The Goldilocks Pricing Myth

We, sellers of new and fabulous things, seem to have this notion that there’s a “just right” price that we can hit in the marketplace.

Imagine this Goldilocks Price (if we could only find it)…. It’s not too high, it’s not too low. It’s just right.

Think again.

For your new customer, there simply is no Goldilocks Price.

Why? Because there are only two situations in which your price is “just right.”

The first is in markets with limited product differentiation and lots of competitors. In these markets, everyone knows the “right” price because you can Google it. If you’re unlucky enough to be selling into this kind of market, you’re in a race to the bottom to squeeze margins enough to survive. No fun (and sooner or later you’ll be Amazon-ed).

There’s also a good scenario with “just right” pricing. This is with your longtime, repeat customers who fully appreciate and understand the value you deliver. The price is “just right” to them because it’s high enough to match the exceptional value-creation bar you uniquely manage to hit. Nice work.

Now, let’s get back to that new customer who thinks your prices seem a bit high.

You’re selling a differentiated product that you’re explaining to them for the first time. They have some idea of what it’s supposed to cost, but that’s just based on what they budgeted or what a friend told them or some number they made up.

It seems high to them not because it’s overpriced but because they don’t yet understand the value that you will create for them.

If you find yourself in this sort of situation, don’t respond to “that sounds expensive” with an offer to do your exceptional work for less.

Instead, recognize that what they’re really saying is “I don’t understand the value, yet.”

Then tell a better story to help them to see what you see, to get a taste of what your best clients get to experience every day.

$6.55

Feeling a little tired and sore after getting a yellow fever and typhoid  shot for an upcoming trip, I stopped off at a local NYC deli and ordered a fresh carrot juice.  The woman who fed carrots into the industrial-strength juicer was kind and friendly, and she even put a bit of fresh orange juice in for taste.  And then she handed it to me and said it cost $6.55.

I don’t think she liked my reaction.  I actually said “you’re kidding, right?!”  But she wasn’t.  And I did pay.

Later that same day I bought lunch from another place, a delicious tuna melt with tomato on a fresh Portuguese roll.  It too cost $6.55.

One price felt right to me, another one felt stratospheric.  Which one was the right one?

It could be that it was both.  The crazy carrot juice price reminded me that there’s a place for outlandish pricing – for $6,000 conference fees and charging $1,000 a ticket for a half day seminar and for setting a high minimum donation amount to be on a nonprofit Board.  Just know why you’re doing it and don’t be surprised when some people grumble – the grumbling might just be an indicator that you’ve set the price high enough.

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