10 Minutes to Better Pricing: My Favorite Pointers (So Far) on Pricing and Profit
Pricing Pointers, Issue #36
These 10 pricing pointers are some of my personal favorite posts I wrote on LinkedIn (similar to Substack notes). I’ve rearranged them in a logical order, moving from identifying the core pricing problem to the solution’s mechanics. My goal is to help you harvest more of the value you are creating and delivering in the marketplace.
1️⃣ What if you could increase your company’s profits by 10% with no upfront investment and no new customers?
It’s possible, and it all comes down to one often-neglected strategy.
Many small businesses believe the path to greater profits is through more sales or lower costs. They spend countless hours chasing new customers or squeezing every penny out of their budget.
However, they overlook the most powerful lever for growth: their pricing strategy.
A 1% increase in your prices can do more for your bottom line than either a 1% increase in your sales or a 1% cut in your costs. In fact, it’s been estimated that a 1% price increase would increase the typical business’s bottom line by 10%.
Unlike a new marketing campaign or a cost-cutting initiative, pricing improvements require little, if any, upfront investment. Furthermore, their impact is felt immediately.
What would happen to your business if you increased your prices by 1%? Would you lose all of your customers? And which customers would you actually lose―your best or your worst?
Yes, watching your costs and finding new customers is important, but so is actively managing your pricing.
You have more pricing power than you think. It’s time to start using it.
2️⃣ The most costly pricing mistake small businesses make is settling on a single number
Stop trying to find the “perfect” price for your product. It doesn’t exist.
This approach assumes every customer values your offer the same way, and they don’t.
Price segmentation isn’t about unnecessary complexity; it’s about capturing all the revenue you leave on the table when you offer only one price.
You need to design a menu of choices so customers choose how much they pay.
3️⃣ ︃One of the most powerful mental models in pricing is the Value Ladder
Give up the idea of settling on a single offering at a fixed price point.
Instead, think of your offerings as rungs on a ladder. Everyone knows which rung is higher in value, even if they cannot afford to climb all the way up.
The value ladder framework uses a principle called self-sorting. Buyers reveal their true willingness to pay by the choices they make.
When you structure a price menu so paying more guarantees receiving more value, customers naturally select the tier that reflects the price-value trade-off they’re willing to make. This is how you harvest more of the value you’re creating in the marketplace.
4️⃣ Use Good, Better, Best pricing as a buffer against low-cost rivals and price hagglers
Your cheapest product isn’t just for attracting bargain hunters. It’s your secret weapon against low-price competitors.
The “Good” version in a Good, Better, Best strategy serves as a price fighter. It allows you to compete against rivals who are undercutting you on price without having to compromise the value of your higher-margin offerings.
It’s also a powerful negotiation tool. When a customer says, “I can’t afford that,” you can counter with, “I can’t give you X for that price, but I can give you Y,” guiding them to your “Good” product instead of losing the sale entirely.
5️⃣ The product paradox: making something worse can make more money
This counterintuitive pricing strategy is a powerful way to justify your premium price and defend against low-price rivals.
This tactic works for three key reasons:
❶ It protects your market share. A no-frills version appeals to truly price-sensitive customers and serves as a defensive product to protect your market share from low-price rivals.
❷ It’s a powerful negotiating tool. When faced with a customer who wants to haggle over your price, you can offer them the lower-price, but lower-value version, forcing them to prove how price-sensitive they really are.
❸ It justifies your premium price. It allows you to justify to premium customers why others “got it for less.” The answer is simple and fair: “They didn’t get everything you did.”
The trick is to make the lower-priced version unattractive to quality-sensitive buyers, preventing them from “trading down.” You can do this by either reducing a feature that’s highly desirable to them or by adding a feature that is highly undesirable to them. Either way, quality-focused customers will happily pay more to get the desirable feature or avoid the undesirable one.
6️⃣ What if the key to more sales isn’t adding more to your product, but taking things away?
Most of us think we need to offer more to compete. But the real game-changer can be unbundling: breaking your offering into smaller, standalone pieces.
This gives customers the choice to pay only for what they truly need. That’s how you win over price-sensitive customers and unlock new revenue streams.
Have you ever considered unbundling one of your products?
7️⃣ Do not pay customers to do what they would have done anyway!
This is the core principle of successful product bundling, and violating it will kill your strategy. The true goal of bundling is not simply to move more units; it is to stimulate sales that otherwise would not happen. If you create a discount bundle for products that customers would have bought together at full price anyway, you are simply sacrificing margin on a guaranteed sale. That’s a pure, unnecessary loss.
Before you launch any bundle, ask yourself a critical question: Does this package attract a customer who would have otherwise only bought product A, or perhaps not purchased anything at all? Answering yes is how you drive incremental sales, which is the true measure of success in bundling.
8️⃣ Your customers value time and money differently.
You can use that to your mutual advantage.
Segment buyers by what they are willing to sacrifice: time or money.
Some people are time-rich but money-poor. They will gladly wait in line or fill out a rebate form for a discount. Others are the opposite: time-poor but money-rich. They will pay extra just to avoid inconvenience.
The key is creating a deliberate trade-off between the price a buyer pays and the hassle they must endure. This lets the first group save money and the second group save time, capturing maximum value from both.
9️⃣ What if you could give a discount only to the people who need it most, while keep full revenue from everyone else?
Most managers face the same choice: cut prices across the board or lose a price-sensitive sale. But a different strategy exists: effort-based price discounts. They force buyers to choose what they value more: their money or their time.
Think about it. Who’s standing in line for hours before the store opens on Black Friday to get that great price on a new TV (while supplies last)?
Price-sensitive customers will spend their time to get the savings. Time-sensitive customers will pay full price to skip the hassle.
What “inconvenience” could you add to your special price to protect your full-price sales?
🔟 Complicated pricing schedules cost you more money than you realize
A powerful discount strategy is also a clear one.
If your customers need a complex calculator to figure out which price tier they qualify for, they become less likely to purchase.
Complex price schedules baffle customers and increase your internal administrative costs for management and customer service.
Simplicity enhances the buying experience and streamlines operations, both of which contribute positively to profit. Keep your price tiers straightforward.