Many business owners believe the best way to grow is by acquiring more customers, but a study from Profitwell shows that improving pricing is nearly four times more effective at increasing profit than acquisition and twice as effective as retention.

You have three options to double one aspect of your business: new customers, the number of purchases, or your prices. While all three options seem to have the same effect on potential revenue, doubling prices is the most powerful option, with the potential to increase profit by six times.

Here are 10 pricing strategies that you can implement right away.

1. Shift to a 28-Day Billing Cycle

Instead of billing monthly, switch to a 28-day cycle. This change gives you 13 billing cycles a year instead of 12, resulting in an instant and permanent 8.3% increase in revenue for no extra cost.

For a business with 20% net margins, this single change can increase net profit by over 41.5%. While weekly or bi-weekly billing offers the same benefit, a 28-day cycle is often easier to manage because it reduces billing hassles associated with short pauses.

2. Implement Processing Fees and a Second Form of Payment

After a customer agrees to the price, inform them of a small card processing fee, such as 3.99%. If they hesitate, offer to waive the fee if they provide a second form of payment. While the fee itself boosts profit by 3-4% for those who accept it, the real win comes from reducing involuntary churn.

For recurring payments, involuntary churn due to card info changes can be a significant portion of total churn, and having a second card on file can save up to 1.7% of monthly churn, dramatically increasing customer lifetime value (LTV).

3. Add Sales Tax

Don't absorb sales tax for your customers; instead, add it to your pricing.

If your business is in a state or country that charges sales tax on your service, paying it for your customers can take a massive hit on your profits.

For example, if you have 20% margins and pay a 5% sales tax, you’re giving away 25% of your profit. Get agreement on the price and then add the tax as a separate, matter-of-fact line item on the invoice, just as a restaurant would.

4. Introduce Annual Price Increases

Your costs of doing business will inevitably go up due to inflation.

You can either watch your margins erode every year or proactively implement a right to increase your rates annually in your contracts.

Choose a reasonable percentage, like 5% to 15%, and add it to new contracts. This helps you maintain profitability and allows you to reinvest in your business to maintain quality.

5. Offer Annual Billing Options

The less often you bill, the lower your churn rate will be.

Offering an annual billing option can increase a customer’s LTV by five times compared to monthly billing. To encourage customers to choose this option, offer an incentive, such as a discount or bonus.

For instance, you could offer a 17% prepaid discount if they commit to a full year. A great way to sell this is to start with the total annual price and then downsell with discounts for longer prepayment durations.

6. Round Up Your Prices

Change your prices to end in .99 instead of a round number.

For most products, this small change can add a few percentage points to your price without affecting your closing rate.

For example, changing a $27/week price to $29.99/week added over 11% to the annualized price of a gym membership. This strategy works for premium goods, but not typically for luxury items, which often end in a round number.

7. Add an Annual Renewal Fee on Top of a Monthly Rate

Advertise a low monthly rate, but include an annual renewal fee in the contract. This tactic allows you to benefit from the low monthly price for sales and advertising while boosting your effective annual revenue by 10% or more without impacting sales conversions.

The key is that people focus on the monthly price, not the total annualized cost, so the extra fee goes straight to your bottom line.

8. Implement Automatic Continuity

If you sell a service with a defined duration, set up an automatic continuity program that charges a smaller monthly fee after the initial period ends.

This zero work option, priced at 5-20% of the main service, allows you to continue generating revenue from customers who want to maintain access to a minimal version of your service. This continuity must be agreed upon upfront and can significantly increase your LTV.

9. Introduce an Ultra-High-Ticket Anchor

Create a premium, mac daddy version of your offering that is at least 10 times more expensive than your core product.

Present this expensive option first to anchor the prospect's mind and make your main offer seem more affordable by comparison. This strategy can dramatically increase your average LTV and may even lead to more sales of your core offer and a higher take rate on your ultra-high-ticket item.

10. Offer a Priced Guarantee or Warranty

After a customer agrees to buy, offer them a paid guarantee or warranty for an additional 5-30% of the product's price.

People are willing to pay for peace of mind, and this works especially well with traditional, main street businesses. As long as the revenue from the guarantee exceeds the cost of fixing or replacing the product, this simple one-line upsell can be very profitable.

Keep Crushing!
- Sales Guy