If I asked you right now, “Is your revenue goal high enough to pay yourself…
Want to know how your pricing can influence buying decisions and support your goals? With pricing, it is easy to focus purely on pricing for profit, which obviously is very important. But when you are strategic with your pricing, it goes beyond just pricing to make a profit. You can use pricing to make people buy faster, commit longer, pay over a longer or shorter period of time, and so much more. And getting buyers to make certain buyer decisions can make all the difference with achieving your business goals. Keep on reading to find out how your pricing can influence buying decisions and support your goals.
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HOW YOUR PRICING CAN INFLUENCE BUYING DECISIONS AND SUPPORT YOUR GOALS
1. Using early-bird pricing to get buyers to buy when an offer is first available
A pricing tactic that I love using is early bird or early booking pricing. This is where you purposefully reduce pricing when you first launch something and make it clear that this price will only be available for a set period of time and then the price will go up. The purpose of this type of pricing is to encourage people to take action fast and buy now rather than later on. This can be useful for a number of reasons and is used for all types of offers. However, a great example of where this type of pricing can support business goals is when used for events.
Putting on an event is a big commitment for businesses. There are considerable costs with putting on an event and lots of those costs happen upfront months before the event is actually happening. Therefore, being able to get sales for the event sooner rather than later is not good from being able to see tickets selling and know people are interested and want to come. But it will also mean the business is genrerating income from the tickets, which helps to bring money back into the business after having paid the initial costs for the event.
If you want to use this pricing in your own business the key thing is to make it clear how long the early bird, or early booking, rate is available for and stick to it. To maximise the success of the early bird rate you could also get people on a waitlist in advance. This means you’ll have a warm list of people who you have already notified that there will be an early bird period for purchasing and that you’ll email or message as soon as they can buy.
| BE STRATEGIC WHEN LAUNCHING A NEW OFFER
There is so much to consider when launching a new offer. Ensuring it complements the rest of your offer suite is key, but you’ll also need to price it correctly, and have a marketing and sales strategy in place so it sells! I cover all of this inside of a Strategy Day. We’ll work out how to add you offer in and ensure that, and everything else continues to sell so you achieve your financial and lifestyle goals. |
2. Creating favourable pay monthly options to grow your monthly recurring revenue stream
Another place where you can be intentional with your pricing to support business goals is by creating, or adjusting, your pay monthly options so more people will take that option, and you are able to build your monthly recurring revenue. If you have a pay in full or pay upfront option and a pay monthly option, then how you price the two options will influence buying decisions.
If you have a specific reason for wanting to see your monthly recurring revenue grow consider how important that is and then how appealing you want your pay monthly option to be. It might be you want to increase your monthly recurring revenue as you want to grow your business and commit to a range of monthly costs (such as software, staff, mentor etc) and therefore having a predictable level of monthly recurring revenue is important. Therefore, at this moment in time you might decide making slightly less profit is worth making in order to build your monthly recurring revenue and that will impact how you set your pricing in order to lead buyer behaviour.
Think about it, you have a 6-month group programme and these are your options.
OPTION 1: £6,000 in full or pay £1,000 x6 monthly installments
OPTION 2: £6,000 in full or pay £1,200 x6 monthly installments
In the first instance, it costs someone exactly the same amount whereas in the second instance you are paying an extra £1,2000 if you pay monthly.
There will always be some people who if there is a pay monthly option they’ll take it. Even if it is costing them more. This could be they don’t have the ability currently to pay the full price, or for cashflow reasons they just prefer to pay a little bit more altogether, but have more money in their bank for longer.
So if you want more people to take the pay monthly option they you are going to need to make it appealing. With option 1 there is nothing to lose by paying monthly and that means all of a sudden everyone will consider should they pay in full or monthly, rather than just a small percentage of people considering it.
3. Use Grandfathered Pricing to Encourage People to Stay
This pricing method is popular with subscriptions, so in my world, I see it mainly used for memberships. Grandfathered pricing is where someone is able to keep their original price even though the price has gone up. For example, you open a membership and decide to have a special founder rate for the first 300 people. Once you get 300 people you put the price up, but those originally 300 continue to receive their rate for as long as they don’t cancel their membership. This is important to note, it isn’t for life. If they decide to leave and want to come back in the future they’ll have to pay the new rate. This makes people think twice before deciding to cancel.
This pricing is great for reducing churn in memberships and getting people to stay for longer. Again, this is an example where you are making less profit. The people who are paying the later, higher, rate will be making you more profit. But grandfathering is a great way to keep people and that may be more valuable to you.
| NOT CONFIDENT WITH PRICING? LET ME HELP YOU.
When set correctly pricing will enable you to influence people and encourage them to take a desired action. I’ve been helping business owners for years to use pricing strategically so that you drive desired behaviour and hit your business goals. So if you aren’t confident with your pricing you don’t need to do it alone. We can work together and get them set FAST. Just book a Pricing Power Hour. For more information and to book a Pricing Power Hour click here. |
4. Setting Minimum Spend Thresholds for Perks or Discounts to Increase Your Average Basket Value
This pricing approach is most commonly used in e-commerce, but it can be used in other types of businesses too. If you want to increase your average basket value you can offer perks and discounts, but only once people hit a minimum spend threshold. For example, it might be that there is a percentage off discount code that is tiered. If you spend over £200 you can save 20%, but if you spend over £300 you can save 30%. This will mean people who end up with a basket value between £200 and £300 will consider whether they should increase their basket to over £300 and get the bigger discount.
You might not be comfortable with offer a discount, but that doesn’t mean you still can’t encourage buyers to spend more. The other approach is to offer perks. A common example of this is where businesses will only offer free shipping if you spend over a certain amount. This will mean some people will buy more than originally intended in order to cross the threshold and get free shipping. Free shipping is a well-recognised perk, but you are only limited by your imagination. There are so many different perks you can offer depending on your business and what your buyers would find valuable.
5. Reducing Rates for Committing Longer-Term to Encourage Loyalty
Another way you can use pricing to influence buying decisions is by offering a reduce rate when someone commits for a longer-term. For example, you might know that if someone works with you for 3 months, there is a 50% chance of them returning to work with you again. However, if they work with you for 6 months, there is a 80% chance of them returning to work with you again. Therefore, when looking at the lifetime value, you are willing to make a little less profit in the first instance, based on the lifetime value of that buyer.
Here’s an example of how this could look for a business. It could be the business has a service and they charge the following:
Sign up for 3 months and pay £2,000
Sign up for 6 months and pay £3,000
The 3-month offer works out at £666.67 per month, whereas the 6-month offer works out at £500 per month. Now there will still be people who wanted 3 months and that was all they wanted, but for those who may have thought I’ll sign up for 3 months and then if I like it, I’ll sign up for another 3 months they are going to seriously consider whether to just pay for the 6 months in one go and make that £1,000 saving.
That’s it. You now know how your pricing can influence buying decisions and support your goals.
As you’ve seen, there is so much to consider in order to use pricing strategically. And what is right for your business is going to absolutely depend on your goals – both short-term and long-term.
I hope you’ve enjoyed reading this blog post. Let me know in the comments what your biggest takeaway is.
You can leave a comment below or drop me a message on Instagram or LinkedIn.
And if you’d like help with your pricing I can help.
- If you just want help with a specific pricing problem book a Pricing Power Hour.
2. If you want help with pricing alongside revising your offer suite, or having a sales and marketing strategy that works then you’ll want to book a Strategy Day (for those who want a strategy fast and can implement alone) or check out my 1:1 Business and Marketing Mentoring (for those who want ongoing support, training and accountability).
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