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#55 – Understand The Price Cliff

By Admin | Jerry's Notes

Jul 19

Last night, I shared with my students in the Startup Blueprint Masterclass the 10 Pricing Strategies that I use in our different businesses…

It was a very interesting discussion that changed their perspective about pricing. 🙂

One of the concepts I shared is the “Price Cliff”…

I told them that generally, customers perceive value in terms of PRICE RANGE, not absolute amount.

Within the range, they will still buy your product or service.

For example, people willing to buy an item for P89 will most probably be willing to pay for it even at the price of P99.

Or, there’s no significant difference between a price of P1,800 and P1,999.

So what should you do then?

Well, you should MAXIMIZE your price to earn the most revenue!

For example, the price points of a scramble business before were P8 (small), P12 (medium), P18 (large).

If it were my business, I would just price it at P10, P15, P20, respectively.

Why?

Because of 3 reasons:

First, there is no significant difference between P8 and P10. If I’m willing to pay P8 for a scramble, I’m willing to pay P10 for it.

Second, the P2 or P3 difference can make a huge difference in your income.

In fact, in can DOUBLE YOUR INCOME (not sales), without you doing anything!

Lastly, giving change to customers will slow down your operations…

Instead of a seamless process, your staff will have to look for P2 change to customers.

And what will happen if he is solo duty, and there’s no “barya” available?

So…

The most logical thing to do for the business is to push your price towards the high end (without falling into the price cliff) while streamlining their operations.

That way, you EARN MORE INCOME for your business that you can use to serve your customers even better…

Unfortunately, many businesses are not conscious with this so they just leave tons of money on the table…

Do you agree with this?

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