This experience of price influencing our perception is VERY common.

We’re primed to think that a higher price equals better quality.

A study at Standford University even confirmed this effect on wine drinkers. Increasing the price on the bottle made it taste better.

It’s a powerful effect, with many studies backing it up.

One of the most interesting studies comes from Dan Ariely (author of Predictably Irrational)…

82 participants received two small electric shocks. One before taking a pain killer and one after.

In group 1, they told them the pain killer cost 10c, and they reported less pain 61% of the time.

In group 2, they told them the pain killer cost $2.50, and they reported less pain 85% of the time.

But the twist was that both pain killers were actually placebos.

The reduced pain was all in their head.

So a high priced placebo reduces pain way more than the cheap one. This highlights the powerful link between price and perceived quality.

Since we relate price with quality, it has profound implications on your pricing strategy…

It’s important to remember that true market value has very little to do with how clients judge your price.

It’s all about perceived value.

If you can solve a big problem for your clients, then the perceived value is very high, and you need to charge a high price.

As long as you can show the value in your service (how much time, money, or pain you save) then a high price actually makes you more desirable.

The importance of doing this cannot be overstated…

Higher prices make your services more desirable.

You’ll attract better quality clients that appreciate and value your work.

This leads to better testimonials and reviews, more referrals and sales, and a flourishing business.

You’ll be happier, less stressed, and able to reinvest your time and energy back into the business.

On the other hand…

Lower prices mean you’re competing on price, not quality.

Your service has now become a commodity.

You’ll attract low-quality clients that expect you to work for peanuts while delivering the world.

This leads to bad reviews, fewer referrals and sales, and a shrinking business.

You’ll be more stressed trying to make ends meet, deliver sub-par work as a result, and end up hating your business.

It’s a downward death spiral that you do NOT want happening.

Heres an example:

If you charge $30 to mow lawns, you’ll probably get fewer clients, but the guys that want you to do it for $10 are the ones that say ‘Well if I pay in cash, I get a discount right?’ or ‘Well, if you need those branches gone before you mow, that’s on you, but I’m not paying you to move them. Why don’t you just bring them with you though, you can use it for firewood. I won’t even charge you to take them!’.

Meanwhile, the dudes that pay $30 are the ones that say “I’m gone all afternoon on Saturday, so if you could do it then that would be perfect. I’ll transfer you your money now.”

Some people use money as a tool to make their lives better/easier, and some use it as a tool to give themselves power.

People that buy time for themselves don’t want to micromanage that time, but people that need to buy power for themselves are the ones that will suck every ounce of power they can out of every dollar they have.

Key Takeaway: Avoid the temptation to drop your prices to attract more clients. More often than not it’s a bad decision. If anything you should be raising your prices.