Pricing Strategies - How to Price Your Product or Services For Maximum Profit

Pricing Strategies - How to Price Your Product or Services For Maximum Profit // There's one simple thing that you can do to make more money. Can you guess what it is? Today I'm going to teach you how to price your product, or service for maximum profit.

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The first tip I have for you is looking at your costs.

If you know your costs are X for your product or service, you got to charge more than that.

You don't want to be losing money per sale. Everyone's like, oh my god I'm going to beat my competitors. I'm going to take the Jeff Bezos route and not worry about margins.

Well, the reality is, unless you have a big pool of money to blow, you can't do that.

You need to make sure it's profitable, including shipping, services, returns, other things like customer service, you need to take everything into account into your price, not just how much it costs for your product or service, but also all the other things like your office space.

Once you include all of those things to run your business you'll figure out what you need to sell your product or service for, so you can make a profit.

You're not in business just for charity.

You need to make a profit and there's nothing wrong with that.

The second thing you need to do is understand your target customers.

What are your target customers looking for? How do they perceive value when they look at the price?

A good example of this is a company called Diamond Foundry. They have figured out how to make diamonds above land. They match all the characteristics of a diamond that you find in the earth and there's really no difference from it.

But they found they can do it much cheaper, by making it above land and created these machines to create the exact same composition as it does in the earth, to make a diamond.

And when they had really cheap, affordable prices, they found that their sales weren't doing well.

Can you guess why? It's because, everyone's like, oh this isn't the same thing, it's too cheap.

So the moment they increased their prices, people like, oh wow, the quality of this must be amazing.

Sure we'll buy it. There's no difference in the product, but people had the perceived value in their space, that higher price means better diamond.

You need to look at your space. It could be that a cheaper price means more sales. Or it could be, cheaper price means fewer sales, because the perceived value isn't there.

The third pricing strategy I have for you is anchoring.

There's a lot of companies that'll show the initial price of let's say $37 and you may get X, Y and Z, but for $47 you'll get X, Y and Z and also 1, 2 and 3 and also A, B and C, just for $10 more.

By using anchoring you'll find that very few people will choose a lower option, which you don't want them to choose, but the majority of the people use the higher option because you're getting so much more value for just a little bit more money.

And that'll increase your profitability, especially if those other things that you're adding in don't cost you much at all.

The fourth thing I want you to do is A/B test.

Using tools like Crazyegg, you can A/B test your pricing, not only to maximize your sales, but also to maximize your profitability.

Sometimes getting fewer sales means more profit. Sometimes getting more sales means more profit.

Using Crazyegg you can A/B test to figure out what's the right price that you should end up rolling out to generate the maximum amount of revenue and profit.

00:00 - Introduction
00:37 Strategy 1 - Based on cost
01:28 Strategy 2 - Understand your target customers
02:34 Strategy 3 - Anchoring
03:11 Strategy 4 - A/B Test

#Sales #NeilPatel #DigitalMarketing

[neilpatel]

How do you determine what to charge for your product or service? Share the ONE most important thing you take into account in the comments below.

[nicola-socialmediasuccess]

I was waiting for a video like this from months!

[JesseDavidson-thde]

A good lecture that will benefit all who have followed this excellent explanation.

[shalinisingh]

I was using fiverr and i found your video on right time

[CarsSupercars]

Hi Neil,
Like always. Excellent tips.

Pricing is really challenging when your competitors have a range of price say $1 to $999 for the same thing.

I wonder how the same product with no difference is sold for $1 and $999 by two different companies.

I'm here referring to digital products where there is no shipping.
Best,
Promothash Boruah

[PatrickCogen]

Great explanation Neil! This is something we need to consider for sure!

[greenangelcbdoilnyc]

Exactly! Some people dont add costs. I own a few online companies. I see some new vendors get in to the business and drop prices so low with out adding costs. They go out of business within 2 months then get hit with taxes and at the end they worked hard and lost money lol

[tinnguyen]

Thank you so much for sharing this useful data! Greatly appreciated.

[kumailsafdar]

Thanks Neil, for making video I was waiting when you will make video on my suggestion. It helped me solve my problem. 👍

[swapnilpatil]

Hello Sir, exactly what I was thinking about my web application project(Web service which gives real time intraday stock alerts). Initially I want to launch this service for US and Indian stock market..The cost of project is all my hard work in research and coding. Initially, I am thinking of giving monthly subscription to people.But, I am confused of pricing . Will you please guide me what are good and affordable prices I set for Indian and US people? Thanks in advance😊👍

[nikhilchoudhary]

sir top article on my niche are ranking without a single backlink so is it possible for me to rank too with a better article without a backlink?

[reubenwallis]

Gonna apply these strategies to my Facebook marketplace Woolworths ooshie sales

[karanraajsingh]

you should add a summary of all the tips you presented us with at the end of you video. 👍🏾🙏

[kravetsflowers]

Hi Neil, thank you for all your work. Which ones of your Videos would you recommend for Right keywords in SEO for the website

[PaulDeuchar]

Thanks Neil! Universe helping answer a question here... maybe
& also considering competitive market positioning for market entry and future growth.. (love multi-factor analysis problems)

- I've just come up to Chiang Mai Thailand to nail this issue, and then the path to market. Such a crazy well timed Vid - Hope you're well!!! :)

[sunglazeresources]

Hi Neil, thanks for ur video...the challenge I face is being a startup, u have to manage everything on ur own... though u know everything like what all needs to be done to run a successful online business. but can't do everything alone. So how to organise you ecomm business at starting stage and scale upto that level when u can hire people or agency to expand ur business further!!

[nitinkhutemate]

Hey Neil, what's better? to have more users paying low price or less users paying high price.

[itsinfactagift]

Thank you for this tips !! You make my day 👌

[esteemedrelationships]

Hi, Neil
I charge $50/hr for writing blogs, informative articles, listicles, brand stories, product reviews and descriptions.

Though I find it hard to get clients who can afford. Why is it so?

[kittycakie]

My bakery idea is for my customers to customize their cakes, pies and tarts. How do I price the toppings, batter, and dough?