The Four Ps of Pricing, and Why Psychology Matters

Earlier this week, I gave a presentation on pricing to Women Entrepreneurs of Saskatchewan, or WESK.

Here are the Four Ps of Pricing.

Figure 21.1 The Cashflow Formula


Now, what does psychology have to do with pricing? I’m glad you asked. Our pricing is based on our belief in the value of our products and services. That belief depends on our belief on the value of ourselves.

If we think we’re great, and we’ve got the data to back it up, we’ll be more confident in our pricing…and in everything else that matters in business and life.

Try this ‘mirror test’ that I learned from mentor, Alan Weiss. Whatever your most expensive price is for your products, services, hourly rates, whatever, multiply by ten. Yes, add a zero to the price. Now, look yourself in the mirror, and say the price.

If your hourly rate was $150 per hour, look in the mirror and say, “My hourly rate is $1,500 per hour.” If your most expensive product or service is $500, then say, “My price is $5,000.”

Did you complete the sentence without smiling, grimacing (common), giggling (very common), or shaking your head in disbelief? Those were the most common reactions earlier this week with the group from WESK.

But we kept practicing. And some people were able to convince themselves that they were worth the higher price. That lesson—and shift in beliefs—will help them immensely in business.

“The first sale is to yourself” is more brilliant advice from my mentor. If you believe it, you will be able to communicate it and use that knowledge and power to help other people.

How strong is the psychological foundation of your pricing?

We’ll discuss the purpose of pricing in the next issue.

Have a good week!

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