Is your Product Rightly priced?
One of the easiest things to do is to confuse Cost, Price, and Value.
One of the toughest decisions for any entrepreneur is to price the products. This does not come down easily if you run a SaaS company. Because any subscription-based businesses are monthly renewed and are in competition with other products. Hence the only Objective is to price them lower to get an edge over the competitors. In Traditional business, the pricing of the product was easily done using the below formula
Selling Price = Cost Price + Profit
The below formula gives an understanding of deciding Markup
Markup = Profit/Cost*100%
Pricing has drastically changed over the years, Steve Jobs once demonstrated at Apple events a Dummpy electronic box calling it an iPhone. It caught the attention of millions of people. Apple later priced the product and started manufacturing them.
There were three parts to the plan, according to Curiosity, and the most detailed involved something described as a ‘golden path’.
This involved a designated order of tasks to carry out during the presentation, with Jobs following a specific route through which he knew would work — and whenever the phone was reaching the limit of its memory at the end of a particular task, he would surreptitiously change over to a new one.
The other two tricks come under the banner of what you might consider common sense, though Jobs and his team still had to find a way to make it all work on the day.
First off was a personal portable cell phone tower, provided by AT&T, the only company that supported the iPhone at the time, in order to ensure those on stage weren’t forced to share bandwidth with the room full of folks trying to share their first glimpse of the new device as quickly as possible — so far, so logical.
But after that, we have the piece de resistance — the true element of fakery to the whole charade.
Throughout the display, the phones were rigged to ensure they would always display the full five-bar connection, regardless of the true status: you can’t be having a phone without a full connection on such a big stage, after all.
He then ushered let's call it an iPhone.
iPhone Sales have been skyrocketed ever since then, The launch of further models like the iPhone 10,11, and 12 in 2020 has raised the bar for other manufacturers.
Stories are the most powerful tools at our disposal. Good stories move us emotionally and make us susceptible to buying or doing things we might not otherwise have done
But on the other side, there is an opportunity cost which is involved by the customer to try and use the product. This opportunity cost is the time invested by customers or clients to train themselves and their team to use the product.
While superficially it may seem that a low price is attractive, there’s a big difference between your price your charge and the customer’s cost. Normally, these two terms are used interchangeably, but the customer’s cost is not just how much they pay for your product, but the additional cost of learning to use your product. The switching costs, onboarding, and training costs, as well as the opportunity costs, are often much more expensive than the actual sticker price!
Hence
Story = Value ( Your Story should create a picture of generating value to them)
Value = What you do better than others.
Ever wondered why does used Nike shoes by Michael Jordon sells more than its actual value because it is backed by a story
Lego sells most of its products at a higher price compared to its competitors, the reason, it asks customers for the opportunity cost to be incurred in it. Every lego product bought is a family activity and it takes days to build. This behaviour creates an urge and curiosity to get hooked to their products. And each day you push yourself harder to achieve a part of finishing lego puzzles. This behaviour keeps you motivated and creates a habit, this is called as habit-forming products.
Here the Value is generated using curiosity and Habit-forming products.
Value = Curiosity + Habits
This is also similar to Ikea products, It sells itself as a budget furniture store but the core of Ikea is its products built for a Family activity or Built by yourself. Every product created by Ikea is easily detachable or attachable
