Many entrepreneurs find pricing decisions for their products and services really challenging. You’ll often hear such people asking each other, “What should I charge?”

I’ve read a number of books about pricing with complex ideas on how to do it correctly. Most involved some form of testing and optimization. They all shared the same underlying assumption though: that the optimal prices are those which extract the most long-term profit. Since that’s extremely difficult to predict, testing is essential.

Testing of that nature can be dreadfully boring though, and you still won’t know if your tests are accurate. Since economies fluctuate anyway, a test done one month could yield different results than if you run it a month later.

I dislike that approach mainly because I find the framing too limiting. It’s a very objective model, and I have a long history of getting better results when I use subjective framing. If my reality is some kind of simulation, it seems unlikely that my simulation is programmed to train me to care about pricing optimizing by doing split tests. That seems like a rather useless skill to develop, akin to improving my telephone sanitizing skills (which admittedly aren’t very polished). I have no desire to sculpt my character into a split testing mogul.

Pricing as Communication

A model I like much better is to think of pricing as a form of communication. The pricing is part of the offer and inseparable from it. The price isn’t something to be tacked on later.

Pricing can communicate whether you’re trying to provide something cheaply or luxuriously, for instance. If I tell you that I bought a car for $8000, that would communicate something different than if I say I bought one for $80,000, even if I told you nothing else about the car.

In this sense pricing also serves as a filter. Your price will affect the types of customers and clients you attract. For instance, I could price Conscious Growth Club at $10K per year instead of $2K a year, and the group would still work, but we’d have different types of members and fewer of them. Otherwise the program’s structure and design could be entirely the same. The price would communicate what types of members we’re looking for. Similarly I know someone who charges $80K per year for his coaching program and $5K for his seminars. Are they objectively any better than our $2K coaching program and $500 workshops? Nope, but the pricing difference will attract different people.

So when I think about pricing from this perspective, I think about the kinds of people I’d like to attract and work with. If I want to offer a coaching program for the kinds of people who like $10K programs, I’ll price it at $10K. I’m personally one of those people, currently enrolled in a friend’s $12K coaching program for the year.

Pricing From the Customer’s Perspective

Another frame I like is to think about what price is best for the customer to pay. This is a good model if you know your customer base really well, and you know how different prices will make them feel.

You could price something low to communicate that it’s easy and accessible if that’s what you think is best for the customer.

Or you could price something higher if you want to communicate that a product or service is a bigger investment or a bigger value. People often appreciate higher priced products more. Pricing too low can reduce a person’s appreciation.

I use this on myself too. I know that if I join a coaching program that costs $10K per year, I’ll appreciate it more and gain more value from it than if I pay $1K per year. When making purchasing decisions, I think about pricing and features in terms of what will help me appreciate a purchase.

Pricing can be a bit funny that way. It’s hard to admit that sometimes it’s better to pay more because you’ll appreciate the ownership experience more. If you pay too little, you may communicate to yourself that you don’t value the purchase as much. Trying to get something for less isn’t always wise.

Setting prices based on what’s likely to be best for my core customer base has been super helpful. I could continue to maintain a healthy business just with this pricing model alone. It seems to work very well in practice, as I get more compliments than complaints about my pricing. People pay enough that they value and appreciate the investment, but it’s still low enough that they can extract lots of value from their purchase to make it very worthwhile. This generates a lot of repeat business too. Most of the sign-ups for our new Stature course are from repeat customers.

The best price for the customer to pay is the price that helps them extract the most value, satisfaction, and appreciation from their purchase. One key factor for the courses I offer is that people need to do the lessons to extract the value. When someone completes the course, I know from experience that they’re very likely to get really good value from it and feel that the deal was more than fair, generous even. But they also have to invest time and energy to extract the full value. If they pay too little, there’s less buy-in and less motivation to do the work and finish the lessons, even if it will benefit them immensely. Paying too little sends a message to their minds that maybe they shouldn’t value this investment as much.

On the other hand, if the price is too high, then people feel stressed out and worried. Or they talk themselves out of making that kind of commitment. Some people, however, will feel even more excited when they commit to a price that’s a stretch for them. I’ve experienced this myself when I’ve stepped up to pay for high-end coaching programs. It can be exciting and fun to spend enough money such that it feels edgy and risky, and so far I’ve always gotten more than my money’s worth when I’ve stretched myself to pay more. That’s mainly because when I take a bigger financial risk, I’m very committed to doing my part to extract the value; otherwise I’d feel really stupid for paying that much for something and not leveraging the heck out of it.

Another factor could be that I join a group with other people who’ve stretched themselves to join as well, and such groups are just awesome to participate in because people really put in the effort to make it work, which benefits everyone in the group. We’re all committed, so we all pitch it and make it work for each other. When everyone has to stretch a bit to get in, it’s even better inside. Higher pricing can serve as a good filter for attracting ambitious, growth-oriented people – not perfectly but pretty well.

One reason I price Conscious Growth Club at $2K is that for much of my audience, that pricing feels pretty edgy already while $10K would feel out of reach for them. Based on the great community I’m seeing inside, I think it’s the right pricing for most members. For some I can tell it’s not edgy enough though. If you’re looking for a community of only entrepreneurs, for instance, a $10K program would be better. In our community people work on all different types of goals: health, relationships, finances, life purpose, meaningful work, creative skills, and more.

Pricing for Trust

Another frame I like using today is what you might call trust-based pricing. I didn’t learn about this somewhere else, at least not to my knowledge. It just gradually evolved from trying to find better frames for this aspect of business.

In doing workshops, creating courses, and running Conscious Growth Club, I experience just how wonderful it is to work closely with people who trust me. High-trust relationships are so win-win all around. Trust reduces friction and makes it easier for people to get results, which in turn leads to more appreciation. Appreciation is good all around, both for business and personal reasons.

When people ask me questions about our products and services, and I can tell they’re not really aligned with what we provide or the kind of relationship I’d like to have with them, I gently recommend that they don’t buy anything. Sometimes I’ll suggest free articles to read instead, and sometimes I’ll suggest other resources in this field that might be a better fit for them. I don’t try to invite everyone to become a customer. To me that’s a special relationship, and the alignment matters.

I’m not suggesting that people need to trust my advice blindly. That’s not the type of trust we’re talking about here.

In this case I’m referring to trust in my intentions, experience, and honesty. I want people to trust that I’m on their side and that I genuinely want to help them grow and improve. If they can at least buy into that, it makes a world of difference for us. These days I only want to work only with people who can feel aligned with having this kind of relationship. I feel very fortunate that I can maintain this standard and still attract plenty of business. Not everyone is right for this kind of relationship, but for the right people who are aligned with it, they tend to love and want nothing less. Having such a high-trust relationship is just beautiful.

I love these kinds of relationships with other businesses too. For instance, I really like the dental practice that I’ve been going to for the past several years. I’ve worked with multiple dentists there, and they’re all great. The people at the front desk are super friendly, and I sometimes joke around with them. The hygienist is awesome too. She and I chat about all sorts of things like travel and even ayahuasca. I’ve never been to another dental practice like this; previous ones felt somber, cold, and heartless. But in this place, it’s obvious that the people like working with each other, and they like their patients too. In the past, I’ve gone at least a decade between dental appointments because I disliked the experience so much. With these people I’m currently going 3x per year, which I’ve never done before. Most importantly, I trust them. They aren’t just friendly. They’re also good at what they do. I hope they stay in business for as long as possible.

I’m a good customer for them too. I show up on time. I follow their advice. I pay every bill on the spot, so they never have to bill me. I never complain about prices or try to negotiate them down.

With high trust in a coaching situation, people are willing to share deeper truths about themselves. If you only get the surface truth, coaching can only go so deep. With more trust people will share the more vulnerable parts of themselves, and that leads to even deeper trust.

When someone trusts me in this way, such as by sharing something that’s really difficult for them to share, I feel honored. It’s a privilege to be trusted with that level of intimacy. It makes me feel more invested in helping the person. Handling such situations can be delicate. Delicate is a word that in my distant past, I’d never have applied to myself. But today I like sculpting my character in that direction. I love the realm of high-trust relationships because it leads into a world of subtlety and delicacy, yet there’s still room for playfulness and fun.

In terms of pricing models, I think about pricing for trust. If I want to attract more high-trust customers (if only because they’re delightful to serve), then I think about what price will best align with attracting and developing high-trust relationships.

If I price too cheaply, it means people can buy without having to trust as much, which can flood the business with too many jaded and skeptical people that I’d rather not deal with. If they want something too cheaply, they probably don’t want something really good, which means they won’t have the right attitude for supporting me in doing my best work. That isn’t going to create a win-win relationship.

If I price too high though, it can damage trust because then people might assume I’m just doing it for personal greed. So if there’s a valid reason for pricing higher than usual, it’s important to communicate that clearly.

It’s also wise to consider the existing trust relationship. I like to offer launch discounts for new courses, such as for the new Stature course that’s launching now. Most of the people who will join during the launch already have a trusting relationship with me, like repeat customers and long-term blog readers or newsletter subscribers, so from my view they don’t have to prove themselves to me. I want to make it easier for them to join, so we’ll have a nice, high-trust group inside. And I also want to make the price lower for them as a way of saying that I trust them too and that I appreciate our relationship. I trust that even at the lower price, they’ll still take it seriously enough and do the work of the course, so they can get the benefits.

After the launch, the course can continue selling for many years, but the new people who discover it probably aren’t part of my core, high-trust audience yet. They may be new to my work. They’re not sure if they can trust me, and I’m not sure if I can trust them. So it may be better if they start with reading free articles for a while. Then they can think about taking a course when they trust me enough to do so. The higher price is a bigger hurdle for them, so it takes more trust for them to say yes.

Some people are really into growing their businesses. For me alignment is way more important than growth. If I can do both, that’s great, but between the two, I see alignment as far more important. I’d be a lot less happy if I 10X’d my business but messed up the alignment in the process. I just don’t want to work closely with people unless we can develop and maintain high-trust relationships.

I really, truly don’t want to do business with people who don’t trust me enough to make it win-win. Even if I made a lot more money trying to capture those extra sales, I wouldn’t want it. Even if I could delegate way more, including all of the customer service, I wouldn’t feel good about a customer service rep having to deal with misaligned customers either. It wouldn’t be right.

Alignment Pricing

I think the ultimate pricing model is to price for alignment. What would an aligned business look like for you, and what pricing decisions would help you create that?

Incidentally, you can use this mindset even if you’re an employee. What’s the right salary for you to request and for your employer to pay such that the alignment is there, and you’re able to invest in a high-trust relationship?

We can also see why split-testing and traditional optimization strategies look good on paper but often fall short in reality. Trying to optimize for profit is short-sighted and risks attracting many misaligned customers. That can increase support costs, negative reviews, product returns, staff turnover, etc. Many people I know who use this model would consider a refund rate of 5-10% to be pretty good. My business’ current refund rate is 0.0%. And the reason is simple, we don’t offer refunds. Instead we have an honor code. If you’d like to see my explanation of the honor code and why we have it, watch the Stature video from 27:33 onward. But the main reason is that I tested offering a money-back guarantee, and while it brought in more sales, it messed up the alignment and created more problems and friction inside the business. It really sucks to feel hesitant about investing fully in someone because I suspect they might request a refund. It’s so nice not to have to deal with that anymore.

Having an honor code instead of money-back guarantee really does turn away some business. I would almost certainly make more money in the short-term by offering unconditional refunds. But the reason I don’t is simple. The headaches aren’t worth it to me.

People have to meet a higher standard of trust to buy with our honor code – trust in me and trust in themselves to follow through. That’s the standard I want. It means fewer people getting through but way more alignment inside. And it makes the business so much nicer and more fulfilling to run. People who are jaded or suspicious just aren’t going to accept such an offer, and I’m glad for that. I’m delighted to refer their business to other people who’d welcome it.

I also think that in the long run, this approach will make the business better for staff members too. It means that staff also get to work with aligned customers who will trust and appreciate them. No staff member should have to deal with customers from hell. We’ll fire such customers from hell and keep the aligned staff. Our staff won’t be treated poorly.

Creating win-win relationships is a high standard, but it elevates so many other parts of the business. It removes so much friction and makes it easier to just do the real work of serving people. Financially it works well too. This will be a six-figure January for us, which is a nice way to start the year.