Price Your Product Right & Make More Money For Doing Less

Saturday I was at a gig to honour the late John Peel. It’s 5 years this month since he died.

I met with up with a friend I’ve not seen for a while.

Since I saw her last, she’s set up a small online business selling hand-designed t-shirts.

Her friend had one on. It was good.

How much you selling them for, I asked?

£40.

£40 for a t-shirt!

I didn’t hide my surprise very well.

She argued that they were hand-painted, took her 4 hours to make and were pretty much one-offs.

Fair enough.

In theory you’re paying for the exclusivity. You’re paying for the personal touch.

Some people will see that. But will enough people?

No matter how business-savvy you think you might be – the truth is, you just don’t know.

Not unless you test the price…

Make more money for doing less

This morning, I took a quick straw poll in the office.

How much would you pay for a good quality t-shirt with a one-off, hand-painted design on it?

General thoughts: between £20 and £30.

A crude test, but it immediately gives you a better idea of the market.

So what about £20?

Sure, you might get more people buying, but that doesn’t necessarily mean it’s the best price.

Think of it like this…

Let’s say you find 20 buyers.

Of those 20 buyers, 7 are prepared to pay £40.

7 times £40 bags you £280.

However, of the 20 buyers – all 20 are prepared to pay £20.

So you’d bag £400.

Hurrah, right?

Not quite. Because of those same 20 buyers, 16 would be happy to pay an extra £10 and buy a t-shirt for £30.

That’s interesting.

16 times £30 is £480.

So, you’ve made £80 more and produced 4 less t-shirts.

It stands to reason that if you can sell fewer t-shirts but make more money…

You could make more money for doing less.

In which case, you can be content that you’ve found the right price.

No matter what your product or service, if you really want to maximise your profit and your efficiency, you’d be mad not to test at least two prices against each other.

But do remember to keep your tests reasonable.

If your price tests are too far apart, your results will either be pointless…

“Hey, people seem to be happy to pay £5 for this glove but no one will spend £500 – how come?”

Or they’ll take forever.

If your product or service is below £60, I’d recommend testing in £10 increments.

Between £70 and £200, I’d try £20-£30 increments. Otherwise, your price testing will take forever.

Beyond the £200 mark, move up to £50 increments.

And when you start getting to the £300/£400 mark and beyond; naturally it makes sense to increase the increments by larger amounts.

Hey, I admit, doing a bit of price testing might seem like extra work – something that stands between you and the profit.

But as I’ve shown you here, in the long run a little bit of price testing will enable you to make more money for doing less.

Category: Marketing