Article of the Week

How I Finally Stopped Pricing My Stuff Too Low
(And How You Can Too!)

Use Value Vs. Cash Value Vs. Market Values

Only one thing bothers me more than watching someone get overcharged… it’s watching someone consistently undercharge people.

Undercharging people carries many ramifications as far as value and self-worth… as well as reinforcing a downward spiral for people who otherwise could really change the world for the better.

People who overcharge always get found out by the market. I have to laugh when I see chuckleheads trying to charge $10,000 to build a sales funnel… when they themselves have never created a funnel that generated that much, let alone was worth that figure to set up.

But it makes me want to cry when I see people who offer real value massively undercharging what they are worth. I used to do that… in fact I still do it to a certain degree and really need to watch myself to avoid slipping into old, bad habits.

Why do people undercharge or overcharge?

It really comes down to the same reason for both undercharging AND overcharging: they don’t understand the difference between Use Value, Cash Value, and Market Value.

Let’s clear this up, shall we?

Use Value is what something is worth to someone in their life or current situation.

Example: a life raft has extremely high Use Value to someone adrift at sea after a shipwreck. A life raft offers comparatively low Use Value for someone riding a Jeep through the Mohave desert. The former would pay you every penny they had for that boat, while the latter would charge YOU for taking the boat off your hands.

Cash Value is what you are willing to accept from someone in exchange for your product, service, or whatever you sell.

Cash Value is the “price” you’re willing to accept in exchange for the USE value you will provide the buyer.

For example: we sell access to our software for $97/month… that’s the minimum cash value we’re willing to accept for the value we provide (which we can demonstrate is worth 100X that in Use Value each month when people use the tools).

Market Value is what the market tells you something is worth to them.

This one is a little trickier from the standpoint of who you’ve chosen as your target market.

For example: a stockbroker might think a piece of software was worth $400 / month, whereas a casual investor might look at the same software and squawk at paying $47 / month.

Stated differently, Market Value is what the average person you’re targeting with your product thinks something is “worth” to them.

The key to this whole process: find a way to balance all three of these different value measures to find the sweet spot for both you AND the customer.

Here’s how I used these distinctions to finally stop undercharging.

Step 1: Define WHO your market is and don’t worry about anyone else’s opinion from this point forward…. except of course the opinion of that chosen target market.

Step 2: Clearly define the RESULT you create with your product or service and what it’s worth to them in their life or business. (Example: a high performing sales letter is worth tens-of-thousands of dollars to virtually ANYONE who wants to increase sales.)

Step 3: Determine the range of Market Value your audience will pay for whatever it is you sell. See what competitors charge as a starting point. Does that mean you have to charge what they charge, or let what they charge limit you? No, but it does serve as a barometer for expectations.

Bottom Line: Your Market Value Also Depends On YOUR Value To The Market!

And your value to the market depends on the USE Value you can demonstrate and PROVE you bring to the market.

And the HIGH value you offer, compared to the comparatively LOW Cash Value you charge, will ultimately determine your financial success!

When I took a step back and looked at the sheer volume of USE Value I brought to the marketplace – compared to the Market Value I was offering – I knew the Cash Value I was asking was WAY too low.

In fact, when I measured the value I brought to the table not in dollars, but in results, I was EMBARASSED to undercharge. The pain of what people would think of me for not charging enough (Use Value and Market Value) was worse that the fear of charging too much (asking too much Cash Value).

By recognizing the Use Value I brought to the table, I cured myself of UNDER charging!

I recognized my value. I understood where the market was in terms of expectation about pricing. I saw where we were better… and I was able to communicate that value in such a way that I had no problem getting the cash value I wanted.

When you operate in a vacuum, it’s hard to know the value / price to put on your products and services. But once you understand how to balance Use, Cash, and Market Values… you’ll never underprice or overprice yourself again!

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