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The advice of the legendary venture capitalist Marc Andreessen for companies is simple: increase your prices.

In an interview at the Tim Ferriss Show, he said:

"The No. 1 – only the topic and we see it everywhere – the No. 1 topic for our companies is when they really have problems They don't charge enough for their product.

In Silicon Valley it has become common wisdom that the way to success is to value your product as cheaply as possible. It assumes that anyone can buy it when it is cheap, and that way you get the volume. "

Some of the largest companies in the world such as IKEA, Costco, Walmart and McDonald's strive for low prices. This is a deliberate strategy because they have created infrastructures (costing billions of dollars in investment) that aim to benefit while offering low prices.

For everyone else, it is much better if we try to ask for more money.

We both know that today's environment is breakneck. Are customers expect Free shipping, free returns, and great customer service. It's free for customers, but it comes from your margins.

And everyone knows that the cost of transportation – the cost of acquiring a customer – will increase every year.

The best way to compete is to increase your profit margins by increasing your prices.

The most important decision when evaluating a company is pricing power. If you have the ability to raise prices without losing business to a competitor, you are doing a very good deal. And if you have to have a prayer hour before you raise the price by 10 percent, then you're doing a terrible business. – Warren Buffett

It's not that easy to raise your prices and call them for a day. There is a delicate balance between price and conversion rates that you need to measure.

Increasing your prices is a long game. It requires a different strategy than most affiliate marketers.

Instead, Increase the perceived value of your products and you can increase yours Prices without lowering your conversion rates.

This article was inspired by my experience buying bedding.

I've been sleeping on Amazon Basics $ 30 sheets for years. They do their job well, but I always try to improve my sleep. The more comfortable my sleeping arrangements are, the better I sleep.

So I went into a rabbit hole to look for sheets. From there I discovered D2C brands like Parachute, Boll and Branch and Brooklinen.

Imagine my shock when I saw that some of these companies charge fees $ 400 + for bedding. And some of the sheets were sold out!

How the hell do they make people pay so much for bedding? Especially when the main benefit is comfort – an attribute that online customers cannot see or feel.

But then I remembered … I'm a marketer. I'm sure part of the price is that the material costs more, but so much of the premium is due to that perceived value.

This is what this article is about.

I will teach you about the concept of perceived value and some actionable ways you can increase the price of your products.

I'm going to use ecommerce brands as examples, but you can apply the same concepts to pretty much anything that can be sold, e.g. B. Software As A Service (SAAS), consulting services and more.

The perceived value is the STILL value

Imagine there are two shirts.

They are made from the same factory and use the same material.

The cost of each shirt is $ 5.


  • The Shenzhen Trading Company sells it for $ 10. You sell it on and it comes in a plastic bag.
  • RuRuRemon sells it for $ 60. You get a really cute bag with quotes. All top yoga influencers use their equipment. And the website is full of amazing texts about how much technology has been incorporated into this ($ 5) shirt.

All the extra stuff is there perceived value because the shirts are identical. But some people are willing to pay for it additional $ 50.

Some people think it's dodgy and even unethical. You say you tear off customers!

Do you think Nike's $ 200 shoes are sold for nearly what they cost?

Here is my opinion: perceived value is still value.

People underestimate the emotions when it comes to making a purchase.

There are a few categories that I don't really care about – I can buy the cheapest office paper well. Sorry, but Jim and Dwight don't convince me of anything.

(Ok, maybe Asian Jim has a chance.)

However, there are some other categories that I'm more than willing to pay a premium for. I don't mind spending $ 3,000 on a Macbook Pro or $ 200 on a simple human trash can.

One of the reasons is identity.

We all have one person we want to become. And we all want people to do it perceive us as this person. By purchasing certain products, we feel closer to the person.

Before COVID-19, I always had guests for dinner parties and board games. I want my friends to think that I am the type who has a simple human trash can with motion sensor and not the brown plastic that I used in college.

Because of this, some people are willing to pay over $ 3,000 for a Louis Vuitton designer handbag. They want others to see them as the kind of person who can afford a Louis Vitton bag.

And Louis Vuitton has spent centuries cultivating that customer identity.

The bag probably cost $ 150 in material goods, but I don't think customers feel cheated.

The best brands don't sell products – You sell a lifestyle.

They sell a shortcut to the feeling that you are living your dream life.

If your products can improve a person's image, status, or self-esteem, you can ask for more money.

  • Are you using the same product as your hero? It is worth it.
  • feeling joy from unpacking the product? It is worth it.
  • Understand the story behind the brand and resonate with it? It is worth it.

People really underestimate how strong emotions and identity can be when it comes to sales.

5 Leverage to increase the perceived value of your product

I'm going to introduce you to five ways to do that perceived value Of your product.

In addition, as a marketer, you should always be curious when you see someone who charges higher prices than usual.

What do they do so differently than everyone else to justify their pricing? It is often so Not just a question of "our ingredients and materials cost more".

Ask yourself: "What's really going on here?"

1. Luxury brands sell a lifestyle, not just the product

When I was in my twenties, I started doing luxury fashion.

As soon as I started making money with affiliate marketing, I felt the need to bow. I wanted people to see me as money and luxury goods the quickest way to do it.

So I went to the Phipps Plaza mall in Atlanta and visited places like Louis Vuitton, Gucci and Tiffany.

I was nervous when I went inside. It was a combination of severe fraud syndrome and the fear that the security forces would not let me in because I did not look like a typical customer.

I couldn't help but notice how different these businesses felt. What made the experience so great?

  • Every shop had a security guard at the front. There is a big difference between the security forces in luxury shops and those in cheap ones: Your suits actually fit!
  • I had to wait in line to get to Louis Vuitton. They wanted to maintain a certain level of experience and support for each customer.
  • The packaging was an experience. You didn't just put my wallet in a plastic bag. They put it in a fancy box and wrapped it up like a Christmas present. The receipt came in an envelope!
  • The design and layout of the shops was different. Have you ever been to a Forever21 store? They try to bring as much clothing as possible into the stores. There was so much space There were ambitious photos everywhere. Beautiful people in exotic locations carry luxury goods.

Unfortunately, the items I bought did their job. People liked to ask me about my Rollie when I went to a conference.

In a strange way, by buying objects with a massive perceived value, I increased the perceived value of people for me.

The biggest lesson I learned about buying luxury goods is that you offer your customers an “experience”.

People want to feel special.

How can we convey the luxury experience in an online world?

This article was inspired by me when buying bed linen. Let's take a look at the marketing of Parachute Home.

The first point of contact for this brand is the ads.

The production value of the video is high. We unconsciously know that this was not filmed on an iPhone.

The formula and layout of the video are also different.

The typical ecommerce video would be something like a pattern break, the benefits of the product, testimonials, optimistic music, tons of subtitles, and a call to action in the end.

You don't do any of this here because they focus on selling you a lifestyle. The implication is: people who have their shit together and are successful have bedrooms that look like this! And of course buy Parachute Home.

Next, let's look at the product detail page.

Screenshot 2020 07 13 at 9.06.33

First, high quality images about a professional and a studio.

Next, there are no cheap conversion tricks on the landing page.

You know what I'm talking about:

  • Fake anchor prices. There is no original price of $ 500. Sale Today: $ 339.
  • Countdown timer. The sale only takes the next 15 minutes.
  • Email opt-in gimmicks. It's okay to collect email addresses, but brands like this don't spin the wheel to win a prize.

Finally, the packaging.

If you want to submit Premium, this must be communicated in every step of the process.

Don't just use all of this work to ship the product in a plastic bag and tape.

You can see below how they pack their products. Opening the box is like unpacking a gift in itself.

2nd. Explain why it is worth the price

A few years ago my friend sent me a video of his "dream" camera. I couldn't believe my eyes – it costs $ 50,000.

For this price, I assume that this is a camera that was developed for Hollywood or only for the best of the best photographers.

It was not like that. This was a limited camera from Hermes and Leica.

What do you notice when watching this video?

I caught the following:

  • There is a story behind the product. The camera was made in honor of Jean-Louise Dumas, who was the president of Hermes. This adds an emotional aspect to the product.
  • The video didn't focus on the technical details. It showed the art and craftsmanship of Hermes. People who can afford a camera worth $ 50,000 appreciate the quality that you cannot achieve with mass production in a Chinese factory. The video says you don't buy a camera – you buy art.
  • It is a limited edition. There are less than 100 of the Jean-Louise Dumas editions. When an item becomes a collector's item, there is no upper price limit. Think how much early versions of Superman comics are worth.

Storytelling was essential for the sale of this product. You could have it said that the bag was made by hand But isn't it much more effective to see it? Show, don't tell.

There are several reasons why your product has a high price. Remember that your customers only care about themselves. How does the high price increase the product and ultimately the product?

They don't care whether you have high acquisition costs or whether you need a high salary to cover your child benefit.

Here is a video from Parachute showing their factory and how their products are made.

Some quick takeaways:

  • It is manufactured in Guimaraes, Portugal. It is a city with a strong heritage when it comes to textiles. You have a museum director who supports this. If you want pizza, you want it to be made in Naples, Italy, or Brooklyn NYC. You don't want Vietnamese pizza.
  • "The textile factory was founded by my grandfather." This gives me a mood similar to Jiro Dreams of Sushi. He explained that all of his products came from families that have been doing this for generations.
  • The manual process. The fabrics are cut by hand and ultimately inspected by people. Quality control is a focus. We have a tendency that people = better quality.
  • I get a strong mood that they combine their product with history, heritage and art. It has its price and they target the market that appreciates it. Yes, there are some people who do $ 30 worth of sheets, but that doesn't bring much profit. And this is Not the target group here.

Let's summarize all of this and talk about how we can show why the product is worth the higher price.

A. Research and development

You have spent millions of dollars researching and developing the product. Purple, the mattress company, brags that they have over 30 patents for their technology.

Research and development goes into a better product.

B. We have better ingredients that cost more

Real mushrooms is my favorite brand of mushrooms.

They took the time to tell me the difference between their mushrooms and other brands. They also told me why mushrooms grown in China are superior.

You have redesigned the situation.

In front: These RealMushrooms are expensive. Is the quality worth it compared to the competition?

After this: The competition sells fake mushrooms. No wonder they are so cheap. If I want real mushrooms, RealMushrooms is the only place I can buy them. The $ 30 a bottle doesn't seem that expensive.

C. Tell the story behind the brand

We are story-driven.

In the book “Start With Why,” Simon Sinek explains that great marketing begins by explaining why the company exists.

Bulletproof – The founder traveled to hike in the mountains of Tibet. He was exhausted until a local person gave him a traditional coffee drink with butter. He never experienced such mental clarity and wanted to bring it west.

Moleskine – These were inspired by the notebooks that Hemingway and Piccasso used.

Warby Parker – One of the founders lost his glasses on a backpack trip. Because glasses were so expensive, he had to do without them for a whole semester. That gave them the inspiration to create Warby Parker.

Why did you start your company and what does it stand for? To be able to: a history is the first step in getting your audience to resonate with you.

3rd. Build an unfair advantage with influencers

Let's talk about Moats.

We are at a time when many things are possible copied. Competitors can jack up your suppliers, steal your product ideas and even copy part of your marketing.

Moats are competitive advantages that cannot be taken away from you so easily. B. holding a patent.

A moat that I've thought a lot about is Influencer. It is hard to compete with onnit in the nootropics area because Joe Rogan acts as the spokesman. And you can't take it away from them because he's a partner in the company.

What would the Honest Co. look like without Jessica Alba? What would FentyBeauty look like without Rihanna?

Gap just signed a ten-year deal with Kanye West so he could design clothes for her. This deal increased Gap's market cap by $ 700 million.

Most people think about working with influencers as a means of distribution. You get traffic when they talk about you on Instagram or YouTube.

A partnership with the right influencer can, however value Of your product and your company.

Check out BlendJet. They sell portable mixers that seem little different from AliExpress. But they have an incredibly perceived value because Jen Selter is a co-owner of the company.

Check out some of the Rolex ambassadors: Roger Federer, Tiger Woods and Phil Mickelson. They make a statement that the best wear only the best.

The main risk is that your product is so closely tied to one person. Subway was a great success when its spokesman Jared was convicted of child pornography.

And now, in July 2020, we feel in the age of demolition culture. I see so many celebrities being "canceled" because of controversial things they said in the past.

So if you are working with an influencer, make sure you do a thorough background check.

4th. Show irrefutable evidence of everything

Customers no longer trust ratings as much as they used to.

Perhaps it's because direct mailers wrote their own reviews with Loox, or because Amazon sellers are giving away free products in exchange for reviews.

But regardless of the reason There is a trust problem.

Ask yourself how you can go Furthermore What are others doing to achieve more credibility?

How can you provide irrefutable evidence that your product is shit?

First, everyone can fake their own ratings. When customers submit video reviews of the product, it is more trustworthy. Or fly to customers and create testimonials in a studio.

Second, the "as seen on GQ, Forbes, MSNBC, etc." was abused to death. show proof of this. Add some thumbnails that mention your company.

Do you have experts who give you more credibility? Show them.

Download 1 offers some of the experts behind their company. People will fake "Lisa from NYC" ratings, but not many people will fake a doctor.

Your customers are skeptical.
Show them that you are different.

5. Don't let them compare the price – turn your product into an offer

Amazon is the boogeyman of the e-commerce world.

Do you purchase Aliexpress products and sell them in a Shopify store? Then one of your biggest weaknesses is that you have multiple competitors selling it equal Product on Amazon.

The difference? They sell it much cheaper and offer 2-day shipping through Amazon Prime.
It's hard to compete directly against it. One way to assert yourself is to turn your product into a product offer.

Here is an example from 1 1

People have in mind that protein powder for a two-pound jug is worth about $ 30.

LadyBoss sells protein powder, but they used all of these additional products for free. If you are new in fitnessWouldn't it be valuable to get a recipe book and access to the training plan?

By creating an offer, LadyBoss can calculate double the average price if desired. You no longer just buy protein, but also a solution for your dream body.

This also ties in with number 1 and sells a lifestyle, a future, a new self. A new identity.

If you would like to learn more about this concept of making an offer out of your product, I wrote more about this concept a few months ago:

Read: Increase the price and conversion rates of your product with value stacking.

Continue investing in value

Affiliate marketers are used to pushing sales as hard as possible. We don't come from a world where we create email lists or build a brand. We get one chance and only one chance to get the sale.

So we use every conversion trick in the book. That won't work in the long run if you're trying to build a brand.

You have to play the long game.

Louis Vuitton had a controversial practice. If their bags couldn't sell them, they'd rather burn them as a loss than offer them as a discount. Why? Discounts damage the brand that they have built up for centuries.

Remember to build a brand like climbing a ladder.
Pay as little as possible. Always put money into reinvesting the brand.

If you want to bring your company up to date, it doesn't make sense to start adding professional photographers and influencers to the A list.

Think of your company as phases.

Let's take a protein powder company as an example

  • Phase 1: Buy bulk protein from China. Get graphics from Give free tubs to micro-influencers.
  • Phase 2: Buy quality protein from manufacturers in the United States. Pay recognizable Instagram / YouTubers to promote your brand.
  • Phase 3: Have your own cows and build your own factory. Hire an A-List branding agency. Get professional A-list athletes to support your protein.

Marketers love numbers. We love to see the average order value and how much cash we have in the bank.

Part of the greatest value comes from what the company itself is worth when you sell it. A big part of it is brand value, which is difficult to measure.

So keep playing the long game.

Image courtesy of Pixabay.

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