How do you know if your price is too high? A few things could be happening: the product isn’t actually as valuable as you think, you’re talking to the wrong customers, you’re not conveying the value properly, or some combination of the three.
Product isn’t actually valuable
You may have identified a problem that isn’t critical or a solution that isn’t good enough to overcome the inertia needed for a customer to buy. This can be difficult to determine but requires keen observation—especially to rule out some of the other causes below.
Talking to the wrong customers
If you have any sales, look at what the most successful customers have in common (not just any customer otherwise that could be misleading). What was the key challenge they were facing and how did your product address that? Similarly, look at sales lost or customers that churned to see what they had in common. Focus on a single customer profile until you’ve really figured it out before moving on to the next.
Not conveying value
You can have the best product in the world and people still won’t buy it if you can’t convey the value it creates. In B2B sales, it’s possible to solve a real problem but customers don’t have the motivation to do anything about it. Finding the right hooks are important to get a potential customer to take action.
See also:
- A third of sales comes from doing nothing at all and that might be misleading
- Willingness to pay should be at the core of product design
- Founder led sales helps identify product problems
Links to this note
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Pricing the Perceived Value Gap
Cost basis tends to get the most attention when it comes to pricing. I remember business classes in college spent endless hours talking about cost plus pricing, margins, and so on. However, perceived value—the difference between the price and what people think it’s worth—gets overlooked. If the perceived value is high relative to the price, it’s a no-brainer to buy.