Pricing is all about Value

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I hit a pipe with my drill…

Have I told you about the time I tried to cut a hole in the wall, from a downstairs bedroom into the garage, that resulted in me drilling a hole in a water pipe that ended up pouring water (clean, thank God) into both the bedroom and my garage?

When I looked into the cost of not only repairing it but doing it right, it felt tiny compared to what this would cost if I kept trying to do things on my own (for which I wasn't qualified).

The price to value ratio was quite high that day.

On one of my first days at the new job my boss got really mad…

Have I told you about the first membership plugin I purchased, to work with WordPress, years ago so that I could quickly set up a protected site where customers could download software and I could track who had and hadn't downloaded the latest update?

You see, as a software company, we were emailing customers patches to our core software. But because we didn't know who had read the email yet, and downloaded the software yet, every time we released a patch that had a further bug in it, we had to email another email stating that our clients should ignore the last email and click on the link in the new email.

Marketing was unhappy. My boss was unhappy. And I was the new guy.

But if I could build a quick membership site, and track who had actually downloaded the buggy software, I could email just those people, and not worry about sending out another email.

It was a quick win. And it was done before lunch. The same day as the issue appeared it was dealt with.

Oh, the price to value ratio on that day was also quite high.

He wanted the chicken AND the steak…

I was getting married. I had hired one of the world's highest ranking wedding photographers. I'd even moved the date of our wedding (more than 13 months away) when I realized he had a conflict.

And when the day came, I was thrilled to have him there. So at meal time when he asked if he could have both the steak and the chicken, do you think I cared?

It was a tiny cost compared the incredible value of having this amazing and incredible photographer taking our photos.

And more importantly, the resulting photos made my new wife (now of eleven years) happy. Happy wife..happy life. Right?

The price to value ratio was awesome!

It doesn't matter what you want to tell customers about your price….

Pricing isn't a perfect science. There isn't a formula that you apply, regardless of context.

Pricing is subjective. And more importantly, pricing discussions happen in the mind of the potential customer.

That's what most people don't understand about pricing… that it's highly dependent on what's inside the head of a prospective customer.

They're the ones evaluating the price to value ratio.

It doesn't matter if you want to tell customers, “hey—that's what everyone else doing what I'm doing is charging.”

They don't care about other vendors.

It doesn't matter if you want to tell customers, “hey—this is what I need in order to run a profitable business.”

They don't care about your business model.

They're evaluating a different calculus in their own minds.

My pricing advice: be explicit about your price to value ratio

When you're writing sales copy, or you're talking to a prospect about your offerings, are you clear about the pain they're feeling and the way you've navigated situations like theirs tons of times before?

When you talk about your process or your product, and how it solves that pain, are you clear about how differentiated your claims are from everyone else? Do they understand your unique approach?

As you articulate where they'll be if they go with you (your product or service), are you clear about the gain they'll experience? Are you making the upside really, really clear? Can you highlight, in detail, how others have benefited.

If you can

  • articulate the pain
  • different the claim
  • focus on the gain

then there's a good chance that when it comes time to share your price, they will already have come to the conclusion you're hoping for.

They will feel that your price to value ratio is incredible.

And make no mistake, this is all a feelings game. I said that it was all about what was going on in their brains, but the truth is that we all use our brains to justify what our hearts have already decided.

So help them feel that your price to value ratio is amazing. The more you focus on that, the easier it is for people to not only accept the value proposition and buy. They'll become raving fans, telling their friends about the great deal they came across.

After all, who doesn't share the $300 value for only $30 that they discover? It's a no brainer.

And that's what you want. What we all want. To make conversion so simple that it's a no brainer.

Are you a product person? Want more info on pricing in the product realm? Check out my pricing ebook or check out my friend Brennan Dunn's free 9-part pricing course.

About Chris Lema

Chris Lema has been working with WordPress since 2005. Over the years he's been a blogger, a speaker at WordCamps, a coach for WordPress product companies, and the founder of the conference for WordPress business owners, called CaboPress. Today he's the VP of Products at Liquid Web, where he manages the world's first managed platform for WooCommerce stores.

Chris Lema

Chris Lema has been working with WordPress since 2005. Over the years he's been a blogger, a speaker at WordCamps, a coach for WordPress product companies, and the founder of the conference for WordPress business owners, called CaboPress. Today he's the VP of Products at Liquid Web, where he manages the world's first managed platform for WooCommerce stores.

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