Your Prices Are Too Low
So we're going to dive in with a question and it's a it's called a trick question what's the easiest way to generate more revenue with less work? Raise your prices exactly. So I want to prove to you, in this first part just how effective and dramatic raising your prices can have have as an impact on your business. So what we're gonna do is we're going to run through a little exercise and it's based on a book that I absolutely love called the one percent windfall by rafi mohammed and what he argues in this book, and it sort of written for corporate america. But it's got plenty of great stuff for us, too is that even by raising your prices by one percent, you can have a huge impact on your bottom line. And so what I want to do is I actually want to have you guys start to think about what these numbers look like, and so I want you to start with your total sales revenue for last year and then think about what if it were one percent higher, five percent higher if your prices were one percen...
t higher. Fuel prices were five percent higher if your prices were ten percent higher. If your prices were twenty five percent higher, how much would that have increased your revenue now I realize that that's probably not math that you could do on top of your head, so we're going to jump over to a really handy spreadsheet because I really want you guys to see the impact that even a small price increase can have on your business so and just you guys know I'm going to show you guys this year if you purchase this course, you actually get this spreadsheet and you see in a minute it's super magical I've never been more excited about spreadsheet in my life all right? So I want to do is start with how much money you made last year so who wants to share their revenue from last year? There's no there's no wrong answer bigger small who's feeling brave ok, perfect. So last year martha made ok so if your prices or one percent higher you would have made additional fifty dollars nice dinner out maybe a good bottle of wine you were five percent higher. You would have made two hundred fifty dollars their shoes right that's how I like to think about my money how many shoes can it by may ten percent price increase would have gotten you an extra five hundred dollars and a twenty five percent price increase would have gotten you twelve hundred fifty dollars so that starts to add up right now you know what some of you are thinking, but if I raise my prices, this implies that I will sell the same amount will that actually happen? Well, one of the things that I want you to keep in mind is that we're talking about really small price increases here, so what's your average product selling price, martha, say sixty nine dollars okay, so if your average product price is sixty nine dollars, one percent keeps you under seventy five percent is still seventy two dollars someone you pay sixty nine dollars something is going to pay seventy two dollars for something but probably gonna pay seventy six dollars or something and even twenty five percent if not a huge price increase so you can do these incremental price increases really without impacting your sales, and what I really want you to see is even if you're not selling a lot by not having these prices higher, you're actually losing a lot of money over time. So if your prices were one percent higher or by not having your price is one percent higher, you're looking at one thousand dollars over the course of your business by not having them twenty five percent higher you're leaving twenty five thousand dollars on the table over the course of your business that's a lot of money to leave on the table all by pricing your products is a few dollars to low and if you sell more, these numbers start to get even crazier. So who had pecan tiffany was your sales revenue ninety five ok, so and I know I think on tv because I know she needs to raise their prices if your prices were ten percent higher, you wouldn't mean almost ten grand more last year tiffany idea and that would have got me to my sales school. Yeah what's your average product price forty five okay, so you are so we're not even talking about yeah, big increases but this is where I really wanna drive this home for you, tiffany, and arguing yeah that's pretty insane how much money you're leaving on the table? Wait, I think I can't afford this huge amount of money that you're leaving on the table by not increasing your prices even a little bit and I have to tell you guys, when I ran the numbers for myself, I was like, oh, I'm reading about your my prices one february first to get it applies to any point in your business this is a huge amount of money that you could potentially be leaving on the table now you might not be making as much money as tiffany, but the other thing that I want to show you is the impact that changing your prices has on the amount of product that you have to make to hit your sales goal so I know a lot of people have pre ambitious sales goals so if you had one hundred twenty thousand dollars sales goal and you were selling at sixty dollars you have to make two thousand products with a lot of product even by raising it by ten or twenty five percent you're talking about two to four hundred products less that you have to make that a lot less time so these really small changes in your price can have a huge impact on your business and even bigger changes can have an even bigger impact so hopefully you guys awake now now that you saw that I looked good and jump back to our slides so I really just wanted you guys to see how much money you're leaving on the table by not raising your prices and I know because I've heard it all before that there's all of these little voices that come up in your head but I can't raise my prices because I'm gonna have a drop of sit drop in sales I can't raise my prices because nobody is going to buy so here's why we're really here I'm not just here to tell you to raise your prices I am also here to help you raise your perceived value because if you can raise your perceived value along with your prices you don't have that price resistance it becomes so much easier to sell at those higher prices that make it easier to grow your business, to hit your revenue goals, to buy a house all of those things that you want to d'oh so here's a secret, let me let you in on price and value are completely subjective. Your customers have no idea what your work is worth you give them clues, you tell them what your work is worth, so this is really important to keep in mind. You get to show them why your price while your work is worth a higher price. Why it's more valuable? And this is not arbitrary we're going to go through this class and we're going to really systematically look at the triggers that improve value, because I want you to be able to apply these to your business the other thing because remember, we're all about these sort of actionable techniques and avoiding overwhelmed and that you don't have to raise all of your prices to see a big impact on your bottom line. So you are you that's really with the eighty twenty rule the eighty twenty rule sort of this eighty of something gives you toward twentieth? Something gives you eighty of something so in this case, it's very likely that eight percent of your sales come from about twenty percent of your products a small handful of products drives a large portion of your sales and if we look at the sales data from my online store, this very clearly shows it's this is over the course of a year and it's byproduct type and this is a really classic long tail curve. A small handful of products up here generate a large portion of my sales, and so if you can increase the perceived value and increase the price on the smallest handful of your products, that could have a big impact on your bottom line and you don't have to deal necessarily what all the ones down here maybe you could get to those eventually if we focus our energy here that's gonna give it a big impact in a short amount of time. So what we're going to d'oh in this class is we're going to focus on raising your perceived value one product at a time that's how we're getting over this over oil? Well, that's, how we're getting over decision paralysis is we're doing at one product at a time before we start really dive in. I want to just address who this classes for this class is designed for basically anyone at any point in their business, any kind of product you're making art if you're selling a product, if you're making craft, you can use this like I mentioned iran, the spreadsheet numbers and I was like, oh I didn't raise my prices a little so at any point your business you can check in, you can raise your prices and you can increase your receive value to make more money. So whether you're just starting out and you're not really selling or you've been selling for a long time and you're feeling a little stuck, you're kind of got that hamster real feeling, you're not hearing your revenue goals any of this can really apply to you, I so now we're going to dive in, and I want to kind of talk to you about what you're going to dio by the end of this class, because we've got a lot that we want to accomplish. First, you're going to determine if your prices are too low, chances are they are going to talk about it a little over a chances are, if you're watching this, you're prices are too low, then we're going to face your pricing. Sears, I know you got him and you're gonna become more confident in your new higher prices, then you're gonna learn the key factors that contribute to higher perceived value for your customers. So we want to really know what it is that influences our customers and how we can use those triggers to increase our value. Then you can identify where your prices and you're perceived value are out of sync. You're actually going to create an action plan to help you improve the perceived value of it top twenty percent of products so again, we're going to get one product at a time we're not going to get overwhelmed by our to do list, we're going to focus on really hitting those perceived value triggers, so just in case you haven't heard my your prices are too low she feel yet let's talk about how do you know if your prices are too low? So I want to start with a quote that is clearly very statistically true from my friend terry gentilly, who you will also know from all of her creative live classes and a few years ago, probably more than a few years ago now there and I did a one day event at etsy antero was doing all these one on one sessions with people and she came back and she was like, yeah, basically I told almost everybody to raise their prices something like eighty three percent, so she was like eighty three percent of makers you to raise their prices statistically based on who she talked tio but I find that's pretty true almost everybody needs to raise their prices, but there are a few more triggers help you know, if this is really for you first of all, you are making a profit when you sell it wholesale you haven't been to class with me you know you need to price so you're profitable at the wholesale price point even if you're only selling online and you're not telling two stores you're missing on a huge opportunity by not pricing so you're profitable so real quick we cover this extensively and some other classes so I'm just gonna give you the recap materials labour overhead profit that's your wholesale price wholesale price times at least two is your retail so when you sell to a store if you're not making a profit your prices are too low of course you're not making a profit when you sell the retail price your prices are definitely too well there is no such thing as a lost leader in a maker business get it out of your head you hear people say all the time oh it's my loss leader does it lead to other sales? Probably not then it's not a loss leader it's just a loss so if you're not making a profit anywhere we want to get rid of that another way to know is actually that all your prices are really similar so if you look at my prices on my web site you can go to shop that magnum dot com you can see my price is what you'll see is that I have a really a huge range of prices necklaces star actually think there's something I think there's a fifty dollars necklace somewhere in there, and he goes all the way up to almost six hundred dollars. What I see most people dio if they price their pieces based just on cost and not on perceived value, so if your prices are too low, it might look something like this is forty five and this big guys like one hundred twenty or something that's, not a big enough range, so you might be priced okay on your lower end, but you might need to raise the prices on some of your higher end pieces. That's also a really good strategy to not have to raise your prices across the board, take your higher and pieces and saliva him up the scale when my favorite strategies so again, making sure that you're not just doing this, but then you're setting a value based price. Your prices are also too low if you feel stuck on a hamster wheel. I can't tell you how many people I've worked with where they're like megan, I'm just so tired I make stuff all the time and I never have any money and tiffany's laughing because I'm preacher tiffany said this to me at one point in her life, which is why she's here today, um just they're tired like ok raise your prices you know that's not the problem that is the problem I swear to you it's the problem so you feel stuck on that hamster wheel you're making and making it making it never feels like you have any money that's a sure sign that you have to raise your prices you've got the lowest prices on the block whoever block here on that's also a sure sign that you need to raise your prices having the lowest price is not a good thing so this is my completely arbitrary but totally true chart of price and perception and in every product category in any type of product there is a line the any prices below the line say one of two things to your customer I'm a hobbyist I'm not serious or this is mass produced there is no way it was made by a human unless that human was working in a sweatshop that's what a low price says to your customer above that line and the flying is different for every type of product above that line says something completely different says you're an artist a crafts person of visionary a designer it says your professional its quality its one of a kind it's bespoke it's a luxury good having the lowest price does not communicate the kinds of value that you need to communicate to really sell and make a living so here's the other thing about selling at a higher price he which part of it is simply having the confidence to do so? And guess what? This can kind of be a fake it till you make it thing at my very first trade show, I set my prices where they needed to be, because my mentors yelled at me and told me to, and I didn't want to upset my mentor, so I did it raise your prices right now, that's, basically, what they said to me, I'm saying it to you and I went to the show and people were like, oh, your prices are kind of high end I was like, you okay? And then, like, one person bought, like, people really pressed her hand, I'm like, ok, but somebody bought it was like, ok, somebody else bought, okay, you know what? People? It's, it's cool, and now people won't even question me because I'm not saying they're like, maybe that my stuff I'm like, yeah, I got this it's cool, it's worth it, buy it right? So huge. Part of it is just changing your attitude around your prices. And one of the ways that you could do that is that you have confidence that the price matches the value that you provide, and you know that your customers see that