How to Think of Pricing

Transcript

Alrighty. So in this video, we're going to be talking about pricing. No lots of customers and a lot of entrepreneurs struggle with this pricing. How do I price my products? They're always word B2B. Am I too low ticket? Am I too high ticket? Oh my God, blah, blah, blah, blah, blah. We're selling at a hundred dollars a month. Like, can it work? Can my business work at a hundred dollars a month? That's not how to think about it. It's so silly. There's a principle in evolutionary psychology called reciprocal altruism. Dr. David buss explains this humans have evolved to follow this practice where if they went out to get food and they brought it back to their little tribe and they couldn't eat all of it, they would store it in their neighbor because there was a time when that human who went out to get the food would go out and not get food and would rely on their neighbor to respond in kind essentially that's the underlying physics of reciprocal altruism and why you help your neighbor, right?

It's in every single religious textbook ever, right with pricing. Are you providing more value than it's worth? That's the lens that we need, not a hundred dollars a month. No. Is the seller benefiting the buyer? You want to build something. You look at the intrinsic value. The way to determine the intrinsic value of something is you look at the opportunity costs and the opportunity cost. There's two components. If you look it up,unegotiation mechanics, opportunity cost has implicit opportunity, cost explicit opportunity costs. So relative to the buyer, the explicit opportunity cost of making that transaction is the money that's withdrawn from their account. That's explicit. And the time they spent in the transaction, the implicit cost is the loss of the benefit that they would achieve by using the thing you sold them. So if they didn't buy your thing, the loss of the benefit, that's the real cost. So if that is big, relative to the price they pay.

Boom, a transaction will exist and both parties will be happy.

 

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