Trust First Pricing Principles

By Maggie Patterson

All opinions in this post are my opinions and mine alone.

You can view our full disclaimer here.

If you run a business, there’s no escaping the need to price your offers. But when it comes to pricing there are so many ways to do it, so many strategies….and so much advice, that it can be incredibly complicated to navigate.

Especially if you’re committed to running your business in a way that’s not buying into the BS of online business. In this episode, we’re digging into common pricing tactics in the online business world, and their alternatives.

Pricing. No matter how you feel about it in your business, it’s inescapable. Your pricing impacts your income, it impacts your ability to position and sell your offers and it impacts how you feel about the work you do.

In short, it’s complicated. And it gets even more convoluted by many of the pricing tactics at play in the online business world.

That’s exactly why I wanted to do an episode on this topic to outline the problems I see in this industry, along with potential solutions.

One of the most common pieces of advice in the online business world is that you should raise your prices. I often work with my clients on their pricing strategy, and the reality is that many people are undercharging, so it’s entirely valid.

However, “raise your prices” is an oversimplification that’s resulted in an online economy of grossly inflated prices that have zero to do with the actual value delivered.

Yes, I’m going there. I can’t even tell you how often I see the prices being charged in the online business world and feel sick.

We’ve got a pricing problem that stems from downright bad advice, the quest to continuously make ever-increasing amounts of money, and sketchy tactics designed to make the sale at all cost.

The High Ticket Everything Problem

ethical-pricing-for-online-services

Now, back to the pricing bubble I alluded to a moment ago. It’s been brewing for years, but we’ve now reached a point of “high ticket” everything.

From one-day events with a five figure price tag to day rates that are $5k or more, pricing has nothing to do with experience or value, but instead status and acquiring wealth.

For consumers in this market, it’s become a badge of honor that you invest that type of money in your business. Dr. Peter Noel Murray, a specialist in the psychological drivers of consumer behavior, shares how luxury purchases are often motivated by our sense of identity and how they make us feel.

The businesses charging these prices use a wide variety of sales strategies in order to convince you that you’re “worth” it. They do this even if they know that there’s no ostensible way you’ll get any return on that investment, because they have a singular goal, which is to make the sale no matter what.

That’s not to say all high ticket pricing is evil, as there are times where I do believe it’s warranted. (But not nearly as much as this industry and its current high ticket everything extravaganza would lead one to believe.)

Too many times with high ticket pricing, sellers get richer, while buyers get totally screwed over. It may seem cynical, but that’s the experience I’ve seen over and over again, and truthfully, high ticket everything is having such a moment that we’re being lulled into believing this is the only way to do business.

I have a lot more to say about the power dynamics of high ticket pricing and its many problems, but in the context of this essay and podcast episode, this is just one of the predatory pricing strategies at work today in online business.

Here are a few others at play in the online business world right now.

Hidden Pricing

One of the most pervasive tactics when it comes to pricing in the online business world is the fact that the price is not easily accessible. Prices are hidden in many ways.

Sometimes you’re required to fill out an application to learn how much the program or mastermind costs. In other situations, you need to get on a sales call, or watch a webinar to learn more.

Hidden pricing is built on the belief that consumers need to to be coached in order to make the sale, and that if they see the price they’ll immediately object. The goal is to get the potential customer to make a series of micro commitments to show “they’re serious” about the opportunity.  As the potential customer makes these commitments, either by filling out an application or sitting through a sales call, they’ve now invested time in the process.

This is where sunk cost fallacy kicks in. Once that time or energy (or even money if there’s a deposit for the application) has been invested, they’re more likely to complete the purchase.

While there may be exceptions (like with customized pricing for services) where a price can’t be easily shared, that’s not the case for courses, programs and masterminds as they have a fixed price.

Where there’s a fixed price for an offer, gating the price from potential customers should be viewed as questionable at best. Making people get into the sales process to get basic pricing information is a red flag as it infantilizes the buyer and chips away at their agency.

In this situation, the seller is acting as a gatekeeper, making the potential for further manipulation (such as badgering the potential buyer into a yes on a sales call) that much higher.

Payment Plans

As an industry, online business has been built on payment plans. On one hand, they make larger investments much easier to cash flow, but many time payment plans are used in a predatory and deceitful way.

Payment plans are often subject to a “ finance” charge, which may sound reasonable on the surface. After all, there is a small cost related to the administration and processing of payment plans.

But if you look closely at payment plans, you’ll notice that in many cases, these payment plans include a charge of 20% or more. This is not a payment plan, it’s a poor tax that punishes people for not paying in full.

The upcharge for using the payment plan is designed to generate additional revenue. Why? Many of these programs and courses have high default rates as they encourage people to spend money they don’t have. The additional funds generated from payment plans helps offset the losses from defaulted payments.

The other common issue with payment plans is the use of the “extended” payment plans in order to get payments down to a price point that’s manageable for potential customers. While these payments are often pitched as an “accessible” option, they’re structured in such a way that you’re making payments far beyond the life of the program or course.

The extended payment plan has nothing to do with being accessible, and everything to do with doing whatever it takes to make the sale. They’re often introduced at the very end of a launch in order to get people off the fence.

This strategy relies heavily on what’s called price anchoring where we use the first mention of price to guide the decision. If you’re considering joining a course with a $497 monthly payment, then a new option is added where the payment is $297/month, it seems like a bargain, even if you ultimately end up paying more.

Pricing Tricks: Charm & Loss Leaders

is-charm-pricing-ethical

As consumers, we’re constantly being subjected to pricing strategies that are designed based on psychological triggers. Some of these we may be very aware of, and others we may be less adept at recognizing.

Two of the most common pricing tactics used in online business are loss leader pricing, and charm pricing.

Charm pricing is something you’ve very likely aware of as it’s literally everywhere, and it’s the reason so much pricing in the online business world ends in a 7 or a 9. It’s based on the idea that you should change the left digit by one and that our brains prefer odd numbers.

That’s why we’ll see a program that’s $997 instead of $1000, as our brains are hardwired to view that lower price as more desirable.

In terms of pricing practices in this industry, charm pricing is one to be aware of. While I personally think that as consumers we’re savvy enough to recognize this, I do question why we need to use it at all.

A less understood pricing trick is lost leading pricing in the context of online business. You may be familiar with the idea of a loss leader which is a sale designed to get you into the store. It’s commonly used by grocery or retail stores as they know if they get you in the store, you’re likely to purchase higher value items.

This same tactic is used heavily in the online business world in the form of “trip wires” or “tiny offers”. The intention of these $27 and $37 dollar products is to get you to make an initial purchase and then have you go on to buy increasingly higher priced products.

As a marketer, I know all too well how effective this strategy is. It offers a proven way to generate revenue as you nurture people to the next purchase. I want to be clear that these sales funnels, or customer journeys, in and of themselves aren’t necessarily unethical.

The shady shit around the loss leader strategy of these low ticket items is the real problem, and that’s why we need to be much more thoughtful about making these purchases. From high pressure sales tactics to “upgrade” into the next purchase, to the fact that many of these products are a complete scam even at that low price point, the ecosystem around this type of pricing and strategy is often toxic.

People purchasing these loss leader products are often treated as a commodity. Much of the language around this pricing and sales approach strips away the humanity of the buyer, and relies on guilt, fear and disrespect.

The Ethics of Pricing

Before we look at how we do better, I want to touch on the ethics of pricing, as it would be easy to quickly look at each of the tactics I’ve outlined above and label them as unethical.

The truth is there’s much more nuance required in a conversation about pricing strategies and tactics. Nothing I’ve shared above is illegal and isn’t really subject to consumer protection.

While the grocery store or gas station can’t engage in certain tactics such as price fixing, the cross border, digital nature of online business means regulation is non-existent.

Just because something isn’t illegal, doesn’t mean it’s right. How and when you use these tactics comes down to your personal and business ethics.

For me, none of these tactics are aligned with my business values, or my personal approach to business which is rooted in putting trust first. My goal with this discussion is not to be prescriptive in terms of what is and isn’t ethical, but to get you thinking about what’s right for you.

As my friend Michelle Mazur always reminds me, ethics are personal, and I firmly believe that it’s more impactful for you, as a business owner and consumer, to engage in critical thinking about pricing and decide for yourself.

Why Trust Matters
in Pricing

In early 2021, I conducted a survey of online business owners, examining spending habits and results. When looking at the most expensive investments made, trust was cited as one of the top three reasons people made those purchases. (The others being wanting to grow and community/peer support.)

This research is backed up by a 2021 report from Deloitte Digital called Trust Drives Profitable Pricing. While the study looks at the consumer, travel and hospitality industry, it provides valuable insights into the connection between trust and pricing.

“Trust is the foundation of the human experience; it is impossible to build successful relationships without it.”

The Deloitte Digital survey of over 100, 000 people found that “62% of customers buy almost exclusively from trusted brands and 88% of customers who highly trust a brand have bought from the brand again.”

The data is clear: trust increases the willingness to pay. In the context of online business, this a double-edged sword, as those engaging in questionable pricing practices are very aware of the need to create trust quickly with consumers.

In fact, that’s why many of these pricing tactics exist. They’re designed to swindle us into the sale quickly, and short circuit us into trusting them. These predatory pricing strategies are designed to strip away your self-trust so you’ll say yes.

The greater awareness we have of how trust is being weaponized against us, the smarter consumers we can be. We’ll have the critical thinking skills required to assess these pricing tactics before we buy, and see them for what they really are.

As business owners, we need a new path forward when it comes to building a business based on trust, and how we approach pricing. It’s not about us being able to charge more, but operating in a climate where we prioritize what I call the five trust cores — truth, transparency, time, respect and results — in our business relationships.

TrustDNA-Framework-w-Logo

Most of all, taking a trust-first approach is a proven, BS-free way for us to build simple and sustainable businesses.

Now, let’s talk about the trust-first pricing principles.

The 4 Trust-First Pricing Principles

As the conversation in online business has evolved towards wanting to do business with more integrity, many of the pricing tactics I’ve outlined above are still incredibly common.

While there’s a growing desire to want to be more ethical in business, there’s also a lack of tangible alternatives. When there are solutions, there’s a hesitation to use the solutions as people worry they can’t sell without them.

I’m not going to deny that the status quo pricing tactics of online business work, because they do.

But if you’re hesitating, I challenge you to consider this:

What are using these tactics costing you? Your integrity? Your peace of mind? Your values? And is making more money really worth it?

What are they costing your customers? Their self-trust? Their agency? Their dignity? Their financial peace of mind?

From my point of view, that cost is far too great as real harm is done in the process.

Let’s talk about alternatives. Here are the four trust-first pricing principles.

#1. Pricing Transparency

One of the key elements of trust is transparency. In my TrustDNA method, transparency is one of the trust cores, as we need to be able to demonstrate that we do what we say we’re going to do.

The Deloitte Digital survey cited pricing transparency as a key factor for consumers, as they want to know that “organizations openly share information.” They cite an example with airlines where consumers are “3.07X more likely to book and pay more for a carrier (compared to its competitors) if transparency is high; the airline might be exceptionally clear about the ticket fare with no hidden fees.”

For offers with fixed pricing, hiding the price behind applications or by requiring a sales call, or to sit through a webinar, is about scarcity and secrecy. If someone has to do more than read a sales page to know how much your mastermind, course, or program costs, you’re stripping away their agency.

To create trust, allow your potential customer to decide for themselves if they want to engage in the next step by providing them with clear, easy-to-understand pricing. Don’t manipulate them and waste their time by making them have to engage further to get basic pricing details.

If you sell services in the business to entrepreneur market, it may be harder to provide a single price for your services, but you can still be transparent. Consider sharing ranges or starts at prices on your website so potential clients know if there’s a potential fit. Plus, this enables you to screen out people where their budget and your pricing aren’t aligned.

Clear, transparent pricing is a win for both the buyer and seller, and as an industry we need to recognize that hiding prices is a needless practice that erodes trust.

#2. Payment Plans Without Upcharges or Extensions

If you’re going to choose to offer pricing plans in your business, there’s simply no need to punish your customers for not paying in full.

I’ve used payment plans consistently for the masterminds I run, with 90% of my clients choosing this option. There’s no additional charge for clients accessing this option, and the administration cost is something I factor into the overall price.

Over the years, I’ve heard from new clients how much they appreciate that there’s no additional cost, and that helps to build trust early on in the relationship. I’d rather absorb the minimal fees resulting from payment processing and the occasional failed payment, than start off a working relationship with them feeling punished by a payment plan.

It’s not uncommon in the industry for the upcharge for payment plans to be 20% or even more, and as a business practice, that needs to end. If you’re not willing to absorb the costs related to payment plans in your business, at least do your customers the courtesy of charging only what it actually costs you to administer it. Your payment plans shouldn’t be used as a way to generate additional revenue.

As for extended payment plans, my recommendation is that payments never extend beyond the length of the program. If a program is six months, there’s no reasonable way that payments should go on for 18 or 24 months.

If your program or offer is priced in such a way that it’s inaccessible for the majority of your audience and you need to create these types of conditions, it’s time to reexamine your overall pricing. While you may make the sale with this tactic, you’re likely degrading trust over time as resentment builds as payments drag on for months and months.

#3. Fair Pricing Based on Actual Value

Unpopular opinion coming right up.

Pricing in the online business market is grossly inflated, and it’s the result of business coaches charging a premium, and then they teach their students to do the same.

For the celebrity entrepreneurs at the top of the food chain to keep making bank, everyone in the industry needs to charge more.

Think about it this way. For someone to be able to pay for a $50k a year mastermind, they need to be charging their customers accordingly. So then that cascades down the chain and we end up freshly minted, inexperienced creators and coaches charging prices that aren’t in line with the value they deliver.

The result is an entire economy built on pricing that has little to do with value, and everything to do with making money. The online business market has a premium pricing problem that’s rooted in late stage capitalism and bullshit 7 figure business dreams.

Listen, I want people to be paid appropriately for expertise, time and talents, but the pricing in this market is out of control. For the past 20 years, I’ve been working in a consulting capacity in corporate settings, giving me insights into real-world pricing.

Much of what I see in the online business world would never ever fly in the real world. If I were to quote some of these prices, I’d be laughed off the Zoom call, and on the agency side I work with established tech companies with very healthy budgets. These are the kind of companies that are used to paying for premium consulting services, and this bullshit pricing would never fly.

Trust me when I say that this is not a mindset issue on my part related to pricing and my “worth”, because it’s not.

It’s about my values, and the belief that pricing should be based on a fair exchange of value. And that yes, I want to run a profitable business, but not at the cost of gouging people with my pricing. And definitely not at the cost of having to make promises I could never keep.

That approach has served me well in the B2E market, as my clients, and would-be clients trust me. They see my values in action, and recognize that this isn’t just about making money.

It’s hard to build, let alone keep, trust when you’re overcharging and under delivering which too many times is the reality in this market.  As I found when asking about the worst business investments in my 2021 survey, people shared how they felt using words like bamboozled, cheated, infuriated, gutted, scammed and swindled.

As an industry, we’re in the midst of a pricing bubble, and problems result when it comes to delivering the corresponding value. We pay high ticket prices and are too often left with no results, a crappy program and feeling like a number.

Return on investment is that much harder to actually achieve when prices are designed in service of the seller only. Prices are set purely based on their personal revenue goals and downright terrible pricing advice from the celebrity entrepreneurs.

Enough is enough. We need a market correction, and that’s only going to happen if we stop buying from people perpetuating this cycle, and we commit to doing better with our own pricing.

For your pricing, the key is finding the middle ground where you get paid for your skills and talents, AND you deliver the goods.

Consider the difference between charging in a way that feels good for both you and your client, and in a way that’s simply about you amassing more money. So much of what’s taught in the market today is about wealth acquisition and has very little to do with value, service, integrity or trust.

#4. Humanize Your Sales Process

Doing business online is appealing as you’re able to reach people without knowing them personally. But just because you’re doing business using digital marketing doesn’t mean that you don’t need to build trusted relationships.

Your pricing is an integral part of your sales process, we need to put people back into that process. We need to find ways to support our potential customers, even if that’s hard to scale. Even if it means they say no. Even if it requires us to drop the shifty tactics and sell less.

And yes, I did imply that maybe part of what you need to do in your business is to get okay with selling less, and making less money, at least in the short-term as you shift tactics.

You can’t claim to be in the business of helping people and then treating them like a number in the sales process. And you really can’t say you’re doing social justice work in your business and then continue to engage in these problematic practices, as they’re incompatible.

For example, tricky pricing tactics like charm pricing and loss leader pricing should be evaluated through the lens of respect for our customers. Does it reinforce trust in the sales process or does it degrade it?

While some of these tactics may seem relatively harmless, not using them can speak volumes about the kind of business you’re running.

Finally, trust-first pricing and humanizing the sales process requires us to tell the truth about what we can really do for our clients, how long it will take and why (or why not) they should work with us.

As an industry, we need to stop fueling our sales by leveraging magical thinking and overpromising results

We can sell without these pricing tricks and by treating our potential customers like people. Putting people back in the process may mean we don’t make the sale, or someone waits for later, but prioritizing respect, truth and transparency is what builds trust.

I’d much rather have customers make a purchase from a place of unwavering trust than being manipulated and bullied into the sale, as how you start that relationship is the foundation of what’s to come.

How Will You Put Trust First in Your Pricing?

yellow mark

The Trust First Pricing principles I’ve shared in this episode and essay are designed to be both thought provoking, and to encourage you into taking action. Within this industry we all have the opportunity to shift how we price our services, and to skip the shifty tactics in favor of ones that build trust.

Which principle will you put into play first? The choice is yours.

be trusted