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

By | September 18, 2019

– There’s one simple thing that you can do to make more money. Can you guess what it is? Hey everyone, I’m Neil Patel and today, I’m going to teach you how to
price your product, or service for maximum profit. (upbeat music) Before we get started,
make sure you subscribe to this channel, that way when I release more marketing tips like
this, you’ll get notified. Question for you, how do
you determine what to charge for your product or service? Well if you just came
up with a random number, that’s a really wrong strategy. Because if you just come
up with a random number, you may not be making
the most amount of money that you should be generating. The first tip I have for
you is look 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 needa make sure it’s
profitable, including shipping, services, returns, other
things like customer service, you need to take everything
in 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 profit. You’re not in business just for charity. You needa make a profit and
there’s nothing wrong with that. The second thing you
needa do is understand your target customers. What are your target
customers looking for? How do they perceive value
when they look at price? A good example of this is a
company call 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 needa look at your space. It could be that cheaper
price means more sales. Or it could be, cheaper
price means less 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 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 less
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. So that’s it. If you follow those tips,
not only will you generate more sales, but you’ll also
generate more profit as well. And if you need help growing your revenue, getting your pricing right,
check out my ad agency Neil Patel Digital. If you enjoyed the
video, like it, share it, comment below and I’ll answer it. Thank you for watching.

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