How should I price my product? $29 or $99?

Business is a game of margin, not volume.

Many people believe that you can make more money by dropping the price and selling a big volume. This is absolutely wrong.

There is a lot of research done on the subject. There’s a book that I love reading over and over called How to Sell at Margins Higher Than Your Competitors  by Larry Steinmetz.

As an example, Delta Airlines filed bankruptcy. Because it competed on the ticket price while the fuel costs went up it was inevitable. There are a lot of other companies that were in the same shoes.

But we can make it up in volume.

When business gets in trouble, there is always some “genius” that gives you a bright idea to cut the price and make it up in volume so you can stay competitive. This is one of the worst mistakes you can make.

Just to prove you wrong that cutting the price is bad, let’s do an experiment.

Are you wearing the cheapest shirt or blouse you could buy? Right now, are you wearing the cheapest clothes? Would you have bought it if it didn’t fit? What if it didn’t match your color, style, or what if it was not available? What about the shoes you wear?  Would you buy the cheapest shoes if they had spots on it?

If most of your answers are no, then most people do not buy based on price.

As a rule of thumb, I usually use this statement:

There is no limit to what people will pay for goods or services if they are properly presented in the right way in the right market and you deliver the right value.

Gene Dmitri

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