One of the most frequent questions that I seem to get is, “Mike, how do I make more money?” Before I give you the tier method, we need to recognize that there is one major assumption here -- the fact that you are already making some money. The question, after all, is how to make more of it.
The fact that you already make some money means that you have some clients who are paying you something. This is a key element required for the tier method of increasing revenue to work. If you are currently making no money and have no clients, then I hate to say it, but this blog post really isn’t for you. Instead, I recommend you read my other blog posts about starting a business from scratch.
Building on a Brand
So if you are ready to get started using the tier method to increase your revenue, first take a look at what you are selling. If you sell a product, let’s say soap, for example, try making a new variation of this product that is more expensive. Maybe the new, expensive version is made using a special rare aloe, organic ingredients, or something like that.
Then, make another, even more elite version of the product. Maybe the next step up the tier has gold flakes mixed in with the soap. While there is no right or wrong answer here, find some way to build a higher tier of your basic product, then a better one, then the best one. Each of these will be at increasing price points, of course.
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Why It Works
Doing this plays into the psychology of your customers. Think about it. We all want to be the best at something. (Blame it on dormant high school pressure, if you want.) So we try to have the best car in town and, if we don’t have that, then it’s the best house. If we don’t’ have that, it’s the best sports coach, or the best parties, or the best something. And having the best soap is one way to get there.
Customers, people, always want to stand out by being the best in some way, and if they can do it with your product, then they, in their mind, are the best. Most people will use your regular old soap (maybe they are the best, in their mind, at something else), but others will, without a doubt, upgrade and gladly pay the price to get the best.
Case in point -- think about the Polo shirt. It is the same stinking shirt you can get just about anywhere. But, with the Polo logo on it, the shirt becomes the next tier up, and people line up happily to pay a boatload more for it. This is because they feel it makes them the best.
Give Them the Chance
Everyone wants to climb up to the highest tier. After all, when you are up there, you can look down on everyone else! So, let people climb your tier quickly. When they buy your regular soap, tell them about your other products.
This works across the board, folks. Do a quick case study of the examples within American Express -- Plum to Gold to Platinum to the “super secret” Black Card. You will see that this model works for services, too.
Still not convinced? Think about flying in a plane -- from standard class to frequent flyer to first class. Shoot, even theme parks do it! They start out with their standard park access, then offer a priority line, and then even an exclusive or ‘early access’ pass.
The key to increasing your revenue is right in front of you. Just look at what you currently offer, whether a service or a product, and determine what you can offer to the person who wants a better and then the best version possible. Then run with it!
Mike Michalowicz is the Author of the business cult-classic, The Toilet Paper Entrepreneur and is a columnist for the Wall Street Journal. Michalowicz has built three multi-million dollar companies, is a frequent expert guest on MSNBC, CNBC, ABC and other television networks, and is a nationally renowned speaker. His website is http://www.ToiletPaperEntrepreneur.com and his book is available at Amazon.com and all major book stores.