The Price is Wrong – Podcast Episode 20

September 20, 2013 , 16 Comments

Sometimes, your brain plays tricks on you. Something can seem completely logical and intuitive, when in reality it’s a grave mistake.

Unfortunately, pricing (of products, services etc.) is one such area where our intuition fails us and we tend to make the wrong decisions.

In today’s podcast episode, you’ll learn how to avoid the most common of all pricing mistakes, see why selling something cheaply can be more expensive than giving it away for free and learn how to switch out of the “customer perspective” (a crucial skill for any business owner).

Podcast Audio

Click here to download this episode.


Thanks for listening! As always, your questions, feedback and comments are greatly appreciated!

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About ​Shane Melaugh

I'm the founder of ActiveGrowth and Thrive Themes and over the last years, I've created and marketed a dozen different software, information and SaaS products. Apart from running my business, I spend most of my time reading, learning, developing skills and helping other people develop theirs. On ActiveGrowth, I want to help you become a better entrepreneur and product creator. Read more about my story here.

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  • Shane, prefer the video. I can’t do 2 things at once anyway as I know I will miss something important if I multi-task. I think it increases the temptation to multi-task with just the audio.

    • Good point about the multi-tasking. I’m the same way. Videos will probably be back the episode after the next one. :)

  • Hi Shane,

    I agree. After a few troublesome experiences, I’ve learned that it’s often better to offer something for free rather than charge a low price for it.

    Might I also add that pricing decisions should take into consideration the type of customer you’re shooting for (i.e. your customer avatar). If you’re targeting premium customers, your prices should not be attracting bargain hunters, etc.

    Regarding the format of your podcasts, audio only is fine for me. I’d only watch the video if there’s something I can get, that I can’t from the audio.

    • Thanks for the reply, Chris! Creating a clear customer avatar is a great way to avoid making pricing mistakes.

  • Love the audio podcast. Video is good and the audio only is also almost just as good.

    Agree, it is better and more profitable to have less high paying clients then many low paying clients. Especially if you are a small company with limited resources.

    I love the “show me the factory” question.

    Thank You,

    • Thanks, Andreas! Being in Switzerland actually really fits the topic, because it’s a country of boutique luxury products. People who sell such products are in a much more enviable position than those who are in a race to the bottom, vying for a mass market (e.g. electronics).

  • Hi Shane…

    I download your podcasts and listen to them on my iPhone as I walk my dogs. ;)

    Agree with you points on this podcast. I have found in general, that the bargain-hunters are the ones who are high-maintenance and are not loyal customers.



    • Very cool! I also love to listen to podcasts and audio books on long drives and used to, back when I went running regularly (got too lazy for that, now). :)

      Good point about customer loyalty, as well. Apple it a pretty good example of how premium products at a premium price can add to the loyalty of the customer base.

  • I tend to watch the video – not 100%, but more often.

    What do you (anybody) think about charging $5 for a small digital product to collect a list of people who have purchased something?

    I’m thinking of these two issues that I’ve read about: 1) Once someone has purchased something small for me they are more likely to purchase something larger, and 2)a list of people who have demonstrated they will spend money (even a little) is much more valuable than people who have not.


    • Concerning the $5 product: you can do it, but only do it with an information product.

      The two points you make are valid and it’s not always a bad idea to sell something at a low price. Information products can be very low maintenance and can work at a low price, especially if the information is timeless and doesn’t require frequent updates. Software products generate massively more costs and require massively more support, which is why for them, I’d categorically recommend against very low prices.

    • Thanks for the comment, Jenny!

      The crazy thing is, in some cases higher prices can actually lead to increased sales. Pricing is, unfortunately, quite a bit more complicated than it seems at first.

  • I prefer audio. And I generally dislike video, especially in the form that most folks produce these days, which tend to use up too much of my time and provide too little value in return.

    That said, there are some videos that are better than others, and most of yours fall into the “better than others” category — usually because they are short, to the point, and don’t consist of endless, vapid, null-content, formulaic hype.

    But the main reason that I prefer audio is that I travel a lot (for both business and recreation). I can’t watch video while driving, and sometimes I’m out of range of the internet when traveling. Video storage takes vastly more memory than audio for offline access, so it’s easier to deal with on my tablet. If I’m going to be driving for 5 or 6 hours, I can easily store that much podcast audio on my tablet, which I can then play through my car’s sound system.

    For these reasons, I forgo video (even yours) when I’m traveling.

    Plus, I still have a day job (of sorts). I can sometimes get away with listening to a podcast, but not with watching a video. I also have to avoid using the company network for bandwidth-sucking activities (and they have a nanny-filter), which means that I use my cellphone for just about all non-work Internet access. Audio is just easier to deal with than video on my phone, and using earbuds or a set of headphones is common enough here that nobody questions what I’m listening to. Actually, about 80% of the time, I have my headphones on with nothing playing, just to block the ambient noise. I listen to podcasts only when my current task is relatively mindless.

    OTOH, because video seems to be more effective than audio, I *do* produce videos myself. When I do, I try to follow your example, and make them short and to the point. And, also following your example, as I produce more of them, I’m getting better at it.

    About pricing: I’m on the board of directors of a nonprofit, and in yesterday’s meeting, one of the board members suggested a fund-raiser where the items sold would have a 20% margin at the price she mentioned. She seemed to be surprised when I said I would vote against it unless we raised the price to a margin of at least 50%, preferably a lot more. She seemed to be confused by the idea of “perceived value,” although enough of the other board members understood so that we were able to move forward on the project. I think that the higher price I want to charge will actually result in more sales, and a much better fund-raising outcome.

    P.S. (Just one more thing, I promise!) I need to express my thanks for something else in this podcast! You have persuaded me to abandon marketing a commodity item — which I can get quite cheaply, and is currently selling on Amazon at a 12x premium — primarily because just about anybody could get it for the same price as I can, resulting in a race to the bottom.

    • Thanks for your comment, Howard!

      I’ll keep adding video to future podcasts, but I will also always keep them “audio-friendly”, i.e. video is not necessary to follow the content. Since podcast episodes tend to be relatively long, I think they’re ideal for listening during commutes and other waiting time.

  • Interesting question about comparing audio versus video.

    It might be an incorrect impression but the podcast format seems to allows presenters to move along more quickly.

    Do you use more words or fewer words per minute in one format compared to the other?

    It’s pretty easy to concentrate on what you say because you keep solidly on track and there’s always a feeling you are heading somewhere with your message.

    I think I probably pay more attention to video (I did have other tabs open while listening to your podcast).

    Derek Halpern’s (Social Triggers) podcasts interviews with psychologist, entrepreneurs, etc. are probably better than videos would be because they keep the attention on the words.

    • Interesting points, David. I don’t think it makes a difference to how I speak, but I’m sure it can make a difference to the attention of individual listeners.

      Personally, I’m in the “distraction” camp, like some of the previous commenters. Video helps me keep the focus on one thing at a time, while audio-only tempts me to open more tabs and multi task.

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