Transcripts
Welcome to Live With The Pricing Lady.
Speaker:I'm Janene, your hostess.
Speaker:This show is all about helping you build a sustainably profitable
Speaker:business while making an unbelievable impact on your world.
Speaker:Learn from my 20 years of experience and from my guests as we discuss their pricing
Speaker:challenges, failures, and successes.
Speaker:Pricing is a way of being or behaving in your business.
Speaker:My mission is to help you confidently charge for the value you deliver.
Speaker:Pricing is either hurting or helping your business.
Speaker:Let's make sure it's helping you reach your dreams.
Speaker:In this episode of Live with The Pricing Lady, we're taking a look at.
Speaker:Should you be offering packages or tiered offers for different customer segments?
Speaker:Sit back, relax and enjoy the episode.
Speaker:This is a strategy I love.
Speaker:for a lot of reasons, but it's not always appropriate in every circumstance.
Speaker:If you follow me, you know, I like to give people a thought process to work through
Speaker:so they can make a more educated decision about what's right for their business.
Speaker:And that's a bit of what I've prepared today to share with you
Speaker:is how you can think about that.
Speaker:Now, as I said, this really can benefit most businesses.
Speaker:For services, it's a very good strategy in most cases.
Speaker:By having different packaged offers, you can meet different price points.
Speaker:Without then having to muddy the waters and, you know, if you want to sell it to
Speaker:someone who says, who potentially has a lower ability to pay, and you sell the
Speaker:same thing, exact same thing to them at a lower price than you sell to someone
Speaker:else who has a higher ability to pay, sometimes that doesn't feel so good.
Speaker:Or you worry about what if they find out, you know, those types of things.
Speaker:And by packaging your offers, you can actually structure them in a way so
Speaker:that the lower priced ones are going to be more attractive to people who are
Speaker:willing to accept less value out of them.
Speaker:working with you or having your service.
Speaker:And then the people who can afford more or want higher value out of what
Speaker:they're buying from you, then you can offer that in a different package.
Speaker:That's one of the great strategies.
Speaker:Another reason that I love these in pricing is because a lot of times, People
Speaker:want to raise their prices and they think that the only way to do that is just,
Speaker:you know, add 10 percent to the price.
Speaker:By packaging up offers, you don't have to make the package price cheaper.
Speaker:You could, but you don't have to.
Speaker:You can Take the things that you're combining, add the prices up, price
Speaker:it there, and you can use that opportunity to raise the price
Speaker:of the things that are unbundled.
Speaker:You could actually use it as a way to increase prices.
Speaker:We see this in supermarkets.
Speaker:They have a normal box of rice.
Speaker:Then eventually they had a bio rice and then they removed the normal rice from the
Speaker:shelf and they left the bio rice there.
Speaker:And then eventually they made the packaging a little bit smaller and
Speaker:you end up effectively paying more.
Speaker:Most people don't notice that kind of thing.
Speaker:They don't like it if they do notice it.
Speaker:So you have to think about that as well.
Speaker:But packaging gives you a lot of flexibility.
Speaker:And as I said before, it's a way to meet the needs of different customer groups.
Speaker:Now this also works for SaaS products.
Speaker:With software as a service, you're bundling up different
Speaker:functionalities usually in your offer.
Speaker:This is a very common strategy there.
Speaker:You can also use it for things like membership sites, right?
Speaker:So there, if you have a membership site, you might have like a, I don't like using
Speaker:the word basic, so I call them essential offer, which is like the lowest offer.
Speaker:And then you may have a more Premium offer as well.
Speaker:So you have two different tiers for people who come into that and those
Speaker:different tiers and have different things included in them that represent or
Speaker:that deliver different levels of value.
Speaker:And of course, you can also use this in a product based business.
Speaker:This is probably where it more or less originated from was in product
Speaker:based businesses, where you can take a bundle of different products or
Speaker:products and services and put them together in a way to deliver kind of
Speaker:a more full package to the customer.
Speaker:And that's actually can be a benefit for your business as
Speaker:well, because it helps you to streamline how you work with people.
Speaker:In all three cases, it can help you streamline, but especially when there's
Speaker:a service component in your offer, then it can help you work more effectively
Speaker:and efficiently with customers.
Speaker:Another thing that is really important with packages and tiers is one thing I
Speaker:always joke with people about is what's the, the best way to sell a 5, 000 offer.
Speaker:Put it next to a 15, 000 offer.
Speaker:Packages and tiers can also help you with something that we call
Speaker:anchoring, which is basically giving people a price to compare it to.
Speaker:And that's what in this example, I've mentioned here, you know, the 15,
Speaker:000, if, if you just said 5, 000, and I asked if that was expensive,
Speaker:most people would think it's.
Speaker:is, you know, expensive without even knowing what it is.
Speaker:But if you say, well there's two options, 5, 000, 15,000 then 5,000 is simply looks
Speaker:and feel smaller to our brains, right?
Speaker:Maybe not so much to our wallets, but certainly to our brains.
Speaker:So we perceive it differently, and this is another real benefit of offering tiers
Speaker:or packages or packaging up your offers.
Speaker:Now, the last reason that I think that this can really help a business,
Speaker:and this specifically has to do with service based businesses,
Speaker:has to do with time based pricing.
Speaker:I'm not a huge fan of time based pricing.
Speaker:It does have its place and, you know, there are a lot of businesses
Speaker:out there very successful with it.
Speaker:A lot of coaches and consultants, would be better suit themselves
Speaker:and their customers if they moved away from time based pricing.
Speaker:Because time isn't what's delivering the value it's your know how, your
Speaker:expertise, how quickly you can do it, or how thoroughly you can do it.
Speaker:Whatever it is that is your unique selling point, it the value usually
Speaker:isn't coming from the time itself.
Speaker:And what happens is if you're in the early stages, you might use time as
Speaker:a way to easily calculate a price.
Speaker:But as you become more effective and efficient, then it would
Speaker:take you less time to deliver to your customers the solution.
Speaker:And therefore you would actually end up getting paid less in the end.
Speaker:And package, so packages can grow with you, whereas time based pricing doesn't.
Speaker:I say time is not the wrapper your services are delivered in.
Speaker:You don't buy the milk for the carton.
Speaker:You buy it for what you get out of it.
Speaker:And that's the same with services.
Speaker:Those are some of the reasons that I think it's, can be a really effective idea.
Speaker:Now, why wouldn't it work?
Speaker:Or when doesn't it work?
Speaker:And that'll come out as we go through some of the things that I suggest
Speaker:you consider if you're thinking about shifting your business or bringing
Speaker:some packages or tiers into play.
Speaker:Let's look at that and then we can always We'll talk a little bit about
Speaker:this on our website in a second.
Speaker:I will likely be a bit other stuff within that as well as come back
Speaker:to the question when not to do it.
Speaker:The first thing to consider, of course, you probably already know this because
Speaker:I say it all the time is you want to think about the customer first.
Speaker:And here, we're really talking about their needs.
Speaker:If there's a need for different budgets, if there's a need for different
Speaker:delivering different levels of value.
Speaker:If it makes sense to have, an essential version and a VIP version, because maybe
Speaker:there is real known, no real need for it.
Speaker:Yeah.
Speaker:If people look at the VIP version and never really want to buy it, it can be a
Speaker:good strategy from a pricing perspective to have it there for the anchoring.
Speaker:But, if you had to put a lot into creating that, and then it, You
Speaker:know, nobody really wants it, then it's not really serving its purpose.
Speaker:So think about a lot of times when people ask me about this, they're like,
Speaker:well, there's this group of people I'd really like to serve, but they have a
Speaker:lower willingness or ability to pay.
Speaker:And how can I do that?
Speaker:That's the kind of customer needs.
Speaker:Now you may choose or decide that you don't want to serve that group, then
Speaker:there's no reason for the package or for the, the tiered offering, right?
Speaker:Or at least not in the context of customer needs.
Speaker:Market trends can also play a role.
Speaker:We've seen probably over the last, I've had my business for about seven years now.
Speaker:And over the last seven years, we've seen people put things together,
Speaker:take them apart, put things together.
Speaker:We've seen a few cycles of that over the last few years.
Speaker:And while market trends can... I think where market trends come into play.
Speaker:is in understanding, you know, what people want right now.
Speaker:I think at the beginning of last year, my assessment of the market was that people
Speaker:are tired of big, long, heavy programs.
Speaker:They want something that's lighter, something that's kind of, it could
Speaker:be long in terms of it's, you know, everyday, like a membership system.
Speaker:Not where there's a lot of learning material all the time.
Speaker:Then you saw people come up with different options and different
Speaker:packages to, to manage that.
Speaker:You have to be careful with market trends because just because it
Speaker:works for somebody else doesn't mean it's going to work for you.
Speaker:But it can give you some indications of what, preferences there are for are
Speaker:right now at what, might take place, be effective in your business as well.
Speaker:Differentiation is another way to do it.
Speaker:Can you clearly differentiate if you break your offer into,
Speaker:let's say, two different tiers?
Speaker:You can't just differentiate the, I mean, you could, but probably
Speaker:it wouldn't last very long.
Speaker:But is there enough differentiation to have two different offers?
Speaker:Sometimes with, say, software as a service, they'd like to differentiate,
Speaker:but they can't turn one part off and on.
Speaker:in order to put it in one package and not the other, right?
Speaker:If you take something out of your current package to create a lower package, let's
Speaker:say, if that's going to make it hard for people to get even basic results,
Speaker:then you wouldn't want to pull that out.
Speaker:Would be hard for you to have that differentiation
Speaker:to be able to make it clear.
Speaker:When you give people options, let's say two options, two different
Speaker:packages like Essential and VIP, if you will, there's two things that
Speaker:play into how they make the decision.
Speaker:What's included in each package and the price.
Speaker:And so it's important for you to be able to not just differentiate them,
Speaker:but clearly meet the needs of the people that you're have in mind targeting
Speaker:for those different packaged offers.
Speaker:The next thing to consider is complexity.
Speaker:The more flexible we like to be, and a lot of us love to be
Speaker:really bendy and flexible, right?
Speaker:The more complexity we usually add into things.
Speaker:So we've all seen like software as a service, they have these
Speaker:lovely tables with all these check marks and X's and things in them.
Speaker:They can get very complicated.
Speaker:Generally if you're looking at having tiered or packaged offers,
Speaker:kind of the sweet spot is three options because Three is something
Speaker:that people can mentally handle.
Speaker:Five you'll see sometimes going up to seven is just don't do it.
Speaker:It's too, it's overload for the customer, so it's complex
Speaker:for them to make a decision.
Speaker:They don't really know where to put themselves, but it's also
Speaker:really complex for you to manage.
Speaker:The complexity is important.
Speaker:And even for you, maybe you have one offering now and you want to
Speaker:split it into two, that could be much more complex for you to manage.
Speaker:Because instead of then, let's say you have a group program and you guide
Speaker:people through this group program if you have a second offering, you
Speaker:may have to have Two programs and run two programs at the same time.
Speaker:Even market and sell two separate programs.
Speaker:And that can, that adds that much more complexity.
Speaker:So be careful about that.
Speaker:Now I'm a believer that everything that you're doing, you should
Speaker:have kind of an idea of, okay, what's the business sense of this.
Speaker:The next thing is really the financial side.
Speaker:Look at, okay, why am I doing this?
Speaker:If you have one offer now, and let's say you decide to put in a
Speaker:premium offer above it, will you go the opposite way this time?
Speaker:What are you hoping to achieve with that?
Speaker:how many people do you think will opt for the premium offer?
Speaker:How many of those would have bought, the, the, the essential offer and upgraded.
Speaker:What is your expectation of doing this?
Speaker:What do you think it will really bring the business?
Speaker:And on the flip side from the finance side, again, if you have one offer now
Speaker:and you got to run two, there's additional costs involved in doing that potentially.
Speaker:depends on the type of offer, right?
Speaker:There can be extra costs associated in doing that and it's important
Speaker:to consider that because if your, your goal most likely is to try
Speaker:and earn more money somehow, right?
Speaker:So you need to understand where that's going to come from and
Speaker:what's going to make it successful.
Speaker:If you sell, an extra, if you put in a premium offer and you sell
Speaker:two premium offers on top of what you usually sell normally, then at
Speaker:first glance, that could seem like, okay, then this has a profit to it.
Speaker:But if it costs you more to implement that premium offer, then you may
Speaker:end up losing money in the end.
Speaker:And that's something that you need to sit down and do the math behind
Speaker:so that you can then monitor it.
Speaker:And if it's not going where you want, then you can change strategies.
Speaker:Okay, we got a few more here.
Speaker:Pricing.
Speaker:How does it fit into your overall pricing?
Speaker:A lot of times people develop a new offer and then they'll be like, Oh
Speaker:wait, I was going to price it here, but compared to this, it doesn't make sense.
Speaker:It looks weird.
Speaker:Think about how you're going to position it in the context
Speaker:of what you offer right now.
Speaker:Sometimes when you add an additional package into your portfolio of
Speaker:what you offer it's not something that you would put on your website.
Speaker:It's just something you might bring to the table if somebody
Speaker:says, Oh, that's too expensive.
Speaker:Right.
Speaker:Okay.
Speaker:Well, I have this other thing.
Speaker:I don't always bring it up, but would you like to talk about it?
Speaker:So it can give you that sort of opportunity as well, but you have
Speaker:to make sure that, you know, that makes some logical sense in the
Speaker:context of your whole offering.
Speaker:Next is customer impact.
Speaker:Will it negatively impact existing customers?
Speaker:And could you get some backlash for it?
Speaker:And I've seen people deal with that in different ways.
Speaker:Some people are like, I don't care.
Speaker:That's the way it is.
Speaker:We all move on, right?
Speaker:And other people don't take action.
Speaker:Or don't create that new package because they were afraid of that
Speaker:feedback that they might get.
Speaker:Ease to implement.
Speaker:How simple is this going to be for me to do?
Speaker:Is it worth my time and effort?
Speaker:Or even ask yourself, you know, how can I do the simplest version
Speaker:of this to test it out first before I go too far down the path?
Speaker:Next, is it aligned with your business goals?
Speaker:You have some objectives.
Speaker:They may be financial.
Speaker:They may be non financial.
Speaker:I mean, you may have the goal, okay, I want to work with single mothers.
Speaker:I'm going to serve 10 of them this year, right?
Speaker:In whatever context it is that you offer, then maybe your
Speaker:package for them is aligned.
Speaker:But if your package is for corporate executives, maybe it's
Speaker:not aligned with that business goal.
Speaker:Right, so just double check that.
Speaker:Is it aligned and does it mean your business goal needs to change for
Speaker:your package or your special package?
Speaker:The last one here is adding value.
Speaker:Whenever you create extra tiers or packages, it should be valuable
Speaker:both to you and to the customer.
Speaker:I think that's probably one of the most important things to remember when
Speaker:you're assessing this is that it has to have added value for both of you.
Speaker:Otherwise, in the end, in the long run, it probably won't
Speaker:get you where you want to go.
Speaker:As you can see from, these 10 areas here of what to consider when you're looking
Speaker:at going into packages and tiered offers.
Speaker:There's a few things to think about.
Speaker:If we want to understand, okay, who doesn't it work for, I think
Speaker:it doesn't work if it's not really needed from the customer side, if
Speaker:there's no real added value for them.
Speaker:Just to have an extra package can be an effective pricing strategy if you want
Speaker:to use it that way, but if you really want to use it as a business strategy
Speaker:to help you meet your objectives, then you need to make sure it has
Speaker:that added value for them as well.
Speaker:I think what I will do is I will leave it at that for now, because that gives
Speaker:you quite a few things to think about.
Speaker:Let's go ahead and recap.
Speaker:The 10 things you want to consider.
Speaker:If you're shifting to packages or tiered offers for different segments.
Speaker:First of all we had customer needs, then we had market trends,
Speaker:differentiation, complexity, and the financial side of doing it.
Speaker:So what is it going to bring you in the end and is that achievable?
Speaker:Then we had to make sure it fits with your pricing for other offers.
Speaker:The impact for your customer.
Speaker:Will there'll be a negative impact.
Speaker:And how can you mitigate that?
Speaker:What is the ease to implement it?
Speaker:Is it aligned with your overall business goals and how.
Speaker:And last are you adding value to you and your customers?
Speaker:Those are the 10 things you want to consider.
Speaker:If you're shifting over to packages or tiered offers, or
Speaker:if you're thinking about it.
Speaker:Now there's a few other questions here that I have for you,
Speaker:that'll help you reflect upon what is right for your business.
Speaker:. You're thinking about it, or you have been using them, why, as we know the why
Speaker:behind things is often the driving force.
Speaker:Make sure that that makes sense for you, your business and your customers.
Speaker:What concerns do you have when it comes to making the shift?
Speaker:So do you have concerns?
Speaker:Is it harder for you to talk about the packages?
Speaker:Do you feel comfortable having those conversations?
Speaker:Are you concerned about how customers will react?
Speaker:List out your concerns and then figure out how you can mitigate those concerns.
Speaker:Always be clear about what you want to achieve, ultimately, by doing it and
Speaker:be able to monitor that because then if it doesn't work out, you can go
Speaker:back and you can shift your strategy.
Speaker:Remember if you've thought about, or have already done this in the
Speaker:past, reflect on what's worked and what hasn't worked for you and how
Speaker:it might be different this time.
Speaker:One more thing before you go.
Speaker:The next cohort of the fair price formula is coming up soon.
Speaker:If you want to learn how to set prices for your business.
Speaker:Head on over to www.thepricinglady.com/setmyprices
Speaker:and get yourself registered.
Speaker:Have a great day and as always enjoy pricing.
Speaker:Thank you for listening to this episode of Live with The Pricing Lady, the podcast.
Speaker:If you enjoyed the episode, rate, review, and subscribe to it, then share
Speaker:it with your friends and colleagues.
Speaker:I love hearing back from you listeners.
Speaker:If you've got comments, questions, or topic ideas, go on over to thepricinglady.
Speaker:com and contact me there.
Speaker:Not sure where to start when it comes to improving pricing and profits?
Speaker:At ThePricingLady.
Speaker:com you can download a copy of my Self Assessment Pricing Scorecard.
Speaker:Find out where it's going well and where you can begin improving.
Speaker:Or just simply book a discovery call with me.
Speaker:There we can discuss what's up with pricing in your business and
Speaker:how I might be able to help you.
Speaker:Thanks once again for joining.
Speaker:Remember, pricing can hurt or help your business.
Speaker:Let's make sure it's helping you reach your dreams.
Speaker:See you next time and as always, enjoy pricing.