The value of a product is often underestimated and most customers are willing to pay much more than expected. By increasing efficiency in customer acquisition and raising the price of a product, a business can create a successful and lucrative model.
Experts suggest that software companies should research their competitors' pricing strategy and provide a snippet of this information to their chief revenue officers as part of pricing strategy development.
Selling software has the benefit of costing the maker zero for each incremental sale versus a physical item. Additionally, offering discounts for higher-priced items can capture more margin even after the discount is applied.
In this episode, the discussion revolves around the differences between the $5 monthly software tools and the ones that cost $6 figures a year. They weigh in on whether the differences in features are enough to prioritize the more expensive option.
The speaker talks about how pricing can make or break a subscription service and shares his own mistake of charging too much for his service, which turned away potential customers. He recommends lowering the price to make it an impulse buy, which can be used to get customers into the funnel for more expensive upsells.
The concept of "pretfall effect" explains how low-cost brands can use pricing to influence consumers' perception of value and quality, but also risk being perceived as low quality due to customer assumptions.