Making a profit on something new can be a challenge. Had we not launched a new offer last year, we might have avoided losses in the past six months. But then we’d have one less thing to sell, which would also be a problem. How do we know which type of work is the most profitable?
Thoughts of the day: Try out new products or services on existing clients first. Price according to market need. Expand to new clients when you know you have an offer that works. Make sure to price in a margin for error. Allow the new venture enough time to get off the ground.
When bringing a new product or service to market there are bound to be glitches. Don’t risk losing a new customer by exposing them to things that could go wrong. Start by focusing on a group of clients you can trust, who will test your products without jeopardizing your relationship. Go to those clients who will give you honest feedback and who will work with you if things aren’t right.
Do your homework on what the market will bear. Ask test clients to provide input on value. Did this product or service make their world better? In what way? How does that translate into savings greater than cost? How much would they pay to get their hands on that kind of savings all the time?
If it looks like your product or service doesn’t make your customers’ world better in a compelling way, go back to the drawing board and figure out a better approach. Did you offer the solution to the wrong customers? Is your offer too hard to work with? Is the need really out there for what you’re offering? Will tweaking make things better or would you be better off scrapping this solution and working on something else?
Once the clients you know and trust are raving about your new offer, and paying the price you want, then, and only then, is it time to branch out to bring on new buyers for your newly tested offer.
You want to stay away from prospects while in the testing phase for two reasons. If you make a mistake delivering, you might lose the new client forever, since they don’t have the positive experiences with you that your current clients have. Secondly, if you make a mistake on pricing, and have to go back to ask for an increase, existing customers will be somewhat understanding, but new customers might think you’re trying to take advantage of them.
When figuring out the right price for your new product or service, temptation may be to price low in order to get over the hump of people asking, “What is this new thing, and why should I use it?” Or, you might look at what competitors charge for similar solutions and set your price in the same ballpark. Don’t do it that way!
Do your homework and figure out the value proposition. Why would people want this offer, and how will it make their lives better? How is this better than what the competitors are offering? Create an exclusive “can’t live without it” approach through your marketing materials, and price to that value.
It’s usually easier to lower a price down the road than it is to raise a price. If you aren’t sure about what to charge, set the price high and offer a first-time user discount. In trade for the discount, ask users for detailed feedback on the value of the product or service. Use those testimonials to justify a higher price when you do a full launch.
Allow ample time to test and make adjustments. Make sure your ultimate market is large, long-lasting and can afford what you can offer. Line up multiple ways to get the word out once you’re ready to go live.
“Pricing Strategy: How to Price a Product” by Bill McFarlane.