A very interesting read by reposted from Ahdora Lumina – One amazing lady I follow on Instagram. I super admire her energy too.
“If you google “How to determine pricing”, the response you’ll get states that “You need to find out how much customers will pay, as well as how much competitors charge.” This is the same thing that I was taught in business class. But here’s what life and experience taught me. The Pricing method I choose is dependent on the particular product/service and situation – this is highly dependent on intention.
Method 1: I may decide to price something extremely valuable at a low price because of my intention. In that same light, I may decide to price something not equally as valuable, at a higher price. It doesn’t mean that I don’t understand the value of what I am providing, it means that I have DECIDED on which pricing method to apply.
The 2nd method is the more conventional one. Take your base production cost, add on your time/expenses, and mark up. Are you satisfied? Are you happy? Yes? Go ahead and put that out to your customers. The End…
That was pretty straightforward right ? Well..yes. Except that human beings are often dissatisfied and greedy. So, here’s what really happens – You apply either method 1 or 2, and you’re happy….UNTIL someone else applies the same method, and has a higher pricing which customers accept. So..now your thinking that you may have under priced your product/service? This is where the Myth of Competitive Pricing comes into play. You didn’t really under price yourself- you priced exactly what you wanted, and you got that. But now..you want more, not because you need it, but because..”How dare someone else price higher”.
I know this really well because all my life, I have worked with Talents. If we determined that 1m was our price, and we got it, we celebrated. However, I would notice the Talent upset when someone else got paid 1.2m. This is right after they celebrated their 1m. Even though that 1m would solve all their needs + an extra mark up. It was an exciting price, but….. Greed + Comparison= Continuous Dissatisfaction. Competitive Pricing is a Joy Killer. Choose your pricing method, Apply it, Be happy, Move along. The opportunity cost is your mental health”