I’ve been doing business for almost 8 years now and I’ve come across and tried many different ways of selling. None of them is perfect nor does any of them work in all scenarios. However, one common crossroad I come into when deciding is whether to sell a new product at a high price or at a low price.
The typical businessman would opt for selling his new product at a low price and hope to make enough sales to cover for his expenses. Such a businessman would usually have very little cost margins. Through experience, I’ve learned that selling cheap products is easy as compared to selling expensive ones. The problem however is making enough sales to make it worth your efforts. Say, in order to raise $500 monthly from a product that sells for only $1.00 each, you will need to make 500 sales. Looking for 500 people who will buy your product might not be that difficult since $1.00 is relatively cheap. But is it worth the effort? Note, that oftentimes the time you consume in selling cheap items is just as much as what you spend in selling expensive products.
So by pricing low, you get more sales but need to exert more effort in order to achieve ‘worthiness’. Now, I’m not saying that selling low is not advisable. There are venues where selling at low price is a lot better than selling high.
The case of a school supplies store.
I know a couple who have a school supplies store not far from our house. They now have a workforce of 40+ employees and they’re making good money. The secret? They sell low. Their prices are way lower than any of the school supplies store within the area. What about the effort that they exert? Well, they don’t actually exert too much effort in selling their goods because people naturally come to them because of their low prices. They may have smaller net income per sale than their competitors but they do have lots and lots of sold products per day.
Are they selling it too low? No, they’re just selling their products at a price low enough to attract more customers and therefore defeat the competition.
What about selling prices at a high price? I talked to a few seasoned sales agents about them marketing my web hosting services. At first, I told them that selling my web hosting would be relatively easy for them because my prices are cheap. I was surprised but what they told me…
One of them said, “Why not sell your products at 15 times it’s current price? It would still be sellable and all you need to do is add a bunch of freebies.” What he’s trying to tell me is to improve the “packaging” of my product to make it more attractive and worth its expensive price. My question however was, wouldn’t that make selling it more difficult? His reply was, “Yes, it would but instead of selling 10 accounts / month in order to earn x amount of money, I would only need to sell 1 / month and still earn the same amount of money.”
Now that’s a bright idea! Honestly, it is! That means less effort for me and them selling the web hosting and yet getting the same amount of money. Furthermore, I would have to handle fewer clients and still earn the same. The end result, better technical support and customer relationship.
A quick lesson… selling cars…
If you’ve followed me this far, you may have already noticed that selling high is actually better than selling low. The general idea here is that a good businessman would always opt for making more money for less work and that’s what selling high is all about.
If you were a car salesman, would you sell the typical Toyota? Or would you go for spyker cars? Selling Toyota cars is easy because they’re cheaper I will tell you for sure that a spyker dealer would be making more money for less time. Here’s why:
- Selling spyker cars means you only have to sell to a smaller group of people - those who can afford
- This small group of people usually know each other and this is good for you - more referrals and connections
- Those who can afford can and will buy more expensive cars anyway - they’re already inclined to do it
- Then it’s easier to sell to this group of people because they have the money - more cash sales for you
Though many of you would argue that selling low is still better, I don’t have anything else to argue. In the end, all I can say is sell your products at reasonable prices. Don’t sell it too low or too high. Just sell it at the right price. It all eventually boils down to the product that your selling. Is it worth the price?
Recommended Reading: The Strategy and Tactics of Pricing: A Guide to Growing More Profitably (4th Edition)
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