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Secrets to Creating Products & Services That Sell Quickly Part 1

Many of you have a product and/or a service that’s not selling. So I’m going to reveal the secret sauce of how to create products that people want to buy, more specifically, the products that will sell quickly. A part of this is going to be finding the right audience, therefore we will be discussing the 4 P’s of marketing, Place, Product, Promotion, and Price. 

We could go over a whole training on the psychology of pricing, but, here’s the quick and dirty: there are 3 types of product pricing strategies that are going to be relevant for you. 

The first pricing strategy we’re going to discuss is the ”Penetration pricing” strategy. That’s when you go into the market to view prices of products similar to what you offer.  For example, if I sell these little glasses and I find out online (on Instagram or Facebook) that everyone else is selling them for $9.99. If I practice penetration pricing, I may sell my glass for 7.99. Why? I literally do this to get new customers. This is a very effective tactic and a strategy that I have used. A lot of people have seen me use it. It’s the same concept as a trip wire; you take the price all the way down, as an incentive, so that people who have never had a chance to experience your products and services before can go ahead and try whatever your product or service is. 

From this point on I’m going to use the term “product". If you’re exchanging something for cash, it’s a product. So if you’re a speaker, and people pay you to speak your speech, your ability to deliver is your product. If you’re a comedian and you get on stage and you tell jokes, your jokes is your product. If you do lawn care services, that’s a product. If I sell glasses, boxes, shoes, it’s all product. All products aren’t physical. If you are exchanging something or trying to sell something for money, it’s a product. Everything has to be packaged up in a specific type of way, so I’m just going to say product from this point forward. 

When you use penetration pricing you should make sure people know it’s for a limited time only. That will create a sense of urgency and it creates the drive for that person to go ahead and purchase whatever your product or service is. We also make sure that it’s very clear to clients that we know that we’re under market rate, that these are not our regular prices, and that we are doing this for a special or promotion, or because we’re entering the marketplace. It’s effective.

The second pricing strategy that many of you are going to find is the “Market Pricing” strategy. I hear a lot of people telling others to go out into the market, see what everyone else is charging for the product you sell, and that’s charge that price too. To be honest, I don’t necessarily agree with this strategy, unless, you know your numbers, and you know this is going to make you profitable. If you price your products what everyone else is pricing in the marketplace you may find out you’re not making any money. That could be because you don’t have the same vendors, suppliers, or access to the same shipping discounts they have, or whatever it may be. It’s going to be different for all of us. Now, for some of you, it will work in your favor. For example, if you sale flatirons or hair dryers, from a manufacturer in China, and it really only costs you $5 total to package the product, and another $5 to ship it to people, and you find out everyone is selling the exact same product for $35, the market price is going to work in your favor. 

I’m here for it, as long as you’re doing the research and actually running the numbers, and making sure you’re going to be in a profitable position. However, most people don’t prepare, and then are about to cry when they are not making money. 

The third pricing strategy is the “Cost Pricing” strategy. I use the Penetration and Cost Pricing strategies. The Cost Pricing strategy is when you figure out your costs, and depending upon what the cost is, you typically figure 3 times more than what the cost is. That should cover supplies, shipping, any overhead, the price of your marketing, and allow you to make a profit. You should literally break everything down by units.

So, start by calculating your fixed costs. Fixed costs things that don’t change (rent, email software provider, etc). Then divide your fixed costs by projected number of sales. For example, if I think I can sale 100 glasses and my fixed costs are $100. $100/100 = $1. So I’m going to write that in a category, $1 per unit = fixed costs. 

Then I will calculate my variable costs. Variable costs are things that fluctuate that directly correlate with how many I produce or sale (shipping costs, etc). For example, with 100 or 10 glasses, my shipping costs are going to fluctuate every month. The shipping costs to get the materials to me, and shipping costs to send them to customers and clients. The amount of boxes I use this month, versus, the amount of boxes I use next month.  If it costs me $200 to ship my 100 glasses, $200/100 = $2. In the variable cost column I’m going to write down $2 per unit.  Fixed cost + variable costs = $3 per unit for 1 glass. 

The next thing I’m going to do is put in the labor cost. Even if you don’t have a team yet, even if you’re not paying an outside person, you have to start paying yourself. This is one of the biggest mistakes that I see small business owners make. You’re not going to stay the size you are forever and you have to start putting things into practice. You have to start turning things into habits. Even if you are your only team member, you pay yourself $10/hr, $12/hr, or $20/hr, whatever that rate would be in the marketplace. That way, when it is time for you to hire an employee, you’re going to have the money for it, because, you’re already used to having to pay someone that amount, and you’ve already factored it into whatever it is you’re selling. This works the same way for digital products, programs, coaches, consultants. However, if you’re a coach or consultant, there is a little bit extra you have to do. 

You’re going to take your labor cost and divide it per unit. I sold 100 glasses. I had to work 10 hours. I pay myself $10/hr. That is $100 in labor. I divide that $100 by 100 glasses, and that is $1 per unit labor costs. 

So that’s $1 per unit for the fixed cost, $2 per unit for the variable cost, and $1 per unit for the labor cost. The total is $4 for the cost of the glass, to get it, package it, and ship it to someone. If I’m using the Cost method I would take the $4 total times 3. Which equals $12. That will effectively cover all of my costs, because I still have to market the glass. Whether it’s running a Facebook ad, another sponsor poster ad, an ad on TV, etc. I’m basically allocating $4 for the cost, I can give myself $4 as the cost to acquire a new customer, and I will give myself $4 in profit. If I sold 100 glasses, that means I made $400 in profit that month. My revenue was $1200, but, by the time I get rid of my expenses and get rid of my marketing and advertising costs, I’m left with $400. 

Those are the 3 basic pricing strategies that the majority of business owners will follow, because a big part of creating a product that sales, is making sure that the product price is attractive to your customers or clients. There are other pricing strategies also, but, I’m only covering the main 3 today.