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Why you need to charge high prices

Why you need to charge high prices

Most business owners think that they need to charge low prices to get clients. But that is simply not true. You see, for clients the decision is not on price alone, it is the balance between the price and the value they perceive!

 

If you doubt this, just think about cars. If everybody only bought on price, then everybody would be driving a Mitsubishi, Toyota or something similar. But instead we have a whole range of cars, including BMW, Mercedes, Ferrari, Rolls Royce and so on. Why? 

 

Because some people put a much higher value on what car they drive and therefore are willing to pay much more to get the same function, going from A to B.

 

In fact charging a low price also lowers the perceived value of the product or service. If the price is that low it can’t be good now can it?

You need to charge high prices!

Charging high prices has many advantages.

Number one: Higher perceived value

A higher price automatically increases the value people perceive of that product or service. Some people might think, I wouldn’t pay that much for that product or service, but that is fine. You are not trying to sell to all people, only to the people that value your product or service.

Number two: You need less clients and order

If you charge more you need less clients or orders. The key word here is need. You don’t need as many clients, but if you can get them, all the better of course.

What this does for you is that you can provide more value to the fewer clients because you have more time or resources available. You can provide more service or a higher quality product.

This reinforces the client’s perceived value of your product or service.

Number three: Higher profit margins

Raising your prices 10% doesn’t increase your profit by just 10%. Raising just 10% can double the profit! Suppose you sell something for €100,- and it costs you €90,- to deliver the sale. That is €10,- profit.

If you raise your price by 10% to €110,- your profit goes up to €20,- That is double the profit you made earlier.

You won’t lose half of your customers by a 10% price increase. So this is a very short route to much higher profits.

So how far do you need to raise your prices? This greatly depends on how much people are complaining about the price. If people complain about the price, you don’t raise it, right? WRONG!

People need to complain about the price, just make sure it is the only thing they complain about. In this video I explain how this works in more detail.

Starting today, increase the value that clients perceive and then increase your prices. Not sure how to increase the perceived value? You can ask any question in the below comments section.

Kind regards,
Timon Vinke

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