How much do you charge for a haircut?
Is it $5, $10 or $25?
Whatever your price is, there is a value attached to that price.
You won’t charge $25 if the customer thinks they are getting an extremely basic hairstyle.
You won't charge $5 if the customer thinks they are paying for a high-end and complex styling.
The price of your product or service has more to do with the value you are providing than anything else.
So in order to optimize your product pricing - you need to keep in mind 2 things:
1. What is the value you are providing to your customers in terms of time saved, money earned, or money saved. For instance, if you are selling a widget which will save the customer 1 hour of their time every day. That means you can save them about 20-25 hours per month. How much is that worth to them?
2. What is the highest dollar figure your customers will pay without decline in demand. Generally a wealthier person or larger company will value their time more than their cash reserves and vice versa.
Now you can test the waters by offering the same services to two groups of customers. Notice the sales for a week or two. Pick the price which gives you more net revenue.
Rinse and repeat.
