What to charge
What to charge?
This is more than just setting a price it is all about knowing why you are setting a price. You can listen to an interview I did with Jon Manning about all the different ways of setting a price. But understanding what to charge is a slightly different proposition.
Look at the ceiling for your market. What do your customers see as the maximum they would pay for your service? Is there a magical glass ceiling that your customers know but you don’t?
Finding what to charge can be incredibly hard. Getting it wrong have a huge effect on your business. Let say you have a $10 cost for your product so you sell it for $11. That is a 10% profit. But what about if customers were willing to pay $12, suddenly you are doubling your profit. A price difference that may mean nothing to your customer is a 100% increase in your profitability.
It also works in reverse. If everyone thinks a lawn mowing service costs $49, you will get no customers at $55. That small difference can put you into a different market in the mind of your target audience. Suddenly you are competing against businesses you didn’t expect to compete against. At $55 customers may be expecting to be getting a gardening service, not just lawn mowing.
What to charge in a new marketing
If you want to make a move into a new market you must leave the old market behind. Look at Cirque De Soleil, they do not have family packs or rides and children’s games. It is a high end entertainment experience that has redefined circus. If you want to charge 500% more than a normal Circus like Cirque De Soleil you have to commit to it. If you are just the best in your market segment you are going to be constrained by the glass ceiling.
Last week I did an interview on the iKamCast podcast. We discussed social media, advertising and experience platforms. I strongly recommend going over to Ken’s podcast and subscribing. Good guests (including me) and some great topics.
I hope this has sparked some thought around what to charge for your product.
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Craig is the host of the "Making Business and Sale Work" podcast. Craig has experience in many online and offline business as well as working for many years as a criminal analyst.