How Effective Pricing Explodes Your Profits, and Your Company
Let me tell you one ‘secret’, and I really need you to listen very carefully…
What is the most singular thing (or element) that makes a huge fundamental difference in a company?
I mean, here is a company that just got started, and in less than 5years, they are doing nearly 9figures in revenue…
Of course, 9figures in USD, not naira.
What do you think is the big ‘growth element?’
The # of customers they have?
The type of product they sell?
Their unique way of communicating their value?
The amount of money they raised?
The fact that they had “first mover” advantage?
What is it that makes that huge astronomical growth?
Want to hear the truth?
I mean, the gospel truth?
It is NONE of those!
Don’t get me wrong, I’m not saying those are not important, but what makes the biggest difference is the pricing.
Yes, you heard that right, the pricing.
Pricing is the most important factor in a business, yet it is the least talked about.
CEOs, managers, and entrepreneurs hardly pay close attention to pricing.
Guess what takes the backseat?
Listen to me today, pricing is everything in a company.
It is how I took a one-man company to 50 person company in less than 4years.
It is how one of our clients took a one-man consulting company to a 35 person company, and almost 8figures in revenue (USD) in under 3years.
You can have the best product, you can have the best marketing message, you can have the best team, you can have the best of everything…
If you fail to have the best of price, it is only a matter of time.
And when I say pricing, most people who know me would conclude that I’m talking about getting premium clients.
That’s actually 10% of what I mean, what about the rest 90%?
What I’m actually talking about is smart pricing.
What should you sell for?
Should you have pre-order pricing?
Should you bundle things together?
My goal today is to stimulate your thinking.
In your business, pricing affects everything including…
How much you can spend on your ads.
How big you can grow.
The type of employee you can hire.
You name it, your pricing affect all these decisions...
Pricing affects every damn thing in your business.
One thing I hate most is theories.
Let me show you real world examples…
Did you by any means watch the 2012 London Olympics?
Those guys who sold the ticket did amazing smart pricing.
I really need you to listen carefully, because this is very important to your business.
They didn’t use price as an effective revenue and profit driver, they also used it to communicate to attendees.
How did they do it?
The year was 2012, so their pricing model was…
£20.12 was the cheapest ticket, £2,012 was the most expensive.
Can you see that communication there?
The number “2012” appearing multiple times.
And that’s not all…
For kids under 18, the motto was “Pay Your Age”.
A 6year old kid paid £6, a 16year old kid paid £16.
Even the queen was happy with the pricing.
Do you know what happened at the end of the games?
I’ll tell you but first, I need you to know that at that games, there was;
1: NO discount sales.
2: NO bundle sale…usually, if you go to the Olympics, you can get 3 games for the price of two or something like that.
Why I’m I telling you this?
Because I want you to know that discounting isn’t the only way to win.
Personally, I prefer smart pricing over discount pricing.
Anyway, how much did they make?
Well, before the games started, their vision was to make £376 million, about $625million.
Guess how much they ended up making?
£660 million, that’s $1.1BILLION.
That’s more than 75% of what they had anticipated.
That is the wonder of pricing, and I mean...
I give you another example…
One time, one of my consulting clients was to sell stuff for 8,000 naira but she decided to first run it by me to get my thought.
We sat down together and ran the numbers.
You know, medium to large companies consult us on pricing, my views are very controversial.
NOT controversial for the sake of controversy, but controversial to them because they would never have thought of my unique ideas.
Anyway, lets talk about this particular clients...
I asked them to go for at least a 2-dimensional pricing model, and later, they could make it 3.
Instead of selling for 8,000 naira, sell for N11,500 and N18,000.
They were stunned at what happened.
Weeks later, we ran the numbers again…
We discovered that 38% were going for the N18,000 price mark.
She was stunned at what was happening to her product.
Now, I need you to listen carefully…
My thinking was that if 38% are buying the product, it means, the price is not high enough.
Do we raise the price to 25,000 naira?
Well, we decided to do the unusual…
Add the third pricing dimension.
Don’t forget, the first price is N11,500, and 62% bought, the second price was N18,000 and 38% were buying this.
What if we reduce the prices and have a third price?
That’s exactly what we did.
Price one became N10,800.
Price two became N17,000
And the price three we just created?
I want you to tweet this out…
Pricing is everything in a business, period.
Yes, tweet that out, because the results were astonishing.
51% went for the N10,800 price.
35% went for the 17,000 price.
Wait a minute…
Can you see what is happening here?
We just reduced the prices, we should have more sales, right?
The percentage of buyers dropped as we reduced the price…
It tells you that the price-sensitive customers are not many.
Yes, I know it is what you’re told…
When you sell, make sure you look at what your competitors sells.
Pricing is about how people divide value.
Everything you do in your business revolves around price.
A whopping 14% took the N55,000 price mark.
From the data, you can see that people were refusing to buy cheaper offers, and were going for the more expensive ones.
What if she had just hit a market with just the N8,000?
What if we didn’t add a third offer for N55,000?
She would have lost millions.
Talking about losing millions…
I see it every day, businesses struggling to survive.
Businesses who should be making a lot of money, but are not.
If you know how to price smartly, and effectively, your business will never suffer.
Now, I’m curious, I might just give some advice, what do you sell, and how are your prices?
I love to know, leave your comments below, I’ll respond.
WHO'S JOHNSON EMMANUEL ?
He is the founder of, Havanzer, one of the fastest growing marketing agencies. Africa.com calls him the top "#1 Marketing Magician", He is considered the #1 authority on engineering profitable customer acquisition campaigns. Johnson is famous for creating multi-million dollars marketing strategies, campaigns and systems.