Let me tell you about a trap I see a lot of business owners fall into…and its especially relevant to you right now…
…at a time when a lot of you out there are working hard to create and sell new or adapted experiences to new types of customers (to make up for the carnage that covid is probably unleashing on your business on some level)
So this trap I see is best described as a ‘mindset’ that leads to a decision like this:
“I’ll start with a really low price point….
…and as my credibility grows, my testimonials grow, my confidence and my list increase…..I’ll start charging more.”
And it’s right here that you start walking yourself into a trap.
Because generally this kind of mindset is going to condemn you to an unproductive, exhausting and unprofitable cycle that becomes harder and harder to break as it gathers momentum.
And it’s a trap that sneaks up on you before you know it…just when you think that everything’s going well
….because when you start out with a low price point, your first few sales are going to be fairly easy. And after the first bunch of sales you think you’re on a winner.
You work out pretty quickly though that if you’re going to keep making these sales, selling a low cost offering…..you’re going to need more customers, more distribution partners, a bigger list…..and you’re going to need to keep making more and more of these low cost sales at the same time as you grow your audience and find new ways to sell..
Pretty soon, you find yourself overwhelmed and exhausted because you’re using up so much gas trying to build your audience, hustle for more sales not to mention cope with the increased operational demand of running more low cost experiences.
Then you start making more mistakes (most of them costly)
You start bringing in more people. You do this quickly and you don’t think it through. You bring in too many people – and you probably bring in the wrong people. You do this from a place of fear and ‘overwhelm – and it gives you a whole new set of headaches.
Added to that, you give in and start investing in too many tools that a business of your size probably doesn’t need because you’re desperate for relief from the overwhelm you’re feeling.
So..you find yourself dropping so much cash on tools, solutions and people that the cash you’re generating in increasing volumes is going right back out the door on a growing stack of invoices and wages
And that leaves you in a place that frankly sucks..
A place of exhausting yourself in the hustle for sales and keeping little of the money they generate.
Here’s an alternative mindset that I encourage you to really think about…:especially if you’re launching something new any time soon.
It goes like this:
“I’m going to launch this thing and I’m going to charge a premium price for a high end experience – because I know I’m good at what I do and can deliver a really valuable product or service.
(then…down the track, if I make a carefully considered choice, I can create lower cost experiences after I have built up a cash reserve and some raving fans – and if I have the tools, resources and solutions in place to easily deliver at scale)”
The advantages of starting with (or quickly pivoting towards) a premium offering are huge.
For starters, it is much much easier to have higher revenue & higher profit margins with premium offering. (I always shot for a 40-45% profit margin on the range of premium experiences I sold)
And because you don’t need as many customers, there’s less pressure to have a sizeable following – or multiple distribution partners generating bookings.
Added to that, not only is a business offering ‘premium’ products or services generally more profitable, … but it’s also a helluva lot more fun to run – and it’s more enjoyable for your staff – the people that are delivering the product or services…
And it creates an environment where people are desperate to work for you – meaning you get a never ending supply of the best available talent that are targeting you, rather than the reverse.
Instead of the business being an endless drain on you as you hustle on the ‘hamster wheel’….
….only to come up for air after a few exhausting months to see you are basically in the same place you were before…
Your business can be inspiring & motivating… a place where you can better serve your customers – and a business that can provide you the luxury of easily accumulating cash.
It’s a nice way to spend your life and so much more rewarding than the alternative.
So give this some serious thought if you’re launching a new product.