Let’s reveal something special about pricing techniques. True, real, expert pricing techniques. Not sneaky business tricks that make people think like you’re pushing them into buying something, jeopardizing your brand and your reputation with customers and prospects, destroying your credibility in the marketplace. This is how lions and sharks of the market like to play, and I’m just in the same for that matter.
So what I’m about to show here are the approaches that actually WORKS to increase sales.
It’s all based on books, psychology, research, personal experience and some of real cases from the best well-established entrepreneurs.
Let’s cut to the chase then, shall we?
I’ll start with 3 core principles many don’t like to obey before we dive into this, to then go to the pricing techniques. Alright? But sure, if you’re in a hurry, you can skip straight to the pricing technique you want to know more about just by clicking on the options below:
- The Principle of Value
- The Principle of Price Subjectivity
- The Principle of Courage
- The Continuous Price Raise Strategy
- The Decoy Pricing Strategy
- The High Reference Pricing Strategy
- The Odd Cents Pricing Strategy
- The Numerical Simplification Pricing Strategy
- The Small Numerical Size Pricing Strategy
Now let’s play with prices.
THE CHAMPIONS MINDSET: THE PRINCIPLE OF VALUE
I’ll start with one thing many fail to COMPLY (yes, not understand, but “comply”) in this market: VALUE. For those who own a business, are entrepreneurs or are starting out as freelancers, Value is the very first thing you need to put first in your mind before talking about raising your price.
Because there shouldn’t be any price discussion until you can provide actual value.
Right? Unless of course, your intent is to deceive other people to make more money, which is something despicable. And worthless in the long run. But I take for granted that if you’ve read this far, then it means you want to know how to increase sales honestly and still charge a lot of money while doing it. Because that’s how real champions think.
Well, from my own business perspective, Value has this exact definition:
THAT THE PRICE YOU’RE EXPOSING TO THE MARKET BECOMES RIDICULOUS
That’s my own definition of value which I constantly follow with nerve. So before you talk about pricing you need to ponder your work, your service, your product and then ask yourself the following question:
THE VALUE QUESTION:
“HOW CAN I ACTUALLY HELP OTHER PEOPLE’S LIVES AND/OR THEIR BUSINESSES WITH MY PRODUCT/SERVICE?”
That’s it. Period.
Thinking about raising your prices should naturally summon this question over and over in your head because you cannot go to the next level without upgrading yourself or your work. You need to have far more value than what you’re charging people for . So champions always focus on how they can actually provide value (value = help) to other people because they know that in EXCHANGE FOR MASSIVE VALUE, people will pay. And pay big loads of money.
This is a key rule for raising your prices.
So here’s a reinforcement to this rule from Grant Cardone himself:
Once you have value, it’s ok to raise the price. Keep that in mind.
OK. Now let’s head to the next principle.
THE CHAMPIONS MINDSET: THE PRINCIPLE OF PRICE SUBJECTIVITY
The second thing you need to know is that price is subjective. Everything you know about a price is purely made up by someone who just “got here first”, creating a pricing pattern which other businesses will follow or try to disrupt.
Want a practical example?
QUESTION: How much would you pay to go to Mars?
Now think for a second.
QUESTION nº2: would you like to go to Mars, explore the outer space, see the Earth how it really is, the sun, the moon from close by, and step on Mars itself with your bare feet for $500,000?
Most people would. I know I would. After all, it’s a remarkable experience. What would I do instead of so awesome with $500,000? Would the memories from spending such amount of money match going to outer space? Probably not.
But here’s the principle exposed: You see, Musk could charge $750,000 and yet, you wouldn’t know if that’s too much or not. You just don’t have anything to compare to. Why?
Because prices are actually subjective.
You define how much your services and products are worth for the customer and if he buys the idea of how much you think your product is worth, or if he maximizes this perception himself, then a sale gets closed. This is why copywriting works so well too, because, through imagination, you can BREAK ANY pricing references that exist in the client’s head regarding your product, forcing the customer to decide how much your product is worth by making him use his own imagination to do it. This is why prices are subjective.
Champions just know that price is a myth. You define the price. Not the market.
Once again, as proof, I’ll show you another snippet from the same video used above on which Cardone also states the same thing about pricing being a myth:
The Market doesn’t define price. You do. Or do you think a pen should cost $730,000?
Therefore, price really is a myth. Because it doesn’t actually stop you from buying, even if you feel you don’t have much money. If the salesperson is very good, and knows how to hit your buying buttons in your head, he’ll get a close from you. Pricing being a myth is a more explicit case on products bought by women, for instance. Why do you think women buy a purse for $18,000 while there’s another one for just $300,00? It all relies on imagination, current needs, ego etc.
Price doesn’t matter actually. It’s subjective. Because you cannot define emotions in price, which is the reason why people buy things in the first place. They buy emotions.
So learn this: price is just a number.
Alright, next and last principle before we begin.
THE CHAMPIONS MINDSET: THE PRINCIPLE OF COURAGE
This is for many the real missing factor why they don’t raise their prices: COURAGE. Without courage, you cannot raise your prices because you’ll assume that somehow, all customers you have now will disappear and you’ll be left in the dark with no money. Forever. Crying in the dark for being left off by average-but-paying customers. So the fear of running out of money or customers actually is what has been blocking you from charging more money. That’s a principle you need to have as well before talking about analyzing pricing techniques. You only beat fear through courage.
The best Entrepreneurs will always take some risks, and raising their prices is what most of them like to take. Here’s a fantastic quote I love a lot from the founder of McDonalds:
SHOULD GET THE HELL OUT OF BUSINESS”
— Ray Kroc, founder of McDonalds
If you don’t take some risks then you cannot raise your prices.
Have some courage. It’s crucial for progress.
Ok, now that you know the core principles, we can start.
PRICING TECHNIQUE #1: THE CONTINUOUS PRICE RAISE STRATEGY
This is a very aggressive pricing technique I’ve been using since I’m building this brand and it takes guts to execute it. Serious guts. This is why I presented the principles to you. Well, basically, here’s how this technique works:
THE CONTINUOUS PRICE RAISE STRATEGY:
You’ll NEVER charge the same price once you’re starting a new contract with someone. You’ll ALWAYS RAISE the price for the next project, whoever that customer is. He may be a loyal customer or a new one. Doesn’t matter. New contract? Raise. And if everybody leaves, you’ll use ALL YOUR MONEY to buy a few months of bills paid, and you’ll only be working on upgrading your product and service until the money runs out because by doing that, you’ll have built a lot more valuable product or service, which will allow you to charge more. And faster too.
Too aggressive? Well, it is.
Because it does take some hardcore courage to do this in practice. You’ll need to be cold and make a shift in your mind, treating yourself like you’re in some sort of “entrepreneurial college” while you’re “working for you as if you were a client”. You raise prices over and over, until everybody stops buying from you. Then, once you hit that mark, you start building up more value.
I use this personally all the time (I’m not sure if I invented this).
Works like a charm.
- DO NOT charge the same amount per project (always raise the price)
- WORK FOR YOUR BRAND when customers leave (shift to full-time mode for yourself)
Simple and effective.
The key thing here is to actually find out what price the market won’t accept to pay you anymore because it will indicate to you that there’s the need to build even more value, to then be able to charge the amount of money you want. So if everybody leaves, don’t shrink and cry.
You’ll just have to invest money in your business once more, work full time for your own brand to make your product/service even better and more valuable than before. This technique will naturally allow you to charge the amount of money you want because more value means more money.
Now here’s the funny thing.
I always thought I was the only one doing this kind of craziness until I discovered Gary Vaynerchuck in an interview saying to entrepreneurs to do EXACTLY the same thing (except the “use all your money” part). Therefore, it was in that moment on which I connected with him because he has a very similar line of thinking about this.
Here’s the video I’m talking about:
To my surprise, even the greatest entrepreneurs like Gary are using the same pricing technique for fast growth. Too bad because I felt really smart when I started it all, assuming I was the only one doing it.
But the point is that you need to be completed prepared to “suffer the consequences” of not having any customers anymore, in case the whole market tells you that there’s work that needs to be done first in order for you be able to charge your new price.
So what you’ll do is spend all your money in your brand to upgrade your services and products as much as possible, so YOUR VALUE can dramatically exceed in comparison with what your business was 3 months ago. If you consistently do this, you’ll be raising your value a lot faster than the competition. And with more value, more money. And with more money, you can buy yourself more “upgrade time”.
There’s also one key point I PERSONALLY experienced with one of my clients that reinforces this technique:
Here’s a personal case.
PERSONAL TESTIMONY: A client of mine who I was coaching to help him become a true Entrepreneur, paid me a raise of 1500% right on the 2nd month of contract. Yes, on the 2nd month. Why? Because I’m very aggressive. I make money, and I immediately enter “build-more-value-mode” again to grow faster.
But here’s the funny part that I want to highlight: HE was the one who asked for a chance to pay me a little less to have the CHANCE to work with me again, after I’ve just raised the price for the next month by 2000%. He asked for one more month, not me. I just raised the price by 2000%, and we ended up closing at a 1500% raise.
But why did that work?
Because I had MASSIVE value to provide. My value bar was too high making the prices look really small. Since I’m always studying, working, evolving, learning and building up more value every single day, this is the only outcome possible, after all. This is how I raise my prices. And this is what I wanted to share with you.
Alright, now let’s explore other smart-ass techniques that are not as aggressive, but have heavy psychology involved.
PRICING TECHNIQUE #2: THE DECOY PRICING STRATEGY
This technique many companies use to make an offer look more appealing than another one they have, shifting the customer’s attention to the most expensive product OR to the average one, by making the person use the logical side to make up his mind and decide for the purchase, due to the obvious “value vs benefit” comparison.
Decoys, in marketing, are products, services, or prices that a business doesn’t really want you to take, but instead use it to create a reference — a price anchor — to promote the other product as a BETTER deal. That’s a decoy.
So here’s how this pricing strategy works:
THE DECOY PRICING STRATEGY:
You’ll raise the price of one (or two) of your products with the intent to make another one look far more interesting. There are different ways the market likes to do this. You either make the average product look almost as expensive as the most expensive product, making the customer logically prefer the most expensive one, or you make the cheapest product look almost as expensive as the average one, making the average one looks the better deal.
You didn’t understand quite well?
Then here’s a simple way for you to memorize this:
PS: Did you know that images help you learn faster?
So by raising the pricing bar up until a point that the most expensive product looks like “a win”, you end up selling the most expensive product with a lot more ease because customers will analyze the options logically, considering “the ROI” of all your offerings, and realize that it doesn’t make much sense to choose the other 2 products. Because after all, both are decoys. Distractions. Something to persuade the customer to choose what you want.
AN IMPORTANT POINT: This is way more effective when you use 3 options only. Once you narrow down the choices to the customer, it gets easier to persuade him because having fewer choices helps the customer to decide faster. It’s all backed up by something called The Psychology of Choices, another psychology study.
But it doesn’t stop there. Here’s another key point besides this.
Using similar pricing HURTS your sales because it causes Analysis paralysis. This is also why you shouldn’t use the same price for different products because people will get confused.
Here’s the explanation for this:
LIMITING CHOICES HELPS COMBAT THE FAMOUS “ANALYSIS PARALYSIS” BEHAVIOR
According to research from Yale: if two similar items are priced the same, consumers are often less likely to buy one than if their prices are even slightly different. In one experiment, researchers gave users a choice of buying a pack of gum or keeping the money. When given a choice between two packs of gum, only 46% made a purchase when both were priced at 63 cents. Conversely, when the packs of gum were differently priced at 62 cents and 64 cents, more than 77% of consumers chose to buy a pack.
Now get back here.
There’s more about this.
The Decoy pricing technique ALSO works really well with a Marketing strategy called BUNDLE. Product bundling combines several offerings in the same product, creating that feeling of “there’s a lot more inside this price than I may be thinking…”, bringing up that sense of obscurity and preventing any sort of comparison with other products/services (once done right), which instantly increases the product’s perceived value by the customer.
Companies that sell SaaS (Software as a Service) products usually like to use this approach. Take a look at how Instapage does with its pricing options:
They focused on the average product, making a good amount of offerings for $55 per month which pushes the customer to choose what they want. The cheapest option has very low value in comparison with the middle option, and the most expensive option doesn’t appear to give that much additional value as well, reinforcing the middle option as the ideal one.
Summarizing: Decoys work. Very well. Use them.
Ok. Next pricing technique!
PRICING TECHNIQUE #3: THE HIGH REFERENCE PRICING STRATEGY
Steve jobs himself used this technique when he was promoting the iPod. It’s genius. It works because it makes people think they just got a discount, which is something every customer wants since getting that feeling of “I was the winner of this business transaction” is what many crave for, whenever they purchase something. Therefore, Jobs adjusted his pricing strategy to give people this feeling in order to maximize his sales.
So here’s how this strategy works:
THE HIGH REFERENCE PRICING STRATEGY
You’ll set a price reference, an anchor, into people’s heads which will be a more expensive price than what you want to charge. This is the price people will memorize as the amount you want to charge them for your product. Then, before customers start to lift any complains about it, YOU will be the one who will lower your own price reference without them asking for it, making people feel like they just got an enormous discount, which will be pushing them towards the purchase. You’ll set a “ceiling price”, to then set the actual price next.
That is what Steve Jobs did (just up until 1:16:33):
Now there’s a difference here: This is not the same as the DECOY strategy because here, the price is purely ARTIFICIAL. What does that mean? It means that you don’t have another product to fight against, you just set up a high reference in people’s mind and you immediately work your way out of it to a “discount”. That “price with a discount” is the actual price you wanted to be paid for in the first place.
Get it? With a simple higher reference you get to change people’s buying behavior.
Ok, time to another technique that worth sharing with you.
PRICING TECHNIQUE #4: THE ODD CENTS PRICING STRATEGY
You see this everywhere and yet, you don’t understand the “WHYs” behind it. Psychology explains this as The Left Digit Effect which states that humans give more importance to the left digit instead of the ones on the right. Therefore, the odd cents pricing strategy is actually a distraction that involves playing around with the cents to reinforce a cheaper, and more precise price in the customer’s mind, because he’ll FOCUS on the left digit instead of the ones on the right. But that’s not all. Because at the same time, the odd cents will indicate a higher price precision. This is why to customers, $2,00 will seem far more money at a first glance than $1,99, for example.
Well, now here’s how this strategy works:
THE ODD CENTS PRICING STRATEGY
You’ll price your product/service in a way that it ends on a mix of the numbers “9”,”8″,”7″,”6″ or “5”. Avoid numbers lower than 5 and always prefer numbers closer to “00” because people will mentally pursue those zeros from where they are at, so if you use a “3”, people will assume they’re paying 3 cents more than they should (unless you use decoys). This strategy will do 2 things: (1) make the price look like it was carefully priced, hence, the odd cents to indicate price precision and (2) make customers assume they’re paying less due to the left digit being smaller in comparison with something that costs just 1 cent more, making the product/service that’s using prices ending at “95,99,89,90,87,75 etc” being perceived as the cheapest one.
Simple, isn’t it? And interesting as well.
This happens because humans, when in a decision making process are REALLY BAD in dealing with absolute terms like dollars, distance or dimensions which is why we automatically make an analog comparison instead. So our brains will leave aside the annoying task of counting the dollars or trying to undertand the pricing different, and will simply reduce the task to a simple and quick comparison: 7.00 vs 6,99. And since the left digit is the one that matters, this gets reduced even more to a simpler one: The 7 vs 6 comparison.
And we know that the smaller one always tends to win.
But can’t people snap out of it and realize the apparent price illusion? Sure. But once the pricing message got delivered to the brain, the subconscious mind memorizes it, taking advantage on selling situations on which the rational side is weaker and unable to make thoughtful decisions, like when the person is tired or sleepy for instance. This is how this pricing technique works best, with the subconscious mind overpowering the rational side when it is on weaker states of mind.
Netflix prices its product using this strategy as well:
Some old school techniques are timeless in the marketplace. Keep that in mind.
PRICING TECHNIQUE #5: THE NUMERICAL SIMPLIFICATION PRICING STRATEGY
Steve Jobs mixed this one with the High Reference Technique. Basically, Psychology proved that humans associate the shorter numerical version of the price, to a smaller price, whenever they read or listen to these price formats:
- PRICE #1: $1500
- PRICE #2: $1,500
- PRICE #3: $1.500,00
So to make you understand faster, here’s the easy explanation for it:
THE NUMERICAL SIMPLIFICATION PRICING STRATEGY
You’ll price your product/service without any commas or cents. Just use the main numbers that tells the product’s full price and that’s it. People will process less information which will be translated to a smaller price.
Just go back to the video I’ve shown above, on the High Reference Technique and see how Steve Jobs presented the iPad. He portrayed the price like this: $499. Nothing else. No commas, no cents, no “extra numbers” to give the price the appearance of “bigger”.
So here’s a reminder from this very article:
Easy, right? Just pure numbers.
Now let’s move on and finish this.
PRICING TECHNIQUE #6: THE SMALL NUMERICAL SIZE PRICING STRATEGY
Here’s something interesting: Humans may perceive a price in a smaller font size as a good deal. Yes, Psychology comes to surprise us all, once again. So putting your pricing in a smaller font size, will make customers perceive it as a better deal than if it were on a bigger font size, because we (humans) associate physical size with price magnitude. Therefore, bigger font = bigger price and smaller font = smaller price.
Summarizing into a 2-line explanation:
THE NUMERICAL SIZE PRICING STRATEGY
You’ll price your product/service with small font sizes. This will make the price look like a smaller price to the eyes of the customer.
Quite simple to understand.
So honestly tell me: which one is a more expensive price to you?
Did you pick the left one?
Well, don’t need to answer that my friend. We all fall into that trap. Just blame Neuromarketing for this and don’t feel guilty about it. We are all together in the same boat.
So here’s the bottom line for this: font size change price perceptions.
So make sure yours is smaller (without hurting your design).
Get yourself locked and loaded. You can never be “too smart” when talking about business because there’s competition arising every day. Therefore, you need to DOMINATE on every aspect of your business you can to stay ahead, especially when the global economy is about to crash. So make your pricing techniques are sharp. Calibrate your pricing and charge customers what you deserve as payment for your work to keep your growth constant and strong.
Remember this: without growth, you cannot expand and improve your customer’s experience which means the level of your product/service stays the same. Pure garbage. So unless your intent in business is to serve people garbage, raise your prices. Because by doing that, you can reinvest the money earned back in your brand to deliver a more high-quality experience to customers, serving them at a whole another level.
And people like being served at a whole another level.
But you need money to do so, so make the bold moves and all necessary adjustments to grow.
And have fun while doing it, as well. You deserve it.