You are charging your customers the wrong price, and it’s hurting your ability to increase the conversion rate on your website and maximize your sales.
And no, I’m not talking about whether your price should end in a 9 or a 7.
I’m talking to those of you that are charging $500 when you should be charging $5,000. Or charging $30/mo when you should be charging $300/mo.
The good news is that you can fix it today.
So What’s Your Product Worth?
I hear a lot of the “rah rah” business coaches out there telling folks to “raise your prices!” and “charge what you’re worth!”
Which is mostly true…
But if you get it wrong, your business will get slammed. You need to understand the psychology behind it first.
As far as I can tell there is very little concrete research going around the coaching and consulting world about pricing psychology and brain science.
How would you like to charge 2.5x MORE than you currently charge, and actually increase your conversion rate?
Or changing your price from $500 to $5,000 overnight and clients not even blinking.
It’s not a pipe dream. It’s totally possible.
I’ve spent the last 4 years studying the brain and psychology as a hobby (kinda weird I know) and in this guide, I’m going to show you how to use science to raise your prices and get your clients actually thanking you for it.
Let’s dig in.
Brain Rules Are Funny
It turns out that the buying process isn’t nearly as rational as you might expect.
Pricing is entirely about the perception of value. Our brains have limited ability to calculate how much a product or service is “actually” worth, so the brain takes its best guess based on what it kinda thinks other things in the past were worth.
This leads to people doing some funny things based on pricing.
- People think wine tastes better when it’s priced more expensively.
- People dining actually buy more food when the menu doesn’t have a dollar sign.
- Or even that people buy more when you make the font size of your price smaller…
There are hundreds of fascinating studies breaking this down, but I’ve broken down the top 3 that you should apply to your coaching today.
Ultimately, your goal should be to charge your client whatever it would take to solve their pain. Your goal should not be to manipulate your clients into paying you more but to raise your prices so you can add more value, solve more pain, and ultimately make them happy, raving, fans.
I started off selling $500/mo SEO deals and now I charge up to $24,000 for our coaching programs. Here is some of the psychology of pricing that helped me make that jump.
3 Powerful Psychology Lessons
Lesson #1: Expensive Is Better
Because our brains like to use shortcuts to decide if something is valuable or not, we instantly think expensive means something is good. That’s how the rest of the world works, right?
I used to do coaching calls for $1 per minute on clarity.fm. It was a lot of fun and people would ask good questions and listen on the call. I’d follow up, later on, to see if they applied what they learned. They never really did. It was weird.
Then I wondered what would happen if I raised my price to $6.67 per minute.
Instead of people getting on the call and listening, they took notes when I talked. And I followed up later, and they applied what we talked about.
Same Dave, same advice, different price.
The Jewelry Store Mistake
A fascinating study was described in the book Influence in which jewelry store owner was struggling to sell some turquoise jewelry, so she asked a clerk to cut the price in half so they could sell more. The clerk misunderstood and doubled the price of the jewelry on accident.
The next day, the owner returned and all of the jewelry was sold.
In this case, people don’t know much about turquoise jewelry, so their brain has to use shortcuts to decide if it is a quality piece or not. They assume because it’s a higher price, it must be better quality – so they buy.
When you raise your prices, your clients will assume you can get them better results. They will actually be happier to buy and more bought into your service. This is a win-win.
Recently, I was deciding between 2 providers selling me a service. They were essentially offering the same thing as far as I could tell.
Provider A: $5,000/mo
Provider B: $2,500/mo
Which one did I choose? Provider A.
I really just wanted the job done right. I didn’t want to mess around with people who couldn’t do it as well, and so simply because provider A charged a higher price, I assumed they would get me better results.
This is all your clients want as well. Better results.
Double your prices today and your prospects will assume you are more of an expert and authority. You’ll drive away bad clients and sign better clients.
Their brains will thank you.
Lesson #2: Price Anchors FTW
Our brains tend to evaluate price compared to other nearby prices. This has massive implications when it comes to the way you should price your services.
On the ConversionXL blog, William Poundstone describes an experiment done with real estate prices. The researchers invited real estate experts and undergrad students to appraise a home for sale. All the test subjects were given the information a buyer would normally have, including a list of houses that recently sold, nearby houses currently for sale and the price of the seller’s listed home.
The subjects were divided into 4 groups, each given a different listing price, and were then asked to estimate what the home was worth.
These were the results:
By anchoring the price of the SAME house as $149,000 instead of $119,000, experts valued the home at $16,000 more. That’s a little easier than redoing the kitchen, don’t you think?
Increase Price to Increase Conversion
Now that you’ve raised the price of your coaching or consulting (based off strategy #1), let’s say you went from selling a training program that cost $997 to selling the same program for $2997.
Here’s how you could make that price point even more powerful.
Add an $8,000 package that helps them get it done faster or easier. Maybe there is a Done-For-You option you can add.
Next time you are on the phone selling a prospect, tell them about the $8,000 package first. Say it with confidence. After you tell them about that package, then tell them about the $2997 package they can buy as well.
Even if you don’t intend on selling any of the $8,000 packages, simply having it there will make your $2997 package look amazing and more people will buy it.
It might look something like this:
What’s even cooler, is that some people will buy the $8,000 package right there. That’s great! That means ideally you can help them get results better and faster than they could before.
Lesson #3: Discounts Destroy Conversions
Discounting can be very tempting at times. Cash might be tight one month, and you think “If I just lowered the price of my online course and ran a quick flash sale, I could email my list and land some new clients”
That’s true in the short term, but it will erode your brand’s value in the long term.
It will train all of your prospects to expect discounts from you. It will be harder to upsell current clients later on, which will hurt your customer LTV.
You want your training program to be a premium service, not a discount one. This is why you don’t see Tesla, Rolls Royce, or Gucci running discounts.
A study conducted by a group of resort properties took all of their customer feedback cards to see if the customer satisfaction correlated with the price the customer paid.
The results are amazing and utterly counterintuitive.
The customers who paid full price tended to have the highest ratings about the resorts.
The customers who received a discount tended to have lower ratings and complained about service more.
When people pay full price for something, they have a different expectation and perception of what they receive. They like it more because they want to like it more.
On the other hand, people who receive discounts expect things to suck a little bit. After all, it was discounted, right? They are mentally pre-framed to be less satisfied.
This is happening in your business right now if you discount. It’s bad for you and it’s bad for your clients.
Add Value Instead of Discounting
When running a promotion, or negotiating with a client, the key is to add more value rather than lowering the price. Don’t lower the price.
- Add a few extra calls or consultations.
Offer a small done-for-you service.
Split the cost up into monthly payments.
But please don’t ever discount.
It might feel good to your customer at the moment, but their brain will look down on you forever in the future.
A lot of you guys out there need to take a serious look at your pricing and shake things up a bit. It will be kind of scary at first, but I promise you will attract better clients, make more money, and get more raving fans.