The Marketing Word | Differentiation Marketing

Stop Pricing for Your Market

I was doing a talk on marketing yesterday for one of my favorite groups of people, the Sarasota Internet Marketing Master Mind.  I was going through my target market profile and reached the section that asked what income level your prospects had.  I pointed to the top line that said "Under $20,000" and said, "If you are marketing to people who make less than $20,000 per year, STOP.  They don't have any money."

Yes, they buy groceries and gas, hot dogs and team sweatshirts and other small ticket items.  But think about how many of those small ticket items you are going to have to sell to people who honestly have to think about spending $30 or $40.  Now extrapolate out a bit.  People who are making under $30,000 a year are going to have a hard time spending $2,000 for your product.  People making $50,000 per year will think hard about spending $8,000 or $10,000 for a discretionary item.  Conversely, people making $200,000 per year won't trust something that they perceive as too low in price.   (We like them.)

The upshot is that price is relative to income.  If your target market makes $35,000 per year, the price of your product or service needs to be affordable for them.

"So Barb," you are saying.  "Want to take another swing at the title of this blog post?"

Nope.

I'm a little bit dyslexic and a big fan of doing things backwards.  Say you want to make $5,000 per month.  Now, maybe you have  a little ebook that sells for $47.  You're going to have to sell over 100 of those ebooks every month to make your $5,000.  That's not easy to do.  It's not impossible by any means, but MAN OH MAN it's a lot of work. But $47 is about the right price for this particular industry.  In fact, compared to its competitors, it's a  little bit on the high side. The market set the price for the product.

What got me thinking about this?  I got an invitation to a seminar with a comedy writer from the Tonight Show.  That's about the best credit you can have in comedy writing.  So a three hour session with someone who is one of the top people in his profession was $199.  Two hundred bucks.  That's like sitting down with Stephen Hawking or Colin Powell and buying them lunch in return.  And that got me thinking...

Most people who want to be comedians do not have much money.  In fact, most working comedians don't have very much money.  Two hundred dollars is a lot for them to shell out.  EVEN TO TALK TO THE BEST IN THE BUSINESS.  The industry limits the amount of money that can be charged to the customer.

And here's where I realized the whole equation is backwards.  Instead of pricing what you're selling to meet what your market can afford, CHANGE MARKETS.  Change industries if you have to.  Work with people who can afford to pay you what you need to earn.  Go back to the example of needing $5,000 per month.  I can sell 110 ebooks at $47 each or I can write three custom ebooks for private clients.  Yeah, it's active income vs the supposedly passive return of an ebook.  But marketing the ebook is active work, too and trying to sell 100 in a month without a big name is hard work.  Trust me.

Instead of writing business plans for small business start-ups (which have no money), write business plans for large corporations.  Instead of designing clothes for the average woman, design high end stuff.  Instead of charging $25 an hour, find a clientele that is willing to pay you $250 an hour.

Maybe not the best of examples, but I've had an entire glass of wine. (Big night!)  But do you get what I'm saying here?  If you're not making the money you need to make, stop pricing your goods and services to fit your market.  Find a market that can pay you what you need to make.

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6 comments

  • Dan Auito · 10/08/2010 at 7:01 pm

    Selling to the affluent is much more fun! Great reminder Barb!

  • Bonnie Dye · 10/09/2010 at 2:52 pm

    Great post Barb! I agree completely. I love my friends who can only afford $49, but I’m ready to market to someone else!

  • Joseph Costa · 10/09/2010 at 11:08 pm

    Common sense that is so often ignored. Thanks Barbara

  • Carol Kostic · 10/11/2010 at 10:37 am

    So very true, Barb. The activity has an intrinsic value attached, no matter the quality of execution. The BEST, most EFFECTIVE ditch digger can only make what a ditch digger makes (nothing personal, just an example). Understand what your ‘niche’ can and will pay, and either deal with it, or switch! Love reality!

  • Fred Moore · 02/06/2013 at 5:44 am

    As a corporate speaker/entertainer I was once told by a big name speaker to double my price. I’d lose half my clients but still be making the same money for half the amount of work!

  • Admin comment by Barbara Grassey · 02/06/2013 at 3:16 pm

    I like the way he thinks!

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