What is an effective pricing strategy? And how can it create more time for you?
Imagine making one change in your pricing strategy. Then let's say you make two. But let's say we make three changes.
With three tiny changes, we have not just made tiny little moves, but have created a whole pricing environment. Or a trophic cascade, where one thing leads to the other, and then the entire cascading effect changes the way you do business.
Your revenue goes up, which buys you more time. Wouldn't you like to know how to create this pricing cascade? That's what this audio is all about. It shows you how to go about putting together your pricing elements of the cascade.
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Note: (This is an unedited transcript)
After the coast of California is an estuary called Elkone Slough.
This estuary is extremely polluted because of the agriculture runoff. All of those excessive nutrients they see into the water supply, they add to the amount of algae and the plants, the sea grass, it gets killed.
Yet in 2010, Brent Hughes, a biologist from Sanoma University, found that the C-grass was expanding, it was growing, it was thriving. And all of this growth didn't make any sense, because that nutrient concentration, it was the highest that he'd ever seen on the planet.
That C-grass should have been dead, dead, dead. Which is why Hughes set out to solve the mystery, and he looked at things that biologists look at, he looked at what a quality temperature, changes in C grass coverage over time.
He went back 50 years and he was not making any progress until he ran into a boat captain. And this boat captain had been running wildlife tours since around 1995. And over the years, the captain had handed clickers to his passengers who went click-click clicking away every time they saw an author.
And that's when the biologists saw the correlation.
We saw that when the auto-population went up, so did the sea grass. California's coastline is pretty chilly at the best of times and the sea otters need to eat about 25% off their body weight every single day just to keep warm.
Dark consists of sea urchins of clams, but especially crabs and crabs are very crucial because crabs were eating the sea slugs and with fewer crabs around the sea slugs started to grow much bigger.
They also grew more abundant and then they started eating the algae. The algae, this was the algae on the seagrass. Without the algae, the seagrass could grow and clean once again. What he was found was that once the autos returned to the assuré, the sea grass increased by 600%.
What he'd experienced was what we call a trophic cascade.
A traffic cascade is when one thing happens and then that leads to the second which then leads to the third and so on. And that changes the whole ecosystem. And in today's podcast, we're going to talk about a change in your pricing ecosystem.
But if you do one thing, then you will get results. But if you do the second thing, those results expand. And then by the time you add the third thing, what you have is this traffic cascade.
All three things are working together to create this environment and the environment then boosts your revenue and of course your free time which is what we're looking for. But let's now go off an attention.
What are those three things that we're going to cover today?
To get our pricing trophic cascade going we have to look at location, we have to look at comparison and finally something called “Organized Scarcity”. Let's start out of the first one which is location.
1) Location
Because I draw in paint all the time my bag, my backpack has the Spencer box and it's a pencil box I got in Turkey and it has the usual stuff. The eraser, the pencil in right in the middle of it is an Akaya.
Nakaya is a fountain pen company in Japan that has been making these fountain pens since 1919. My pen is a bright arraishia which is Vemilian in Japanese, but unlike everything else in their pencil box, this is worth close to $1,000.
Everything else is around $5 to $35.
And when it's open, sitting out there, yes that bright Vemilian color stands out, but you don't think much of it. And the reason why you don't think much of it is because it's in that half-rusted pencil box and it's got all of those companion things which are with very little.
And this is the first factor of pricing and that is where is it located. The location becomes the crux of the whole pricing issue.
So why is location so very important?
You take a book, any book, and you put it on Amazon. Now, guess the price. Immediately, you know that book is going to be between $9 to $16. You take a bottle of wine, and you put it in the supermarket.
What is the price of that wine. What are the chances that you're gonna find $65 or $100 or $200 wine in the supermarket. You're not going to find it. And the reason for that is just the location.
You can take something extremely expensive and put it in some other location. And immediately, the surrounding stuff, that determines what the price of your product is going to be. Or at least what the customer is willing to pay. And we can see this across the board.
Let's say you write a book and you put it on Amazon. Or you create a course and you put it on Udemy or Domestika.org. Or you take some amazing painting and you put it in a cafe. What we're seeing here is not just digital products and courses, but also physical products.
Where they are located makes a huge difference.
If you were to take that very same painting and put it in an art gallery, you would get 300% 400% 600% even a thousand% more than if it were in a cafe. If you were to take that very same ebook and have it on your website, it would get 200-300% more.
As for courses, it's the same thing. A course could sell for 999 on Domestika or Yudemi. And that very same course could sell on your website or somebody else's website and sell for a whole lot more. And not just a little more.
We are talking about the difference between $10 and probably $300, so $500.
Which makes us assume and assume wrongly that we should not be on these other sites. That our products should always be in a gallery format on this pricey website, and that's not the way things work. For instance, if you go to Amazon.com and you look for the brain audit, you will find it there, and it costs $9.99.
And if you go to our website, well, you would expect it to be $9.99. And they're identical. At this stage, they're identical. And that's because you want to keep that parity. You want clients to come in. You want them to see what you do.
You want them to experience what you're doing. And when clients like your product or your service, they tend to come back. And this demonstrates that location is very crucial in the sense that if you try and get the attention a client that is probably never going to get to your website.
Well Amazon or Udemy or someplace YouTube for instance free. Well, then you're getting them to the website. So it is what you'd call an attractor or some kind of attraction device which gets the clients to the next stage. So the first thing that you have to consider is where are my products, where are my services being sold.
Because the environment, it determines what that price is going to be.
It doesn't matter how much a cost, it doesn't matter how much a cost for you to produce, all the matters in this is the environment. What does this mean for us as entrepreneurs. Well, what you've got to do is you have to have the bulk of your products, your higher price products on a completely different environment, a completely different place where it's more gallery-like.
And then you can also have some kind of free or low price products on other sites or even your site. Essentially what you're doing now is you segregating those two sections. And when you segregate them, that's when you start to get the higher prices.
So you start the first part of that traffic cascade. You decide where things are going to go and why they're going to be there. So it's strategic. It's not just let's throw everything on Amazon. Let's throw everything on YouTube.
Let's put it on you to me. It's not the way to go around things. I mean if you've done it that's fine but have a strategy of where you're going to put stuff because it's the environment that matters.
The location makes a huge difference in how your products and your services are perceived, but people don't know how much they should pay for your products.
They don't know the value, which is why we use the factor of comparison. And that takes us to the second part of this trophic cascade, namely comparison.
2. Comparison
When I started out in marketing around the year 2000, I knew nothing about it. So I went to the library and I got a whole bunch of books and I had a stack of around 30 books. And in the middle of one of those books was a book by this guy called Jay Abraham.
I didn't know about it at that point in time and never heard of Jay Abraham. So I opened the book, I liked what I saw, and websites were just brand new back then. People were barely selling anything through websites, most websites were just free information on the internet.
Anyway, as I went through Jay Abraham website, I saw that there were other products. And the very next thing from this free book was a $500 book. And I thought that's really expensive. I'm going to buy a $500 book and so I just sat on it.
Until I then learned about his $5,000 workshop and then after that he said me something which was a $25,000 workshop.
You know what happened next.
I mean the $500 book doesn't look so expensive when you're faced with a $25,000 decision. And this comparison factor is true even if you can't afford that high price tag. Even if you can't afford the $25,000 or the $5,000, you cannot help it.
You step in and you start comparing. And that's what we do. That's how we assign value to something else. And we know this to be true because of a simple example. Let's say you walked into the Auckland real estate market.
Now you probably don't know much about the Auckland real estate market. But let's say I say that there are houses being sold for 250,000. There are those that are being sold for 700,000 and then others that are selling for 1.3 million.
Instantly your brain has made a decision.
It has categorized the 200,000 houses as probably cheaper in not such a good area and then half a million dollars for a house that seems like excessive but you know on the other scale there's 1.3 million and your brain is not scrambling.
It has already made that decision and it has made that decision based on nothing but comparison. You don't know any historical values, you don't know what's happening in the market, who's buying into it, you don't know anything.
You just compare one with the other and you make that decision.
So the second part of this traffic cascade is how are you going to do this with your own products, with your own services. And if you look at the psychotactic website, you see this progression. And you've seen this progression in many places.
You've seen, okay, this cost $10, that cost $50, that cost $100, that cost $500, and that cost $3,000. Having that in the first place is crucial. Even if you sell the $3,000 product to just two people, it doesn't matter. What matters is that you have it because people are going to make their comparisons.
So that's kind of the first level, the most obvious level of comparison, that if you don't have that ladder going up at some level, then you're not allowing people to compare anything. And if they don't compare it, then one product doesn't become cheaper as compared with the other.
Now this is obvious, as I said. What's not obvious is when you go to the Nav bar and you see there's a little drop down, and then it says books and then it says products under $50 and then it says products over $200. Notice there you are making a choice.
So when you see products over $200, the products under $50 suddenly becomes affordable or at least a lot cheaper. It's something that we can't help. We can't help it because we are comparing the $200 products, which might be $200 might be 500, might be $3,000.
What this means for you is that for you to sell one product, which is either $10 or $20 or $50 or whatever, you're going to need comparison products, you're going to need comparison services that make the smaller amounts more affordable.
And in doing so, what you've done is you've taken a book which would probably sell for $10 on Amazon. And now it's $30 on your website. So it's $300 more. It's not the same book, by the way. You can't do that. You can't just take it and sell it and do different places.
It's a two different prices.
But you could take a similar book and sell it at 300% on your website. Provided you have something that's comparing something that's being sold for $50, then the $30 looks cheap or something that's been sold for $150, and then the $30 looks cheap.
And it's at this point that we realize that we might have to write something or create something that's more complicated, more detailed. So if we've got a book that's a 100 pages and we're selling it for $10. Then surely the course would need 100 videos and I don't know what else, but that's not how it works.
When you look at the ebook, the brain audit, it's a 180 pages and it sells for $10.
And then if you look at a product like dot board pricing and it's got three books and probably more content and it sells for around $39. And that makes perfect sense. But on the other hand, you could have a product that has less.
So, for instance, we have a product that shows you how to use in design and use it in just one hour. So, it has just a few videos because that's all it takes. You don't want to go through 18 hours of in-design learning just to put an ebook together.
You would rather have an instruction and how much of that instruction cost, $250. So six or seven videos cost $250. You would think that you needed 20 videos just because you're charging so much more. But you don't.
And that's the beauty of pricing.
It doesn't have to be logical or rational and you don't have to justify it in any way. However, you need this comparison structure in place, which means that if you're going to sit down today or tomorrow or whenever and work out, how can I have at least three products or three services or whatever it is that you're doing.
And then one directly plays off the other. So one makes the other look more affordable. That's what works in the housing market, that's what works in the painting market that works in every market. We have no choice but to make these comparisons.
And your client is going to make those comparisons whether you like it or not. And if you don't have it, then you're in trouble. Then that traffic cascade isn't going very far. It's going far enough with the location, but it's not going far enough for the comparison.
So two parts, that's what we've covered so far.
The first thing is the location where you have your products and services. The second thing is the comparison, which slides us right into the third part, which is a factor of scarcity. And you've heard about scarcity before, haven't you. But this is not just scarcity, this is organized scarcity.
3. Organized scarcity
Just about five minutes away from my house, there's a little French restaurant, and they serve all kinds of organic wines and all kinds of food, but what's a real hit at that place is this loaf of bread. I don't know how you make the bread but the bread is delicious.
It's a hit. It gets over every evening. So the owner of this restaurant decides to make more bread and he decides to sell some of the bread. The problem is that when you get there and you want to buy the bread like if you're not sitting the restaurant and you just want to buy the bread, there is no bread.
So some days there is a loaf of bread, maybe two loves a bread, some days there is nothing. What we have there is a factor of scarcity, but we don't have organized scarcity.
So what is organized scarcity?
Organized scarcity is just a specific. When you have a specific and you add it to the scarcity, you can organize scarcity. If we take the guy who's selling bread, then he doesn't have a date, he doesn't have a time. He doesn't tell us how many loves the bread we have.
So after a while, Well as a customer you just get fed up. You go there a couple of times and go, well he's not organized. The scarcity is not organized. Well I'm out of here and you go and buy bread elsewhere. But if he said they're going to be six loves of bread on Friday at 4pm, that's when you have organized scarcity.
You've got all of these specifics in place.
Those specifics cause, cause urgency, urgency causes people to get a little and see about stuff and as a result, you can charge more. Everybody is selling bread around this shop.
There are supermarkets, there is a bread shop, but these six loves a bread can now come on in a much higher price. And you don't have to taste the bread to know that, know it theoretically and practically that's how it works.
How do you go about creating organized guests?
When you look at restaurants, all of the world, there is no scarcity. You go into a restaurant and usually there's a place you might have to wait a little while and there's no scarcity at all. But you'll notice some restaurants have a timing.
So you can book in from say 5 to 7 pm for that dinner service or from 7 to 9 pm or from 9 to 11 pm. Now that has a figure on it and that becomes organized scarcity. It suggests that there are limited seats. It suggests that you have to pick a time.
And this is how we've gone about things on the Psychotactics site.
If you've been there on the the psychotic site and you've either tried to buy any of the courses like the article writing course or the info products course or any of the courses you find that this organized scarcity is always in place.
It's a digital product, it's a home study, we still sell only 25 copies or 35 copies. It's a course and there are just 20 seats or 16 seats. It's a workshop and again it's not just scarcity, but there is a precise number on it. And if you're going to sell products, well, think of it as a restaurant.
In the restaurant, you have all of these tables, and that's fine if they're not all scarce, people can come in, but in this corner of the restaurant, that's the area that you mark out. And then those people who are willing to pay a premium and show up from 4 o'clock to 6 o'clock will then be given priority to sitting that area.
And what you've taken is the same area. I mean, there are all tables in the restaurant. Maybe this has a slightly better view. Maybe it doesn't even have a better view, but because you've marked it out as different as separate. Now you can charge a premium for it. And you've created scarcity in, of course, urgency.
Summary
We looked at three separate factors and all of them, one by one, they all have their powers, their superpowers. So when you have something in a different location, in a more pricey location, in a gallery-like situation, automatically that has more value.
Not just 5-10%, but sometimes 1,000% or 2,000%. Location becomes the crux and you've got to work out where are you going to put your stuff. Your own website is usually the place where you can charge the most.
You can have other products on Amazon or YouTube or Udemy or whatever, but you have to make sure that once they're gone through with that basic level, then they come to your website and now we have a different level together, a different pricing order.
The second part of the cascade is the comparison.
You have to have something that you can compare with other things because that determines how affordable the first thing looks. That sounds confusing, you know exactly what I mean. Your 1.3 million house determines the $200,000 house as quite cheap and half a million as kind of affordable.
Having those structures in place is very crucial. Even if you don't have, you know, 180 pages and then the big product has 1,800 pages, you can just be 200 pages. You don't have to expand everything. You can at some point even reduce some of the things and charge more for it.
So don't just get stuck in the rut of, oh I have to put in lots more videos, lots more recordings, lots more of everything. No you don't. Sometimes you can reduce it.
So that's the second thing comparison and the third was organized scarcity.
That is you can't just say this is not going to be available. You have to say this is going to be available and it's going to be 25 of these at 5 p.m. and you have to fulfill these obligations and that becomes organized scarcity and with that we have our trophic cascade. One thing works really well, three of them they are amazing.
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