Packaged and tiered offers: What's the right strategy for your small business?

Welcome to Live With The Pricing Lady.

I'm Janene, your hostess.

This show is all about helping you build a sustainably profitable

business while making an unbelievable impact on your world.

Learn from my 20 years of experience and from my guests as we discuss their pricing

challenges, failures, and successes.

Pricing is a way of being or behaving in your business.

My mission is to help you confidently charge for the value you deliver.

Pricing is either hurting or helping your business.

Let's make sure it's helping you reach your dreams.

In this episode of Live with The Pricing Lady, we're taking a look at.

Should you be offering packages or tiered offers for different customer segments?

Sit back, relax and enjoy the episode.

This is a strategy I love.

for a lot of reasons, but it's not always appropriate in every circumstance.

If you follow me, you know, I like to give people a thought process to work through

so they can make a more educated decision about what's right for their business.

And that's a bit of what I've prepared today to share with you

is how you can think about that.

Now, as I said, this really can benefit most businesses.

For services, it's a very good strategy in most cases.

By having different packaged offers, you can meet different price points.

Without then having to muddy the waters and, you know, if you want to sell it to

someone who says, who potentially has a lower ability to pay, and you sell the

same thing, exact same thing to them at a lower price than you sell to someone

else who has a higher ability to pay, sometimes that doesn't feel so good.

Or you worry about what if they find out, you know, those types of things.

And by packaging your offers, you can actually structure them in a way so

that the lower priced ones are going to be more attractive to people who are

willing to accept less value out of them.

working with you or having your service.

And then the people who can afford more or want higher value out of what

they're buying from you, then you can offer that in a different package.

That's one of the great strategies.

Another reason that I love these in pricing is because a lot of times, People

want to raise their prices and they think that the only way to do that is just,

you know, add 10 percent to the price.

By packaging up offers, you don't have to make the package price cheaper.

You could, but you don't have to.

You can Take the things that you're combining, add the prices up, price

it there, and you can use that opportunity to raise the price

of the things that are unbundled.

You could actually use it as a way to increase prices.

We see this in supermarkets.

They have a normal box of rice.

Then eventually they had a bio rice and then they removed the normal rice from the

shelf and they left the bio rice there.

And then eventually they made the packaging a little bit smaller and

you end up effectively paying more.

Most people don't notice that kind of thing.

They don't like it if they do notice it.

So you have to think about that as well.

But packaging gives you a lot of flexibility.

And as I said before, it's a way to meet the needs of different customer groups.

Now this also works for SaaS products.

With software as a service, you're bundling up different

functionalities usually in your offer.

This is a very common strategy there.

You can also use it for things like membership sites, right?

So there, if you have a membership site, you might have like a, I don't like using

the word basic, so I call them essential offer, which is like the lowest offer.

And then you may have a more Premium offer as well.

So you have two different tiers for people who come into that and those

different tiers and have different things included in them that represent or

that deliver different levels of value.

And of course, you can also use this in a product based business.

This is probably where it more or less originated from was in product

based businesses, where you can take a bundle of different products or

products and services and put them together in a way to deliver kind of

a more full package to the customer.

And that's actually can be a benefit for your business as

well, because it helps you to streamline how you work with people.

In all three cases, it can help you streamline, but especially when there's

a service component in your offer, then it can help you work more effectively

and efficiently with customers.

Another thing that is really important with packages and tiers is one thing I

always joke with people about is what's the, the best way to sell a 5, 000 offer.

Put it next to a 15, 000 offer.

Packages and tiers can also help you with something that we call

anchoring, which is basically giving people a price to compare it to.

And that's what in this example, I've mentioned here, you know, the 15,

000, if, if you just said 5, 000, and I asked if that was expensive,

most people would think it's.

is, you know, expensive without even knowing what it is.

But if you say, well there's two options, 5, 000, 15,000 then 5,000 is simply looks

and feel smaller to our brains, right?

Maybe not so much to our wallets, but certainly to our brains.

So we perceive it differently, and this is another real benefit of offering tiers

or packages or packaging up your offers.

Now, the last reason that I think that this can really help a business,

and this specifically has to do with service based businesses,

has to do with time based pricing.

I'm not a huge fan of time based pricing.

It does have its place and, you know, there are a lot of businesses

out there very successful with it.

A lot of coaches and consultants, would be better suit themselves

and their customers if they moved away from time based pricing.

Because time isn't what's delivering the value it's your know how, your

expertise, how quickly you can do it, or how thoroughly you can do it.

Whatever it is that is your unique selling point, it the value usually

isn't coming from the time itself.

And what happens is if you're in the early stages, you might use time as

a way to easily calculate a price.

But as you become more effective and efficient, then it would

take you less time to deliver to your customers the solution.

And therefore you would actually end up getting paid less in the end.

And package, so packages can grow with you, whereas time based pricing doesn't.

I say time is not the wrapper your services are delivered in.

You don't buy the milk for the carton.

You buy it for what you get out of it.

And that's the same with services.

Those are some of the reasons that I think it's, can be a really effective idea.

Now, why wouldn't it work?

Or when doesn't it work?

And that'll come out as we go through some of the things that I suggest

you consider if you're thinking about shifting your business or bringing

some packages or tiers into play.

Let's look at that and then we can always We'll talk a little bit about

this on our website in a second.

I will likely be a bit other stuff within that as well as come back

to the question when not to do it.

The first thing to consider, of course, you probably already know this because

I say it all the time is you want to think about the customer first.

And here, we're really talking about their needs.

If there's a need for different budgets, if there's a need for different

delivering different levels of value.

If it makes sense to have, an essential version and a VIP version, because maybe

there is real known, no real need for it.

Yeah.

If people look at the VIP version and never really want to buy it, it can be a

good strategy from a pricing perspective to have it there for the anchoring.

But, if you had to put a lot into creating that, and then it, You

know, nobody really wants it, then it's not really serving its purpose.

So think about a lot of times when people ask me about this, they're like,

well, there's this group of people I'd really like to serve, but they have a

lower willingness or ability to pay.

And how can I do that?

That's the kind of customer needs.

Now you may choose or decide that you don't want to serve that group, then

there's no reason for the package or for the, the tiered offering, right?

Or at least not in the context of customer needs.

Market trends can also play a role.

We've seen probably over the last, I've had my business for about seven years now.

And over the last seven years, we've seen people put things together,

take them apart, put things together.

We've seen a few cycles of that over the last few years.

And while market trends can... I think where market trends come into play.

is in understanding, you know, what people want right now.

I think at the beginning of last year, my assessment of the market was that people

are tired of big, long, heavy programs.

They want something that's lighter, something that's kind of, it could

be long in terms of it's, you know, everyday, like a membership system.

Not where there's a lot of learning material all the time.

Then you saw people come up with different options and different

packages to, to manage that.

You have to be careful with market trends because just because it

works for somebody else doesn't mean it's going to work for you.

But it can give you some indications of what, preferences there are for are

right now at what, might take place, be effective in your business as well.

Differentiation is another way to do it.

Can you clearly differentiate if you break your offer into,

let's say, two different tiers?

You can't just differentiate the, I mean, you could, but probably

it wouldn't last very long.

But is there enough differentiation to have two different offers?

Sometimes with, say, software as a service, they'd like to differentiate,

but they can't turn one part off and on.

in order to put it in one package and not the other, right?

If you take something out of your current package to create a lower package, let's

say, if that's going to make it hard for people to get even basic results,

then you wouldn't want to pull that out.

Would be hard for you to have that differentiation

to be able to make it clear.

When you give people options, let's say two options, two different

packages like Essential and VIP, if you will, there's two things that

play into how they make the decision.

What's included in each package and the price.

And so it's important for you to be able to not just differentiate them,

but clearly meet the needs of the people that you're have in mind targeting

for those different packaged offers.

The next thing to consider is complexity.

The more flexible we like to be, and a lot of us love to be

really bendy and flexible, right?

The more complexity we usually add into things.

So we've all seen like software as a service, they have these

lovely tables with all these check marks and X's and things in them.

They can get very complicated.

Generally if you're looking at having tiered or packaged offers,

kind of the sweet spot is three options because Three is something

that people can mentally handle.

Five you'll see sometimes going up to seven is just don't do it.

It's too, it's overload for the customer, so it's complex

for them to make a decision.

They don't really know where to put themselves, but it's also

really complex for you to manage.

The complexity is important.

And even for you, maybe you have one offering now and you want to

split it into two, that could be much more complex for you to manage.

Because instead of then, let's say you have a group program and you guide

people through this group program if you have a second offering, you

may have to have Two programs and run two programs at the same time.

Even market and sell two separate programs.

And that can, that adds that much more complexity.

So be careful about that.

Now I'm a believer that everything that you're doing, you should

have kind of an idea of, okay, what's the business sense of this.

The next thing is really the financial side.

Look at, okay, why am I doing this?

If you have one offer now, and let's say you decide to put in a

premium offer above it, will you go the opposite way this time?

What are you hoping to achieve with that?

how many people do you think will opt for the premium offer?

How many of those would have bought, the, the, the essential offer and upgraded.

What is your expectation of doing this?

What do you think it will really bring the business?

And on the flip side from the finance side, again, if you have one offer now

and you got to run two, there's additional costs involved in doing that potentially.

depends on the type of offer, right?

There can be extra costs associated in doing that and it's important

to consider that because if your, your goal most likely is to try

and earn more money somehow, right?

So you need to understand where that's going to come from and

what's going to make it successful.

If you sell, an extra, if you put in a premium offer and you sell

two premium offers on top of what you usually sell normally, then at

first glance, that could seem like, okay, then this has a profit to it.

But if it costs you more to implement that premium offer, then you may

end up losing money in the end.

And that's something that you need to sit down and do the math behind

so that you can then monitor it.

And if it's not going where you want, then you can change strategies.

Okay, we got a few more here.

Pricing.

How does it fit into your overall pricing?

A lot of times people develop a new offer and then they'll be like, Oh

wait, I was going to price it here, but compared to this, it doesn't make sense.

It looks weird.

Think about how you're going to position it in the context

of what you offer right now.

Sometimes when you add an additional package into your portfolio of

what you offer it's not something that you would put on your website.

It's just something you might bring to the table if somebody

says, Oh, that's too expensive.

Right.

Okay.

Well, I have this other thing.

I don't always bring it up, but would you like to talk about it?

So it can give you that sort of opportunity as well, but you have

to make sure that, you know, that makes some logical sense in the

context of your whole offering.

Next is customer impact.

Will it negatively impact existing customers?

And could you get some backlash for it?

And I've seen people deal with that in different ways.

Some people are like, I don't care.

That's the way it is.

We all move on, right?

And other people don't take action.

Or don't create that new package because they were afraid of that

feedback that they might get.

Ease to implement.

How simple is this going to be for me to do?

Is it worth my time and effort?

Or even ask yourself, you know, how can I do the simplest version

of this to test it out first before I go too far down the path?

Next, is it aligned with your business goals?

You have some objectives.

They may be financial.

They may be non financial.

I mean, you may have the goal, okay, I want to work with single mothers.

I'm going to serve 10 of them this year, right?

In whatever context it is that you offer, then maybe your

package for them is aligned.

But if your package is for corporate executives, maybe it's

not aligned with that business goal.

Right, so just double check that.

Is it aligned and does it mean your business goal needs to change for

your package or your special package?

The last one here is adding value.

Whenever you create extra tiers or packages, it should be valuable

both to you and to the customer.

I think that's probably one of the most important things to remember when

you're assessing this is that it has to have added value for both of you.

Otherwise, in the end, in the long run, it probably won't

get you where you want to go.

As you can see from, these 10 areas here of what to consider when you're looking

at going into packages and tiered offers.

There's a few things to think about.

If we want to understand, okay, who doesn't it work for, I think

it doesn't work if it's not really needed from the customer side, if

there's no real added value for them.

Just to have an extra package can be an effective pricing strategy if you want

to use it that way, but if you really want to use it as a business strategy

to help you meet your objectives, then you need to make sure it has

that added value for them as well.

I think what I will do is I will leave it at that for now, because that gives

you quite a few things to think about.

Let's go ahead and recap.

The 10 things you want to consider.

If you're shifting to packages or tiered offers for different segments.

First of all we had customer needs, then we had market trends,

differentiation, complexity, and the financial side of doing it.

So what is it going to bring you in the end and is that achievable?

Then we had to make sure it fits with your pricing for other offers.

The impact for your customer.

Will there'll be a negative impact.

And how can you mitigate that?

What is the ease to implement it?

Is it aligned with your overall business goals and how.

And last are you adding value to you and your customers?

Those are the 10 things you want to consider.

If you're shifting over to packages or tiered offers, or

if you're thinking about it.

Now there's a few other questions here that I have for you,

that'll help you reflect upon what is right for your business.

. You're thinking about it, or you have been using them, why, as we know the why

behind things is often the driving force.

Make sure that that makes sense for you, your business and your customers.

What concerns do you have when it comes to making the shift?

So do you have concerns?

Is it harder for you to talk about the packages?

Do you feel comfortable having those conversations?

Are you concerned about how customers will react?

List out your concerns and then figure out how you can mitigate those concerns.

Always be clear about what you want to achieve, ultimately, by doing it and

be able to monitor that because then if it doesn't work out, you can go

back and you can shift your strategy.

Remember if you've thought about, or have already done this in the

past, reflect on what's worked and what hasn't worked for you and how

it might be different this time.

One more thing before you go.

The next cohort of the fair price formula is coming up soon.

If you want to learn how to set prices for your business.

Head on over to www.thepricinglady.com/setmyprices

and get yourself registered.

Have a great day and as always enjoy pricing.

Thank you for listening to this episode of Live with The Pricing Lady, the podcast.

If you enjoyed the episode, rate, review, and subscribe to it, then share

it with your friends and colleagues.

I love hearing back from you listeners.

If you've got comments, questions, or topic ideas, go on over to thepricinglady.

com and contact me there.

Not sure where to start when it comes to improving pricing and profits?

At ThePricingLady.

com you can download a copy of my Self Assessment Pricing Scorecard.

Find out where it's going well and where you can begin improving.

Or just simply book a discovery call with me.

There we can discuss what's up with pricing in your business and

how I might be able to help you.

Thanks once again for joining.

Remember, pricing can hurt or help your business.

Let's make sure it's helping you reach your dreams.

See you next time and as always, enjoy pricing.