One of my favorite hummus brands – Sabra – constantly asks me, “how much will you pay for a container of hummus?” It uses dynamic price-testing, varying the price between $2.99 and $7.49, for the exact same thing. Tricky.
My reactions look kinda like this:
$2.99 – What great deal!! Is it mispriced? Buying now
$3.49 – That seems like a good deal, it’s worth it – I’ll buy it
$5.49 – Hmm, that seems a little high. I might not buy it
$7.49 – Rip off. I’d NEVER pay that, come on
So I’m guessing Sabra thinks its hummus is worth about $4 to $4.50 to me.
Part of me thinks – I could buy all the ingredients for this in this same store. So what am I paying for? I’m really paying for a service with a bow on it – for sitting down and blending it all together. Oh, and having the culinary taste to do so in the right proportions and the right way.
Prepared or semi-prepared food products are productized services.
Just like the ones that you make and sell in the form of consultative expertise – all wrapped in a neat bow, ie packaging. That bow consists of a well-designed and informative product page with self-service ecommerce purchasing and automated email follow-up).
We know how hummus makers price productized services – how do we price ours? The same way – figuring out what buyers are willing to pay.
That’s why the productized service pricing calculator gives that “What Will They Pay?” factor more weight than the answer to, “?”. The latter is so variable. You might be overcharging or undercharging based on your reputation, your lead flow, your selling and custom pricing skills, and your skill at delivery.
But researching (even in your own imagination or from memory) is the best approach.
This similar to the approach you intuitively use when billing at an hourly rate – you try out different rates and see what sticks.
An easy way to do this is to talk to a former client who will give you 15 minutes of their time and keep asking them prices until you hear some variation of:
(1) What great deal!! Is it mispriced? Buying now
(2) That seems like a good deal, it’s worth it – I’ll buy it
(3) Hmm, that seems a little high but I might buy it
(4) Rip off. I’d NEVER pay that, come on
These questions come out of research by ProfitWell, which aggregates pricing and churn data from thousands of subscription SaaS and DtC products.
Profitwell found that the most profitable price (factoring in total, long-term conversion, and total, long-term churn) sits about 30% of the way between, “seems like a good deal” and “seems a little too high”.
You might find the same.
–Rowan