How To Price Your Product And Services | Online Verge


Do you know that if your product pricing is
wrong then it can bring your entire business
down?
Often most of the startups fix their product
pricing as per their financial goals or even
they set it randomly, which is so harmful
for your business and it will damage your
entire business module.
Hello guys, you are watching Online Verge
and today we are going to talk about product
pricing and how to set your product pricing
to achieve your desired business goals.
Watch this video till the end because I’m
going to let you know the secret of ‘how
you can sell your product or service at the
right time and at right amount using product
pricing rules’.
So keep watching this video.
At the end of this video, I’ll be sharing
my research about the pricing structure with
an example.
Just like I’ve mentioned before, most of
the entrepreneurs set their product’s price
according to their financial goals or even
desires.
There are also so many startups out there
that are setting their product price randomly.
Now these types of startups often try to cover
up their financial goals with providing huge
discounts and offers which often end up with
financial loss.
Yes!
I agree that discounts and offers are the
main reason that most of the businesses make
money in less time.
But when you are running a startup or even
just started off or even in between cash-crunch
phase, then you should really take care of
your pricing.
Remember this, your product pricing should
be your primary ROI.
Now there are two types of product pricing,
number one is ‘One Time Cost’ which is
like customer pays you for one time and purchase
the product, like smartphone, TV or else.
Second one is ‘Subscription’ based pricing.
You charge customers for certain services
for certain durations.
Now let’s see the main categories and it’s
sub-categories of pricing structure.
In our first category, we will discuss about
sub-categories of ‘One Time Costing’ product
module.
Number one sub-category is Fixed Product Price
When any customer purchases any item from
you they expect it to be at fixed price or
any fixed price range.
Below that range it is profitable for the
customers but not for you, above that range
it is profitable for you but not for the customers.
So you need to fix the price and find that
sweet spot which includes your business cost
and profit.
In fixed pricing structure, even to make more
sales you often absorb the loss and provide
discount.
It is easier to calculate the numbers but
it is not always a win-win situation for both
of you.
For example, if you are selling Fashion accessories
or even clothing, you only need to sell it
once, so while selling your products, you
can expect a profit, even if you are providing
a discount.
You do not need to add your after sales service
cost.
Because once customer bought it, there are
almost zero possibilities that they will be
come back to you for further services, because
there are none.
But what happens when you offer an after sales
service, which is second sub-category of ‘One
Time Cost’ module.
Number two is After Sales Service Cost
When any startup has one time purchase module,
often most of the startups forget to add up
the after sales cost into the product pricing.
The after sales cost might vary from product
to product which might include your product’s
lifespan, usage, category and warranty.
Now you need to remember that if you are planning
to design a one-time cost purchase module
then you have to follow the 30/10 rule, which
I’ve explained in my online course in detail,
if you want to enroll in it, I’m leaving
the link in the description below.
In this sub-category customer expects an after
sales service after purchasing your product.
For example, Smart-TV.
Once customer buys TV from you, you are bound
to provide at least 1 year free service.
In this module you have to consider the cost
of this period which of course you are providing
for free to your customers.
Now let’s see the second type of product
pricing.
The second type is Subscription based type.
Today most of the businesses prefer this module,
because it is kind of a less risky ROI module.
It has some flaws in it but it is less risky
than one time cost module.
This module mitigates some amount of risk
such as ‘less chances for getting out of
business.’
So this subscription based module helps you
to stay in the business for a longer period.
Now let’s see how this subscription based
module works and let’s through some lights
on its sub-categories which are grabbing attentions
from the big brands too.
Now when you want to sell your product and
if you want to stay longer in the business,
then you should consider taking the subscription
based module road.
So, what do you need to do is to mix product
pricing and services with subscription based
services.
Let’s talk about first sub-category which
is Freemium category.
In this module you offer some services for
free and to obtain some mind-blowing services
you charge them.
You can offer your product or services in
two conditions:
Number one is time condition which includes
a trail period, such as 30 days or less and
then the customer needs to pay to enjoy the
services for longer duration.
Second condition is you design 10 features,
offer 2 features for free and charge for the
rest 8 features.
In that way you will always get a chance to
connect with your customer and show what you’ve
got.
When your customer uses your services it is
easier to convince them to use your services
further.
But remember, if you are going to convince
them and offering them a free trail make sure
your trail period or feature is outstanding
and memorable.
Now let’s see the second sub-category of
the subscription module, which is ‘Pay as
you go’ module.
You can mix this subscription with the earlier
one to convince your consumer, but the issue
is, it is only limited with some fixed categories
such as web hosting or online services, but
don’t let that stop you, be creative about
your product and services.
To understand it let’s take an example.
Suppose I’ve rented 3 bedroom house.
Now I’m the only one who is going to live
in there, but I’m paying for all the rooms,
even though if I’m using only one.
In this scenario I can pay for only one room
and if plan to use another I’ll add it’s
cost in my rent.
So at the end of the month I’ll be paying
only for one room or two, not for the entire
house.
This is what these cloud hosting services
companies do.
You only pay for the space and resources which
you only use for your work.
Now, those are two main types of product pricing.
You should really consider these two types
while designing your product price.
Now when you design your pricing structure
always remember that it should be your primary
source of income for your business.
You can even use one type or both, so be creative
and tactful.
Now as I promised I’ll be telling you one
case study which I recently did.
If you are from India then you might know
Reliance Jio, for those who don’t know,
Jio is a 4G internet connection and was introduced
by reliance in India.
You do not need to pay a single penny to purchase
it, you can get their Jio SIM card for free
with your some basic identification documents.
But to start the service you need to make
a first recharge and once you do that it immediately
provides you the 4G internet service for certain
period, which again depends on your plan of
recharge, but when your plan duration gets
over internet speed will slow down.
To get the 4G speed, you again need to recharge
your card with their 4G plan, otherwise you
will have free internet access but it will
challenge your patience.
Now for a year Reliance Jio is literally eating
customers from other telecom companies because
of their 4G plans and internet connection.
They have successfully made their users addicted
to the high internet speed and now they are
introducing broadband connection which has
almost 1GBPS speed, which is 1 Gigabyte Per
Second, means you can make more than 4 skype
calls in entire world without interruption
of a bit, download any Netflix movie in few
seconds and consume your 1GB data plan in
few seconds which today takes at least hour
or more.
Now, here you can learn from Jio.
First they introduced the fast internet service
and offered their subscription at dirt-cheap
cost.
Because of the less subscription price most
of the youth and others shifted or even purchased
another phone number.
And today they are addicted to the fast internet
speed, because let’s face it, if you are
using 1MBPS or even more downloading speed,
there are less chances that you will shift
your service provider.
Second they are coming up with their new Gigafiber
plan which is almost 1GBPS.
Their pricing for this subscription is increased
by almost 30 to 40% but it is still cheap
for that kind of speed.
So, they created a market first, captured
the audience, made them addicted to the speed
and now offering more speed so they won’t
go anywhere else and stick to the reliance.
This costing structure is called LTV – long
term valuation, they invested their money
in the infrastructure, let go of the product
selling cost, invested in service, collected
their loss with their subscription module
and convinced their existing customers to
stay with them for longer period.
Sounds familiar?
This is exactly what these internet companies
are doing today, offering services for free
and make it addictive, they make you stay
longer so they can make money from interest
based advertisement.
I don’t want to be brutal here, but in both
cases, whether it is online platform or internet
connection, it was never their product, it
was just a platform to get you, so, you are
the product which they are taking care of.
Instead of selling a one-time product to you,
they made you as their monthly subscriber,
longer you stay, longer they get paid.
So, these are some types of subscription module
for any startup.
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If you have any opinion or would like to contribute
anything, please share it in the comment.
Thanks for watching!

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