Transcript: MOTM #425 Practical Pricing Strategies for Online Business

[Transcription starts at 1:13]

Hello, hello, hello my podcast people, and thank you for joining me for yet another episode of my favorite podcast. If you're watching then I think it's still called the podcast. Still haven't figured out what the right name is, but either way, grateful for each and every one of you. So today we're talking about practical pricing strategies for online business.

And of course, you know, this was inspired by something and that I'm feeling some kind of way and I wanna chat about it. So we got Black Friday coming up. We've got Cyber Monday coming up, all the sales. I actually just did a presentation about this, about selling and pricing. Uh, I've been getting some questions from clients and

just felt like it would be a good time to talk about this. One of the things that I think we're all experiencing and it's undeniable, is that things are just too damn expensive right now. Like, we've known that school is too expensive. We kind of just like accepted it and like for me, yes, I have student loan debt, I still do, and I already have it, so I can't like, you know, go back in time.

So being salty about it and just fixating and focusing on it doesn't change anything. Do I wish this on other people? No. And do I have discussions about like, you know, fixing the system and that it needs to start there? That school needs to not be so expensive. For sure. And we're seeing this across the board now.

Just being alive is too expensive. Bread, milk, eggs, all those things that we hear about. You know, it's too expensive. And what I see in the online space and you know, from online business owners and marketers, things like that is… I wanna say price gouging, like, there's just no limit to these things. And quite frankly, the, the pricing, it just comes outta nowhere, right?

It just, people just pull it outta their ass. There's no, it's not tied to anything, uh, specifically. In addition to that, all of the pricing and marketing tactics and strategies that we're taught, they come from a broken game, right? We are learning how to win a broken game, and I'm not sure if enough of us stop and say, do I actually wanna play this game?

Yes, I can use these strategies, I can take these strategies, but do I want to win that game? So one of the first times I thought about this was, um, reading, what was it called? The book, I think it's called Wolf of Wall Street. Right? It's based on the movie Wolf of Wall Street. And there are some interesting things, some helpful things in there.

But to just take everything at face value means that we accept the game that this is trying to teach us how to win. And I find that inherently problematic. I'm seeing stuff on social media and quite frankly, part of the reasons that I'm, if you're watching this, you see me just scratching my face right now, just rubbing my eyes.

Cause I'm just like, you know, the Instagram of days before is gone and it's not fun to be on there anymore. And everyone's selling something all the time. And if you're listening to this and you have a business, and I don't want you to feel some kind of way and start feeling bad, cuz I'm saying people are selling stuff, but it's the truth.

It feels like people are always selling something and some of the stuff that I see being sold, some of the the ways that I see things being sold, I don't like it and the pricing around it. And so often when people are leading with this discussion, online business coaches are leading with this discussion of raise your prices,

raise your prices, raise your prices, I'm not certain that their, you know, impetus, their desire for you to do this comes from a good place. Oftentimes, it feels like they want to encourage people to raise their prices so that they can sell something expensive and not feel so bad about it. Cuz they're like, well, everyone's doing it.

And the reality is, folks, the limit does exist. Endless abundance is not real. It's a myth. And I was just at, you know, um, Allison Tenney's ignited Women Summit, no, Ignited Leadership Summit, excuse me, she changed the name. And one of the speakers there spoke about this and this concept of, yeah, on the one end we talk about scarcity and we of course see business coaches talking about that and kind of using it and, and weaponizing it.

And on the other side of that is endless abundance. That's fake as well. The limit does exist. It's not sustainable to just have more, more, more, more, more, more, more, more and more. The big question that I want you to ask yourself, and I think all the things that I do and all the marketing and coaching and stuff that I do, it comes back to this is, “What is your enough?” And

in this episode we're talking specifically or more specifically about pricing and money, but we can look at this and should look at this in general, but for today's episode, let's think about it in terms of money, in terms of income, in terms of revenue. What is your enough? Are you salty perhaps because others are getting more? And I see this kind of creep in where they're like, well, other people are charging more.

And it's like, “Well, do you need to?” Or are you just like, well, they can charge more, so then I should charge more. Like I'm not getting my fair share. Is that creeping in? Or you know, have we divorced ourselves from that and put the blinders on and been like, this is what I need, this is what I want, this is what I feel is fair and I'm gonna go with that.

It is okay to be okay with what you charge. I have a good friend talk to her quite often about this stuff and I know she gets some, some heat from other people being like, “You should charge more.” And she's just like, I don't, I don't want to. And I remember being in a place like that where feeling like I should charge more,

and other people are saying stuff about that and we kind of come up with these ways of justifying our prices instead of being like, this is what I wanna charge. Right. So a story that I told myself for a while was that if I raise the prices, I'm gonna price out the people who I actually wanna work with, which can be true

to a certain degree. I'm not saying that this is the both/and of that can be true and also you can just be okay with your prices cuz you're okay with them. You don't have to charge a zillion dollars for everything, even if other people are doing, so. Again, a lot of that pricing psychology that exists, it comes from a broken model.

It teaches you how to win a broken game. Yes. If we like kind of go to the extremes, charging $1 for your services, one, like maybe you're not gonna be able to eat and two people may not value it because of, especially when it's like a physical product, they may not value it because they've been burned in the past and we know, like you pay things, when you pay less for things and pay like super, super less for things like then it doesn't work and it's, it's, you know, shitty and cheap.

But there are exceptions to that rule, and especially when there's a service being delivered, especially when people trust you. And yes, when people pay, they pay attention, but there is wiggle room within that. You're okay. It's okay. You're allowed to, and it's okay to be okay charging what you charge.

Spoiler alert, the thing that you and most people probably want the most is time. And money can be a vehicle, can be a resource to help you, you know, get back your time. But at some point it's like diminishing returns, right? At some point you don't like, does Elon need that much money? Now he's just going off and ruining shit.

Right. So taking a moment and saying, what is my enough? What do I actually want? And if it's more time, yes, money can help with that, but at some point you just become like, oh, I'm just charging more. I'm making more money, but I didn't get my time back. And we gotta, gotta look at that. Two things I wanna bring up before I get into like kind of the strategy, um, and the practical, uh, parts of this is number one, ignore,

I'm gonna go with that word. Ignore folks who say you should have charged more. You could have charged more. Because those people probably wouldn't have paid more when you first charged it. They are saying this now, having more or different data. They're on the other side of that outcome. So they see the value.

They understand the value, they, they have a guarantee on that outcome cause they already got it. It's kinda like when I had the discussion, people were asking me like, “Should I get my OCS? Should I go to PT school?” I want to say no, you don't have to go. But I am also very aware that I'm on the other side of that and I have, you know, benefited from all the, the affordances, benefited from all the benefits of having that degree.

So I think it's important to consider that when people say that, oh, you should have charged more. You could have charged more. They probably wouldn't have paid more because they didn't know that that is how dope the outcome was. So ignore that. But if you wanna take something from it, then focus on your ability, or focus on improving your ability to convey or guarantee that outcome that they achieved that then made them say, “Hey, yeah, I would pay more.”

Second thing that I wanna get to, that grinds my gears: when folks say you're leaving money on the table, or if you are concerned about leaving money on the table. Guess what? It's on the table. You can go back and get it later. You can go back and get it later. People will oftentimes use this as a, you know, a way to justify or way to encourage people to raise their prices.

Oh, you're leaving money on the table. Or people will like not even take action cuz they're worried, “I'm leaving money on the table.” Guess what? It's on the table. You can go back and get it. So please don't use that as an excuse. Please don't say it to other people. It's fine. I just realized I did forget one point here as it relates to, uh, “You should have raised your prices, you could have charged more.” If you feel this way,

the best way to encourage someone to raise their prices, so maybe right now I'm speaking to a coach, um, or someone else, you know, in a space like this, the best way to help someone raise their prices, the best way to encourage someone to raise their prices is to pay them more. It's not to tell them, try and convince them with your words.

It's actually open up your wallet, and pay them more. I have done this and so I'm not saying, you know, speaking from like theoretical, I've done this and this is why I believe this. Yeah, we all like a good deal and we're gonna come back to that at the end. But if you are really in it to help someone and you want them to raise their prices or change their prices, pay them more.

Okay, so let's hop on into, uh, five steps that I like to think about or like to coach people through when it comes to setting your prices. So here's the practical pricing strategies for online business 

Number one, do your homework. See what the market is holding. Do your research, ask around, creep on some websites and see what the range is. Yes, this does matter, especially for like a physical product or like an in, in person service. Where you're at matters. And I know that there are people out there that will be like, “Oh, you're not thinking, you know, abundantly enough, yada, yada, yada.”

But, the limit does exist. And for me, I'm not trying to have to try and convince people and, you know, really bend over backwards to try and convince 'em of the value of this thing. Let it be easy. So see what the market is holding. It doesn't mean you need to be on the bottom of that, but just see what the, the market is holding so you have a starting point when you're looking to price your services.

If- I was gonna go on-, but if you are in the online space, then what you're gonna look at in terms of the homework is like, people that are similar to you, people that are doing similar things. Cause I as, as I'm saying this, I'm thinking people are gonna be like, “Oh, I did my research and like an online course can go from like

$99 or like $29 to like $900 million.” I get that. Try to figure out people that are in your exact space, doing the exact thing that you're offering, the exact thing that you're doing. Offering a similar service, right? If we're going B to C, business to consumer, that's going to be different than going B to B,

business to business. If your, whatever service that you're offering, product course, whatever, helps people make more money. Typically, people are more willing to pay for that. And so the prices for those kinds of services are gonna be different than those folks who are going B to C, business to consumer.

And you know, my world is physical therapy, helping people get outta pain, something like that. So just keep that in mind and look to compare completely, right? And compare yourself to other people in the space that you are in providing a similar service to what you're providing. Step number two, do your math.

Is there a certain amount of money that you need to make? Yes, we want this to be a profitable business and be able to pay your expenses. This is also why it's great to not burn the ships. Y'all folks know, I hate that burning the ships. Give yourself a safety net, right? So I have realized that some folks don't know what burning the ships means.

And basically it means that you've removed your out. There's no out, there's no safety net. This thing has to work. Don't do that when you're starting a business, when you're starting an online business. Give yourself a safety net. This way the business doesn't have to work. You don't have to make a certain amount of money in order to keep the lights on and you know, just pay your operating expenses.

So the math here would be what are your operating expenses? What do you need to make to turn a profit? Step number three, based on this information, based on this data, pick a number that you feel comfortable starting with, and start there. Pick a number, pick a price that you're like, “I can confidently sell this.

I believe in this.” So for me, when I first started treating and had a, you know, cash based side hustle with physical therapy, I charged $60 for an hour, and $40 for coaches, cuz I was treating out of a CrossFit box. I felt comfortable with that number. I didn't have to like, you know, put on some kind of gross sales hat.

I could just, it felt good and it was easy. Let it be easy. You can always raise your prices later and you likely will. I now charge for an hour, $397. If I was still doing physical therapy, I'd probably be in the 200 range, maybe 250, depending. I mean, I live in LA so the market, that is standard for here and I would feel good about that and people could actually get the service, and they're not looking, you know, to come multiple times a week.

It'd be four times total, something like that. So for me, I would feel good with that and that is what I'm willing to pay as well. Um, when I go and see my, my chiro, go see Karen, it's between $200, $300, something like that. And 100% I'm okay with that. So you can always raise your prices later. Start at a point that feels good for you.

Remember, like I said earlier, don't worry about that, “You're leaving money on the table.” Guess what? You can go back and get it later. Those people who you help, they'll pay a higher rate. If you got them that outcome, they'll pay it later. And if they're like, no, I refuse to, cool, then you don't wanna work with them cause they're gonna be a pain in your ass.

Number four, speaking of changing your prices, change your prices when you get salty. When you're like, “This is not worth it. I don't feel like I wanna even deliver this service. I don't wanna see this person, like, I don't wanna do this thing”. It's time to raise your prices. And you folks, if you listen to my past episodes, you know that I'm all about kind of waiting until there's like that strong impetus for change.

I'm using impetus to lot this episode, and this is the second time, but it's top of mind. So waiting until you have that impetus for change, and then you will make that change. You will make that move. Step number five, if you're wanting to raise your prices, but you're hesitant, I have found that typically that hesitation comes from uncertainty as to whether or not you can deliver on that new price point.

Right? And it can be difficult to kind of value your services because sometimes you're like, well, I wouldn't pay for that because you do that thing, you feel that it's easy. This is your expertise. And so you're like, I wouldn't. But if you, if you take yourself outside of this and you think about something that isn't within your expertise,

suddenly you're like, “Oh, I would pay more, cause I don't have that solution.” So that's one thing to think about, but if you're like, I kind of wanna raise my prices, but like I'm unsure, one, of course, as per step number four, you can wait until you get salty. But my suggestion is keep your current price, outline what the deliverables would be, the quality of service would be that

is commensurate with that new price. And then do that. Deliver those things. Keep doing that. Gather the data, believe the data, and then when you get salty or when you're like, “Oh, actually I believe this”, you can change. You got the option there. So if you feel like you can't deliver on it or feel like you wanna change but you're uncertain, oftentimes it comes from a place of not being sure if you could deliver on it.

So outline what that new price point, what the deliverables, what that quality of service would look like, what the standard of service would look like, what you would be delivering. Do those things, but at the same price point. Gather the data, be like, “Okay, I can deliver this. It is worth this.” And then you can change the price.

So five practical steps, tactical steps there. A few more points I'm gonna go into and then we'll wrap this thing up. But if we're talking about, or as we're talking about changing your rates, the question I always get is should you change your rates for current people? And of course, cause I'm a physical therapist, the answer is it depends.

But I hate when people say that cause they don't say what it depends on. And we're gonna go into that. What does it depend on? So we're talking about online business and one of the things that we offer in the online space, is online memberships. I run one, it's called the Mafia. To me, online memberships can allow for folks to stay at the same price because there's typically pretty low overhead and it's not changing drastically every year.

An in-person membership, like a gym membership, however, may require you to raise rates across the board just because the rent goes up. You have to keep the lights on, maybe your, your margins and when you did the math in the beginning wasn't as good. I don't know. But there definitely can be an argument made for raising rates across the board and not grandfathering people in.

If you want more information about that, definitely check out my guy, Sean Pastuch, I believe he's @Drseanpastuch. We'll link that in the show notes. Thank you, Courtney. Thank you Joe. Um, you can check him out cuz he has, this is what he does. He talks about, you know, making sustainable businesses, especially for trainers,

and part of that is going to be the pricing structure that you utilize. And so if it comes to changing, changing prices and raising rates, I think an argument can be made for keeping or grandfathering people in for online memberships, because the overhead doesn't really change, um, that much. And then for gym memberships, there can, argument can be made for raising rates for people and not grandfathering people in.

My personal favorite approach for raising rates is to increase the rates from new people, right? So that also includes if someone's a current member or current client, and then they leave and they stop services, they stop their plan of care, and then they come back, well, now you're new. I love you, but you're new.

And so they get the new price. For one-on-one services, this becomes a little bit different. And this is both online and in person. Number one, you are gonna have to, you know, grow up and, uh, have conversations when you get salty. Because I get it, we're dealing with people and wanna be, we don't wanna have those conversations.

But we've all been in that situation where perhaps we have that client that's been with us for like eleventy billion years and they're paying $1, and you're like, I am so salty, I don't even want this person on my schedule. Realistically, your best bet is to have that conversation and you're doing both of you a service

by having that transparency and being like, “Hey, this is where we're at. We started at this rate. Here's what, you know, here's what my rate is now, and it's changing.” I would say 99% of the time people are gonna be happy to pay that new rate. Ideally yeah, it would be great to have a client that is an old client, but they're just like, “Hey, I wanna pay you more.”

But most of the time we won't get that, so have the conversation. There's something to be said with, or something to be said about like, waiting to raise your rates for these older people, these, you know, OGs, early adopters, until after the trust has been built and the value has been established. So what I mean by this is to raise your rates after six months for current people or after a year,

again, it's fine if you wanna do that, but from a relationship perspective, and if I put myself in the, like, consumer's perspective or consumer seat, perhaps I haven't really seen the value of this thing yet. Whereas if you had been working with someone for a long enough time, you're like, dude, I'll pay whatever.

Like I get it and I'm, I'm, I'm happy to support you. So I think there's something to be said about that. So there's my, my spiel on raising rates. It depends. You can grandfather people- I said grandfather weird. I was like grandfather – you can grandfather people in, you can not. Depends on your situation. Have those conversations.

There's an argument to be made for either side. All right. One other strategy I wanna talk about that you may have heard about is price anchoring. And as per Google, I got a little definition here. Let me get it up on my screen. Price anchoring refers to the practice of establishing a price point which customers can refer to when making decisions.

Every time you see a discount with $100 $75, the 100 is the price anchor for the $75 sales price. So this is something that I do talk about with my business clients, and it is a concept that I think is worth noting and considering. And I think there's two ways to do this in your business. One which I think introduces the most objectivity is price anchoring relative to your other services. And your clients and customers are going to do this inherently.

So oftentimes the price anchor here will be your one-on-one service or your hourly rate. And then from there it kind of price anchors other things like a group offer or DIY offer because it um, ties into how much access that they have to you. If you want some other examples of other services that you can be offering and kind of how you can stratify this,

I have a free ebook. I've spoken about this before. It's called The Value Ladder. One hundred percent free, except it's in exchange for your email, of course. Um, but you can head over to and you can grab that. So back to the example here, if we're price anchoring relative to our other services, for me, my hourly rate is $397.

I offer a six week group coaching program, the Instagram intensive, which technically is 12 hours of face time.. It's not one on one, it's a leveraged model, but it's 12 hours, and that costs $497. So when people come in and they want to, uh, learn more about Instagram, they want my help for Instagram, using Instagram for business or online business,

I will look to push them towards the six week program, the intensive, and I can use that price anchoring to show them, hey, there's, here's the value, here's the discount actually that you're getting. You can get me for one hour at $397, or you can get me for 12 hours, yes, there's other people in there, but it's 12 hours across six weeks, and that will cost you $497.

The second way that we see price anchoring used is, and we, this is kind of oftentimes used more, um, or talked about more in marketing and like in the online space and advertising for people's products and when business coaches wanna seem really savvy,. And this is, uh, a way to drive sales of a certain product or a certain package that you may be offering.

So I'm gonna break this down into sessions. Let's say that you offer one session and that's $100. That means that the price per session is $100. Let's say that you offer three sessions and the cost of that is $200. That would mean that the per session price is $66. 66 cents repeating. And let's say you have another package that's five sessions and that's $400.

The price per session then would be $80. So in this case we see that if we're price anchoring it based on the one session, then that three session package that is $66.66 cents per session would be the most attractive. They get the most discount with that. If you're saying it like that, it's because you're looking to drive traffic, if you will, to that package. You're looking to have people buy that and find that the most attractive. So that's a way that you can price anchor your services. Okay. Last part here, before I wrap us up:

displaying your prices, should you or should you not? I think you should. I didn't even wait there. I didn't take a breath. I think you should. You know, I hate that word should, so I'll say, “I always do.” It is a personal choice, but if you're like, “Hey, but Maestro what do you think?” I think yes, autonomy is sexy. I personally hate scrolling.

I hate when it's like, “We'll hop on a call. I can tell you more.” Like I'm a grownup. I don't need you to convince me of anything. I also want to encourage you to give people the benefit of the doubt. Sometimes people wanna see the price so they can plan for it. And they can save for it and they can prepare for it. And maybe they don't buy it right now, but they'll buy it next year.

And we're hiding this stuff. I hate it. I hate scrolling. I don't care if this thing is $9 or $9 million. For me, put the price on it. Please. Like I, I can't. You know, you look at a house, not that I'm ever looking at houses, but like, that's annoying. You're like, I just wanna see it. I'm on Zillow looking at the stuff I can't even afford to buy, but like, what's the price?

So for me, I put the price on. Okay. Last thing I think it's important to consider when it comes to pricing. People don't necessarily want things cheaper. They wanna guarantee of their desired outcome. And I think you listening to this understand that. I don't want the steepest discount cuz then maybe it's gonna break.

I want a guarantee that this is going to get me the outcome that I desire. So if you're considering pricing stuff and you're like, “Oh, I want more people to get it, and I want people to be attracted to it”, don't just slash the prices. Look to increase the perceived value of it. And the way that we're gonna do that is by guaranteeing an outcome.

People will get excited about a deal, but they will get their wallet out for a guaranteed outcome. All right, well that is all I gotta say about pricing. That's a lie. There's more that I could say, but I wanna be mindful of the time parameters here. Keep things on the shorter-ish side and so we'll wrap it up there.

Don't forget if you want that free, download ,The Value Ladder, so you can learn about stratifying your offers or coming up with other offers, cause I've oftentimes seen that physical therapists, we offer one-on-one services and then don't know what else we can be offering or what that would look like.

The book goes into all of that, and then from there you can think about pricing based on how much access they have to you. It's got a little, uh, DIY kind of, um, PDF in there so that you can fill in and you can put in your own services. You come up with some services. Basically, I love it.

I worked hard on this thing, and if you want it, head on over, All right, that's all I got for today. As always, endlessly appreciative for every single one of you. Until next time friends, Maestro out.

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