Setting High Prices and Why It Works So Well

June 30, 2012 by  Filed under: Marketing 

If you want to make more money from your business, one of the best things you can do is sell at a high price, or a “premium price” as it’s known. There are two big reason for this. The first is selling at a high price increases you profits in one go. The second is that selling at premium prices makes it easier to sell stuff, because a high price tells the market you have a high-quality product, and for the most part people tend to want quality rather than cheapness.

I once had a client who was struggling to make a decent profit from his business. After looking at his product, and determining he was offering a great deal of value, I told him to put the prices up. And not by a small amount, but to more or less double them. He couldn’t believe I was asking him to do something so radical, and fought the idea for several weeks until I finally persuaded him to give it a try. After all, I said, if it doesn’t work, you can always lower the prices back down to the original level.

So he gave it a try. A few days after the price increase someone came into his office for a demonstration of the product. And not only did the high price not affect sales in a negative way, but the prospect actually bought the highest-priced offering of the three versions available. The prospect looked at the three versions, saw the highest-priced one and just wanted the best. And those high-prices actually helped sell more products to more people over the following few years than anything else the client had ever tried.

High Prices Increase Demand

What we can learn from this is that high prices make people want your products more, not less, because most people want the best, and want to think they can afford the best. As for the people who don’t want the best and aren’t prepared to pay for it, it’s better to not deal with them at all, because cheapskates often complain about the price (even when it is cheap), pay late, make demands and generally make your life miserable. The best thing to do is to send those people to your competitors.

The other great thing about premium pricing is that the extra revenue it brings is free, and translates almost directly into profits. Think about it. If you add 25% to your prices, that’s money you haven’t had to do any more work for. It really is free money, and the more of that you get, the better.

Finally, you should remember premium pricing doesn’t only work for your regular offers and products. It can also work for completely new products.

Here’s what I mean.

If you have a bunch of customers, it’s almost guaranteed there will be some people among them prepared to spend much more money with you on buying a super-expensive deluxe version of your product. And the only way they can do this is if you create the product and offer it to them. In fact, every business should have a deluxe version to offer to its best customers and clients, because to not have one is simply leaving money on the table.

So there you have it. Easy ways to make your business more profitable and without doing a stroke more work. Just give it a try, and you may well be pleasantly surprised at the results.

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