About 15 years before I started at University, my Dad was an economics lecturer at University. I remember going to him in a bit of a panic, because in my kid -> candy store approach to college life I somehow, accidently, managed to miss almost all of my Economics 101 classes.
And here I was now crashing headfirst into exams armed with only a few scrappy notes where I should have had reams.
Dad taught me the key concepts in what must have been at most a few hours. Aside from quietly congratulating myself on being efficient (minimum amount of work for the maximum marks), the concept of Price Elasticity struck me as something that might actually be useful one day.
Flash-forward another 15 years and it is over 18 months now since WORK[etc] changed its core pricing. Pricing went up, not by a lot, but it did go up. And even though we were going to grandfather all our existing customers I still had a lot of sleepless nights in the lead up to the switch.
Would new customers stop signing up? Would it cause an avalanche of complaints? Would conversions just drop away?
So what actually happened when we switched on the new pricing?
Conversion rates didn’t change. The number of people complaining that the price was too high stayed the same. The number of people letting me know the price was too low didn’t change.
Everything stayed the same. Except…
Except no one emailed anymore to tell me that they almost discounted – pun alert – WORK[etc] because they thought it too cheap. That used to happen quite a bit.
The perception of cheap price = poor product was actually really hurting us. How many other potential customers had not taken the time to share their thoughts, instead quickly moving on to the next prodcut? 99 out of a 100 is my guess.
But with the changes, our revenues overall increased. Partly because of the pricing change, but more so because the extra revenue has gone straight into building out the support and development teams and investing in the best infrastructure available. Which in turn attracts more customers. Which leads to more revenue to invest in R&D, and so on and so on.
Increase pricing = increased revenues = increased support & faster development = more customers = more revenue. Repeat.
Maybe I shouldn’t have been so surprised though – even though the product was now at a higher price point, the bottom line was that it still represented exceptional value for money. And in fact, if a potential customer claimed it was too expensive, we would ask them to look more closely at their business.
So what would have happened if we kept pricing the same?
Most likely growth would have plateaued and the business stalled. In terms of product we would have only achieved maybe a quarter of what we’ve been able to do in the last 18 months.
Which then begs the question, how many other business owners are holding back their business because they’re focussed too much on keeping prices lower than the competition?
Are you missing opportunities in your business to increase revenues? Without impacting on sales or conversions? Think about it.
Oh – and I did pass Economics 101 in the end. Just.
I’m sure there will be a few people who read this and want to feel hard done by or choose to see this as some sort of capitalist gloating. If this is you, then WORK[etc] just is not going to be a good fit for your business.
Our best customers, our favorite customers, the customers that get the most out of WORK[etc], are the ones who rely on WORK[etc] every day, who appreciate the effort our support team goes to each and every time and who know that WORK[etc] will be a key factor in their success.
Price is equal to value, and WORK[etc]’s value becomes immeasurable to a succesful business.
We love you. We’re only working harder for you.