Price: why “cheap” is often a trap
Lesson 4 of 31 in the course “Million Dollar Sales Course”. Free, with animations and a quiz.
The race to the bottom
Last lesson you built an offer. Now the price. Hormozi describes how most people set it: look at competitors, take the average, go a bit cheaper and add “a little more”. The problem is that competitors do the same thing. Prices slide down until everyone works for almost nothing. You can only cut down to zero, but you can raise forever. Dan Kennedy, quoted by Hormozi: there’s no strategic benefit to being the second cheapest in the market.
A niche raises the price
How do you get out of the race? An example Hormozi took from Kennedy. A time management course for everyone is worth, say, $19. The same course for salespeople: $99. For B2B outbound sales: $499. For power tool sales reps: $1997. The content is almost the same, but people recognise themselves in it and get more out of it, because the examples are about their job. That’s why we narrowed the audience so hard in the customer lesson.
The virtuous cycle of a higher price
Hormozi sees a higher price not as greed but as care. When someone pays a noticeable amount, they commit more and reach the result more often. A dirt-cheap course is easy to drop. A higher price attracts the most motivated customers, and you have money left for quality: an editor, support, bonuses. A low price spins the opposite loop: the customer doesn’t commit, there’s no result, and there’s no money left to improve.
Case: a $5 wine and a $45 wine
Hormozi retells this study in a simplified way, so here’s what really happened. 2008, Caltech and Stanford, published in PNAS. 20 participants tasted wines with price tags. The same wine was shown once as $5 and once as $45, and with the higher tag people rated it tastier. The brain scanner backed it up: the pleasure area was more active at the higher price. And blind, without price tags, the cheap wine didn’t lose. Price literally changes how things feel.
Keep value far ahead of price
A higher price doesn’t mean “inflating”. People buy when what they get is clearly bigger than what they pay. Hormozi’s rule: raise the value first, then the price. The laziest way to widen the gap is to cut the price, and that’s usually a mistake. Better to add something that solves one more of the customer’s problems. The goal: the customer pays, say, $100 and feels they got $1,000 worth.
Your move: price from value
Take your offer. Next to each part, write what it’s worth to the customer: how much time or money it saves, what it brings. Add it up. The price should be clearly lower than that total, so buying feels like a good deal. The picture shows an example with made-up numbers: value for Misha around $200, price $49. And don’t compare with the cheapest competitor, compare with what the customer’s problem costs if it stays unsolved.
Check yourself
- Which pricing strategy do you pick?
Correct answer: Narrow the course to a specific customer and raise the value. This takes you out of comparison: a course “for everyone” gets compared on price, while a course “for Misha” has nothing to compare against. That’s the way out of the race to the bottom. - What will most likely happen?
Correct answer: Many buy and drop it: they put in little, so nothing keeps them. That’s the flip side of the price cycle: put in little, and it’s easier to quit. And without results there are no reviews and no next sales. - What did the wine study show?
Correct answer: Price changes the pleasure itself, not just the opinion. The same wine felt tastier with a higher price tag, and the scanner showed more activity in the pleasure area. A higher price literally boosts the feeling of value. - What’s the better move?
Correct answer: Add a clip review and templates, keep the price. The gap between price and value grows through value. That’s Hormozi’s rule: value first, then price.
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