that price tobe a premium option, but not a overbearing
(07:01):
option just for the sake of profit.
Okay.
We got it.
Now last, certainly not leastthis is a fun, a tongue twister.
Don't make the mistake of usingcost driven pricing instead
do price driven, costing.
So don't do cost driven pricing,do price driven, costing.
(07:23):
What does that mean?
If you are a practical CEO, practicalentrepreneur, very pragmatic type person.
This one is going to be kind of.
To wrap your head around, orat least be hard to swallow.
I have no doubt.
You can wrap your head around it.
Cost driven pricing effectively says,go figure out what the cost of goods
(07:43):
are or the cost of giving a serviceis, and then add margin on top of it.
So, you know, if your widgetcosts $5, you know, increase it
by 30%, if your services are.
You know, $600 an hour, you know,blended then add another, you
(08:04):
know, 25% or 10% on top of that.
This is a mistake ultimately.
And the reason is because it's,while it's, it's going to give you a
profit, at least in the short-term, atleast in terms of the math, again, it
does not take into context that yourbusiness lives within the ecosystem
(08:24):
of options that are available.
To the consumer, even if you don'tparticularly think you have competition
and he worked from this model, eventuallysomeone will enter your market.
And because it's purely markup based, soto speak, you're going to get undercut,
or someone's gonna be able to offer morevalue at the same price because you're not
(08:46):
taking into context, the total landscapeof options that the consumer has.
So this is good math, but bad marketing.
So Drucker's advice in thisis to do priced based costing.
So if you're familiar with thebook, uh, I can't remember his
name now, but it's profit first.
(09:07):
This is sort of similarto the profit first model.
You need to set a price that is appealingto the consumer arbitrarily without
thinking about your costs, by the way.
So.
Let's say your widgets costs $9 or $10.
And then you typically markthat up, you know, 30%.
(09:29):
So you're somewhere in the $13to 1499 range, depending on how
you kind of boil everything down.
So that is an exampleof what you should not.
What you should do.
However, say what is most attractiveto the consumer and, uh, you do in your
own research, you figure out that 7 99.
(09:52):
Or $8 net range is the most attractivething to consumer that puts the impetus on
you, the business owner to go figure outhow to get your costs down, or possibly
take a loss on what you're selling andthen make up that loss on other items.
So maybe your, your main productends up becoming a loss leader,
you know, in exchange for like addon services that are reoccurring.
(10:16):
The point is your product.
Live in isolation.
Therefore the price of your product shouldbe based off of incentive to the consumer
and the driving needs of the consumer.
Not purely on the math thatmakes your business profit.
(10:38):
This requires you to be more innovativeas a company, more creative as a company.
And we'll really challenge, I think yourexecutive team or those who are involved
in kind of getting something out thereto think through what a price should be.
So again, the three mistakes thatwe're making pricing, our feature
based pricing, where we just increasedpricing based off the number of
(11:00):
features, consumers don't care.
Don't give them a widget with 10 thingswhen maybe they only want five, uh,
charging what the market will bear.
Eventually someone will undercutyou because you're continually
pushing the roof on what is positive.
And then cost driven pricing, whichessentially is just math based markup.
(11:21):
Again, it's good.
In terms of operations, it's bad interms of really understanding what
is attractive to your consumer,you'll get beat eventually, even if.
You know, looking that way right now.
So those are the threemistakes real quick.
I want to jump into a strategy thatyou can use to kind of, once you
understand which price you should be,setting, how to make it more appealing.
(11:47):
Now.
No doubt.
You're familiar with.
Tactic, uh, because you've probablyconsumed things based off of it.
However, I want you to think about howit can be applied to your business.
And this is called charm based pricing.
Now there is a litany, there is unendingdifferent ways to think about pricing
strategy, and that really requires anin-depth, you know, study of your business
(12:11):
in the market to get that exactly right.
However, one of the easiestthings you can do is charm based.
And charm based pricing, particularly inthe west is where we change the number
to be more appealing to the consumer,completely arbitrarily to the costing and
(12:32):
the actual sort of profit, because whatwe're most concerned about at this point,
once we have our profits and our costswork out is not the profit of the cost.
It's the appeal to the consumer.
So advertising and marketing.
Right.
Are there whole own sort ofsegment of your business?
(12:52):
However, pricing appeal needs to kindof fall underneath that category.
Meaning your cost, your operationalcosts, your blended rates, your profit
margins, all that type of stuff.
Sit in one bucket and they shouldn't have.
Tell you what your priceshould be for your product.
They might inform the actuals.
(13:12):
They might inform the, the,uh, the, the black lines and
the red lines, so to speak.
But the pricing psychology is what tellsthe consumer that you have something
of value to them for their money.
And so it needs to be aseparate conversation.
So time-based pricing iswhere you change the number.
(13:35):
To be appealing to the consumer.
Most oftentimes it's with ending ina nine and then using smaller numbers
towards the end of the pricing.
So what's incredible aboutthis type of stuff is that you
can actually charge more for.
And that's because consumers, whenthey're looking purely at price appeal,
(13:56):
they're making an emotional decisionbased off of how they feel about making a
purchase, not how much it actually costs.
And this is true, not just of departmentstores and, you know, fast food.
It's true of your business as well,because they're ultimately just trying
to make the best decision for themselves.
And you live in an information economy.
Price check things.
(14:17):
So you need to give yourselfthe best chance of winning by
making appealing looking numbers.
So let's say that you find outbased off of doing price-driven
costing that, you know, you shouldbe selling your product for $11.
And then, uh, you know, andmaybe previously you were
(14:39):
selling it for, I dunno, $8.
So that's great.
You're getting a little bit of markupnow, obviously, if you were to just
compare the two numbers, arbitrarily eightnumbers is less than a leaven dollars.
However, if you charged$14 and 99 cents versus.
(15:02):
$12 and 50 cents or $8 and 67 cents.
Something like that.
The $14 and 69 cents or 99 cents.
I can't remember what I said is goingto be more appealing to the consumer.
And that's because of the way thenumbers go down initially and then end
(15:26):
in a number they feel comfortable with.
So.
What's great about the strategyis one, it's a marketing tool
that really genuinely works.
And then second of all, you canactually get more for your item or
your service purely out of, um, thatpricing charm working, even as you go
(15:51):
up the scale in terms of costs to the.
So they've done tons of studies on this.
They've done like blind studieswhere, you know, they had people
buy the same, uh, the same shirt,three different times, or at three
different options to buy their shirt.
And consumers would typically pay,even though they knew exactly what the
price was, they would pay more money.
(16:14):
For the shirt purely based offof the way the number ended.
And they've tested this over and over andover and over again in different formats.
And it pretty much holds true.
At least in the west, we get aninternational sales, that stuff
can be kind of blurry, but partlybetween grooming and the way we
have it, like a base 10 system,the numbers are super pretty.
(16:37):
So, okay.
I'm beating the deadnumber horse at this point.
The other side of priceChon based pricing is this.
If you have a truly premium luxuryproduct and you want people to feel
as if they're buying a premium luxuryproduct, then what you do is make sure
(16:59):
that your numbers end in zero and.
It doesn't matter if it's $10 or $150or a thousand dollars, whatever CLE is,
feel like bigger numbers, even $10 feelslike more than 1299 because of the zero.
It's just psychology in the west.
(17:19):
So if you want something to feel morepremium and, you know, from research
that someone will pay it, then do that.
It's also a good strategy.
If you are in a competitive landscapewhere there are lots of premium options
and you feel like your brand has gooddifferentiation, what you can do is use
(17:39):
this to kind of push that perceptionacross the line just a little bit more.
And people will feel as if they aregetting something to higher end for
their money, even if it's not necessarilytrue, or even if the competition
kind of, you know, levels everything.
Okay.
My friends, I'm assuming youhaven't been completely put to sleep
between the Turkey and the math.
(18:02):
If you're still awake and youstill want to apply this, go do
some analysis on your business.
You will benefit from it.
Massive.
And I just think that'sreally good stewardship.
Okay.
My friends have a great week anddon't forget to think you turn away.
Thank you for listening.
If you enjoyed the show, do me afavor and leave a quick review.
When you do it helps otherentrepreneurs find this content and
(18:23):
benefit from it to see next week.
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