Pricing

People don’t know what anything is worth

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Imagine you’re starting a new business as a cat and dog photographer. So as the first step, you head to Amazon to check prices on DSLR cameras.

Hm. That Canon EOS Rebel you’ve been eyeing is priced very reasonably.

In fact, the price on Amazon is cheaper than at the specialized photography equipment website… and at your local brick-and-mortar photography store… and even at Walmart.

But here’s the trick.

I didn’t know about it until today — maybe it won’t be news to you — but of course Amazon gets its own back.

According to an analysis by Boomerang Commerce, Amazon dynamically reduces prices of its most popular items to make you think you’re getting a good deal.

That’s why something like a popular DSLR camera is cheap on Amazon.

But at the same time, Amazon dynamically jacks up the prices of less popular items — cables, lenses, carrying cases — that you are likely to buy with your main purchase.

End result?

You feel you’re getting a deal. Meanwhile, Amazon sits there quietly, with that trademark smirk on its face.

“Meh,” you say. “That’s nothing special. Businesses have a right to manipulate their prices however they want to maximize profits.”

I don’t dispute that.

My point is simply — well, actually, it’s not my point. It’s the point from the people at The Atlantic. They made the video I watched today, which clued me into this Amazon pricing stuff. And the video summed it up like this:

“People used to think the Internet would usher in this new age of transparency for pricing. But really it’s just given retailers new ways to manipulate the same old fundamental bias: People don’t know what anything is worth.”

Marketer Rich Schefren likes to say that marketing is getting people to value your offer.

I used to think that means sharing enough information for your prospect to see what your offer is truly worth.

But people don’t know what anything is worth. No amount of information will help them see the “true” value of your offer.

When you understand this, then Rich’s koan takes on a whole new level of urgency and meaning.

Suddenly, positioning becomes the most important decision you can make.

Because if you can put yourself into a marketplace of one… and given that people don’t know what anything is really worth… well, then you can manipulate the prices of your own offers how you like. And you don’t even have to be sneaky like Amazon about it.

So how do you get yourself into that magical marketplace of one? That’s something I write about on occasion in my email newsletter. If you’d like to read what I write about it the next time, sign up for my newsletter here.

The king’s evil

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“‘Tis called the ‘evil:’
A most miraculous work in this good king;
Which often, since my here-remain in England,
I have seen him do.”

For centuries, English and French kings used to claim they had a divine gift. They had the “king’s touch,” which could heal disease on contact.

Mostly, these monarchs specialized in healing one disease — a nasty condition called scrofula. This was a tumor-like lump on the neck, along with ruptured skin there.

Scrofula even became known as the “king’s evil.” If you had the evil, you could push your way towards the king… get touched… and with almost miraculous certainty, be healed. In this way, the “king’s touch” gave the monarchs a special authority and position, separate from the money and power they controlled.

“Yeah yeah,” I hear you saying. “Enough with the history lesson. Tell me how I can make money.”

All right. So continuing with my recent series, here’s a great way to make money, one I first heard from Ben Settle:

Charge premium prices. $97/month for a 16-page print newsletter… $499/month for access to an insiders’ community… $986 for a paperback book.

There are good practical reasons for this premium price strategy. Ben explains it by saying he’d rather have four quarters than 100 pennies.

Sure, both might add up to $1.

But it takes a lot less work to pick up four quarters than a hundred pennies… plus the quarters are likely to have changed hands less often and therefore be cleaner… plus they are easier to carry than a clunky jar full of copper.

So there’s that.

But there’s another, more powerful reason to charge premium prices.

It goes back to the king’s touch… and the king’s evil. Because scrofula rarely resulted in death, and it usually disappeared on its own. That was the explanation for the kings’ divine gift.

And in a similar way, along with a few other things Ben does, premium prices select a special part of your market.

They select the part that was most likely to succeed anyhow. That was most likely to succeed with your guidance… or with somebody else’s guidance… or without guidance at all, just with some extra time.

And just to be clear — I’m not trying to take away anything from the stuff Ben teaches. There are many profitable ideas inside his paid products. Many I’ve personally used and made money from.

But if you take the extra step, like Ben does, to get those ideas into the hands of people who will most likely succeed, sooner or later, one way or another… well, once they do succeed, you can credibly claim to have the divine gift. The king’s touch. A special authority and positioning, separate from your marketing or the quality of products you sell.

But you say you want more scrofulous business and marketing ideas.

Well I’m not surprised. But I am quite sleepy. So if you do want more, sign up to my email newsletter, and I’ll have a new marketing idea ready for you tomorrow.