This is an interesting topic because there are two methods to make money in your business, and honestly, who doesn’t want to make money in their business?!
Let’s look at “the quantity” aspect of making money. Increasing the number of sales you make is one way to make more money. Typically, the way people increase the quantity of sales is by decreasing the price.
On the other hand, if we look at it from the price aspect, we make more money per sale by raising the price.
So, the question is…which is the best method to use to build your business and make more money? Well, there are pluses and minuses for both.
This information would work whether you sell products or offer services but in order to simplify for this article, I will just use the term product.
There is a negative side to the quantity aspect. The idea of selling quantity is that we lower our price, which should increase sales.
But that’s a double-edged sword because when lowering the price, we lower the perceived value of the product. Another issue to consider is if the product sells for less money, we may attract a different type of client which may result in higher customer service for the product.
But there’s a plus side to lowering the price. Maybe you want to create a product for less money on purpose, in order to sell more of it and build a larger paying client database. For example, if we sell a product for $10 or less, then we can amass a large number of people that we can then upsell into higher-end products.
Now, on the other hand, if you’re looking for the absolute fastest way to make more money in your business, just increase your price. Anyone that knows me understands that I feel most people can increase the price of their products or services by about 25 percent without affecting their sales whatsoever because most people tend to underprice themselves and their offerings.
Underpricing prevents you from making the amount of money you deserve.
When you increase the price of your product, you start making more money on the very next sale…25 percent more money in this example. It’s that simple, you’re still going to sell the same amount of product except you’re now going to actually make more money.
So, if you’re looking for the fastest way to make more money, increase the price you’re selling your products or services for. Why don’t more people just raise their prices? Most folks are scared people will stop buying from them. They are unsure of their own worth and their products real value. Does that strike a chord with you?
Let’s look at the unknown factor between quantity and price, which I briefly mentioned earlier—this is the perception of quality. Perception of quality simply means that people perceive a product that is priced higher to be of higher quality. That doesn’t mean it’s true, but they tend to perceive it as true.
Think about it. We were brought up this way—if it costs more it has to be better. Let’s say there are two purses you are thinking about buying. If one sells for $50 and the other sells for $500, which is the better purse. Well not knowing anything about the two, you’re going to automatically assume that the $500 one is better quality. It does not matter what the product is, people assume the higher priced one is of better quality. That’s just the reality of how people perceive things.
So, when you lower your price, you’re giving people the idea that it’s not as valuable as your competitor’s higher-priced product. Here’s a personal example I’ll never forget. Many moons ago, I was selling a piece of software that created ebooks. It was a totally different game back then. These were self-contained .exe files that were basically websites inside of a piece of software. Anyway, I created this software, and we were one of the first companies on the internet to create and market it. It sold quite well for $497. Then another marketer came out with a similar type of software and sold it for only $19.95, literally a fraction of what my product sold for.
I was shocked. I was sure I was going to lose my main source of income. I had just been screwed in the marketplace! I used more colorful language at the time. Then something strange happened…all of a sudden, I had a bump up in sales, and it continued and continued. I couldn’t quite figure out what was happening. Why were my sales increasing instead of withering away?
Then I stepped back and thought about it for a moment. I realized his low-cost product was creating a lot of product awareness. People started looking at it and then shopping for similar products. When they found my product and saw the much higher price, they assumed it must be better. They wanted the best product available, so they bought mine.
When we see two products, we assume the higher priced one is better, and we will purchase it unless it’s priced way out of our budget. So sometimes, like in my case, a higher price not only leads to more money per sale, but it also enables you to amass a large number of clients.
But, under most circumstances, decreasing the price will enable you to gather a larger number of clients faster. We can then make money by upselling them into other products we have, preferably higher priced products. And that is a very good reason to lower the price of a product or, better yet, to create lower-priced products with the intention of them leading to your higher-priced products. Brick and mortar business do this all the time in order to get you in the door.
So that takes us to the question, which method is better? The answer is both. You should have low-priced products designed specifically to capture more clients. You should then create higher-priced products to sell them into. And if you already have products, you should raise the price on your existing higher end products. Now, go look at your offerings and see how you can utilize both methods!