Your Price in 3 Numbers
Need to price a new product or service?
These are the 3 numbers you need:
Your Floor Price
Your Ceiling Price
And Your Expected Price
Your Floor Price is the price at which you would break even in your business.
Essentially, the price at which you'd make no money, but you'd cover your costs to run the business.
You find it by adding up all the costs of running the business, then dividing by the units you plan to sell.
You would NEVER charge your floor price.
But you want to know what it is,
So you can understand where your lower limit lies.
Your Ceiling Price is the price at which your customer's ROI from buying your product would be 0.
What return on investment can your customer expect from purchasing what you sell them?
That's your Ceiling Price.
The price at which your customer would be no better off from buying your product.
You would never be ABLE to charge your ceiling price.
But you want to know what it is,
So you can understand what percentage of your customers' benefits you're charging for admission.
Your Expected Price is the price that your competition has trained your customers to think your product is worth.
To find it, look at the price customers pay for every alternative they currently have,
With all the features, benefits, and issues associated with them
And determine what that buyer would likely EXPECT your product to be priced.
You don't NECESSARILY want to charge your expected price.
But you'll want to know what it is,
So you can know how hard or easy your sales process will be.
Once you have your 3 numbers, the best price for your product or service should be:
A number no greater than 10% of your Ceiling Price
That's significantly above your Floor Price
While keeping in mind, the greater the leap between your new price and your Expected Price, the harder the sell.
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