Strategies for Setting the Just Right Price

May 9, 2007 6:52 PM

There is an implicit relationship between price and value. We expect to pay more for gourmet food than for fast food and for a luxury car than for an economy model. At the same time, value is a matter of opinion, not fact. I prefer a new Subaru to a '95 Cadillac; my husband prefers the opposite. His wardrobe is built around Dickies®; my taste runs to rather more eclectic (and non-synthetic) clothing.

Given that there is a relationship between price and value and that value is a matter of opinion, I've always priced my products and services by triangulating three factors: what I want or need to earn, my costs, and what the market will bear. That's what I've taught countless other people to do, and it worked fine for a long time. All else being equal, quality, price, and market generally reached a dynamic balance where prosperity and service overlapped.

Lately, though, something has felt out of synch in the way I price products, and I've felt some gritchiness around the prices of products I recommend. I kept examining my assumptions, and everything seemed right. Still, the feeling that something wasn't quite right persisted.

Never one to ignore an itch, I kept scratching until I realized what the problem was. I had been using quite different "markets" to assess what the market will bear. That is, I had been looking at markets that have values that don't match my own. I based my pricing and marketing on the proven best practices of other respected "info product" gurus, but those practices were designed for folks who are not and probably never will be attracted to my work.

Over the years I've learned that you place a high value on authenticity, intelligence, and creativity. I know you have high standards for courtesy, honesty, and what I might call "finish." You are tolerant of mistakes (assuming they are acknowledged). You have a sense of humor, a hunger for spirit, and a fundamental commitment to growth. You are willing to pay for high quality, but remain unmoved by hype and are positively turned off by pressure tactics.

The generic information marketing model is designed to address the needs of people for whom profit is an over-riding value. These folks – many of them good souls – thrive in the hyper-stimulating atmosphere of the motivational circuit: loud, upbeat music, extravagant challenges, and simple formulas for achieving success. The more costly the package, the more this customer tends to believe in its value. And I imagine that for the right person, that value can be substantial.

But this model doesn't fit me and it probably doesn't fit you, either. More than likely, you are past believing in "7 Steps to Instant Gratification." You probably don't believe in easy answers, however much you may sometimes long for them. (Me, too.)

The bottom line is that, in this case, so-called "best practices" just don't apply. The sophistication, values, and life experience of this community constitutes a different market, and we'll just have to develop our own best practices.

What will those practices look like? Here's my hunch:

* Transparency: No fake sales; any specials will be clearly linked to a business purpose, and the regular retail price will always be fair so if you miss a sale you can feel good about buying at another time for full price.

* Clarity: Accurate, no-hype descriptions of products and services.

* Simplicity: Prices expressed in whole dollar amounts. Forget the "95 cents" gimmicks. We can round up!

* Trust: Simple returns and exchanges.

The key to pricing that fits "just right" is to keep asking the questions that got me into this line of work:

What's bugging me about the way I do (or think I have to do) business?
What am I assuming?
What is the truth of this?
What if the truth were not a problem?"

Goldilocks tried three chairs, three bowls of porridge, and three beds before finding the ones that were "just right." In much the same way, the way of the accidental entrepreneur may try several prices on before settling on the one that fits "just right."