Way back in the 80’s, I packed up my bags and headed off to college. At the time, I was very impressed with myself, my professors and the whole "higher education" environment. I was a "scholar"… learning from enlightened mentors the secrets I would need to achieve business success.
Two decades (+ a few year) and a few kids/pounds/gray hairs later… I look back with amusement at those halls of hallowed learning. This morning, I made reference to something that I playfully defined as " 1 of the 14 things I learned in college that actually applies to real life." I’m not sure if the number of "useful" lessons numbers 14… it may be more, it may be less. .. but here is one lesson that I reference frequently in my work: THE PRICING OF YOUR PRODUCT OR SERVICE.
Long ago and far away in a marketing management class, I heard a phrase that I would reference repeatedly during my work: It’s easier to lower a price than it is to raise it.
Worried about where to set the price for your newest product? According to my professor’s teaching, it’s better to aim high and then discount than to go low and try to raise your price. I’ve watched this principle in action over and over again. Not only is it easier to put a product on sale than to increase it’s price… but price also affects perception of the product/service in question.
One client of mine wrote a comprehensive book for chiropractic professionals. In it, Dr. Jean Murray literally offers her readers the equivalent of a BS in Business for Independent Chiropractic Professionals. What? There’s no such degree program? Well, there should be and Dr. Jean Murray has written a comprehensive resource providing EXACTLY what every chiropractor needs to know before launching his/her own practice. From fill in the blank spread sheet programs to sound advice on business structure and management, Dr. Jean Murray offers Information, Advice and Encouragement to medical professionals through her book and her blog Professional Practice Success.
Now, the question here is… "What would you pay to acquire a self study program that is CUSTOMIZED to your profession, developed by a doctorate in business with DECADES of experience helping others just like you achieve business success?"
In my best effort to NOT sound like an infomercial, you’d probably expect such a resource to cost hundreds if not thousands of dollars. So think what would be your reaction if you discovered her resource was priced at $15.95 on Amazon? (I applaud Dr. Murray for not offering her book for $15.95, because if she did, you’d wonder how good she really is at what she does! )
Yes, it’s true… price does set the perception of the quality of the resource in advance. In the case of Dr. Murray’s resource, I truly and honestly believe that if the resources she offers were based on the VALUE of the resources, she should be charging in the $1500 range for her suite of products. She’s elected a much lower price point…. and I can’t argue with her success! While she’s well below my recommended $1495 price point, she’s still well above the typical $15.95 price point of her "competitors" offerings on Amazon… and with good reason. Not only does Dr. Murray have the credentials, she also has "street cred". She’s held the jittery hands of newly minted chiropractors as they navigate their way to launching their own practice…. and celebrated their successful practices with them. Now, she shares that insight through her resources.
One of the things about marketing is it involves a lot of trial and error. When it comes to pricing, it’s much easier to price a resource high and then put it "on sale" than it is to price it low and the try to raise the price in the future. In either case, you need to "justify" the price difference and it’s a lot easier (and more fun) to come up with reasons for the "sale" than reasons for the price increase.
#1 of the 14 things I learned in college that I actually use in real life: It’s easier to lower a price than it is to raise it.
It’s an over simplification to be sure, but it’s a rule I have referred to often in the course of my business.