Price. It’s an emotional topic for shoppers and for brands. 

As shoppers were more influenced by price than we care to admit.

As brands we’re often afraid to change our prices. And our current prices were probably created a long time ago. It’s almost a certainty that they price for at least some of your products is wrong right now.

Byron Myer’s is a super smart dude. He started Inogen, a med-tech business, while in college and took it public in 2014. Now he runs Glimmer Wish with his wife and daughters. He used price theory and price strategy to add tens of millions in sales at Inogen. He’s also used it to scale Glimmer Wish from 0 to over 7 figures in less than a year. 

And this isn’t a “let’s raise prices a bit and see what happens” approach. This is a scientific, mathematical way to find the optimal price to maximize profits.

Why Is your pricing wrong:

• It’s likely based on flawed strategies like competitor benchmarking or cost plus. Both strategies are ok to start with but do NOT produce your optimal price for total profits.
• You’re following old customer psychology that states you should always charge $19.99 instead of $19.97 instead of $20 or $22. Often this is incorrect.
• You haven’t changed the price in over a year.
• In the current environment if you’re not changing price or running tests quarterly, your pricing is probably off.

This topic will make you more Cold. Hard. Cash. Give it a listen!

Byron:

Everyone is so data-driven on ad performance, right? Or they're doing a CRO experiment and they're just diving into the data. But then again, they haven't looked at price in five years on their main selling product. So take that same mindset you use that you're so analytical with on your paid ads and apply it to pricing because there's just so much value. It's one of the easiest things you can do now that you know that there is a process to do it, to improve profit for your business, all of that profit's just going to flow straight to the bottom line. And it's best for almost every brand out there. I could almost guarantee you're at the wrong price point right now.

Brett:

Hey, it's time for the Spicy Curry segment. The point of the show when I get just a little bit spicy. And how is this for spice for you? Your prices are wrong. Almost undoubtedly what you're charging customers right now is not optimized. And I think the reason for this, and we talk about it in the show, is because we kind of are reactionary with our pricing strategy. We price based on co competitors competitor benchmarking or we use cost plus, but we never look at how does our price impact conversion rate and total volume and total profits. And here's the deal. Mathematically speaking, there's a way to find the right price for your business, the right price that will maximize total profits. The deal, we can't take percentages to the bank, we can't take competitor comparisons to the bank, but what we can take to the bank is cold hard cash. So in this episode, Byron Myers and I talk about pricing theory, pricing strategy, and pricing optimization, that you're going to love it. You got to check it out. So now back to the show. I'm here with Byron Myers and can't wait to dive into pricing and pricing strategy, but I want to hear a little more of your story, Byron. And so you're a longtime entrepreneur, very successful guy. You started a med tech business, then now you got a business with your wife and daughters. And so we're going to talk about both, but talk a little bit about your med tech business, why you started that and what the scoop was behind that.

Byron:

Happy to and just great to be here as well. Brett, this is, you're one of my top three podcasts of all time I listened to on the regular. So love that. It's an honor

Brett:

That warms, that warms my heart. That's better than a fivestar review any day, that verbal affirmation there. Love it. Thank you

Byron:

For sharing that. So yeah, my entrepreneurial journey started back in college, uc, Santa Barbara entered a business plan competition with a couple friends just for experience. Didn't want to start a company, but we stumbled onto a great idea, just completely driven from the market, just trying to solve a problem for a grandmother, and that was a portable oxygen concentrator. So basically made its own oxygen from room air and would replace all of the oxygen tanks that people had to drag around, which obviously have a limited capacity. And again, just all from the market. None of us were engineers. I was a math econ major and so it was another founder and the third was biology. And so we really developed the technology along the way after we had a full understanding of the market. But we launched that company still while in college. Ultimately took it public in 2014 at the peak, our market cap was over 6 billion. Definitely has stumbled since then. But I put in a good 20 years with the company and now actually I'm doing a new company Glimmer Wish that my daughter came up with haircare and skincare. And that has already been more fulfilling, has been more fun, more rewarding personally than taking a MedTech company public. It's just been great to do it with family

Brett:

And that's one of my dreams. I would love to start a business, start a brand, do something with family. We have a small real estate business that a few of my kids and my wife, my wife mostly runs it, so that's fun. But we'd love to do more. Building a business with family kind of fun. And it's great. Even if it doesn't make a lot of money, it's still enjoyable. And so I love the story though of Enogen where most people that start a school project, Byron, they just try to get a passing grade and hope the teacher doesn't call 'em out too much. They're just throwing stuff together. But you built an idea that eventually turned into a real business that eventually iPod. That's crazy. Not very often that that happens for sure. And I know maybe the recent history hasn't been as great for the company, but great while you were there, sounds like, and things do change for sure. I love this topic of pricing and price optimization, but when did you first become passionate about pricing? Was that something that just kind of evolved over time? Was there a eureka moment? Talk about why you became so focused on pricing.

Byron:

Yeah, yeah, great question. And this has really become my passion project now because brands I've just noticed don't pay attention to pricing, but how I stumbled across this at some point along the way in the Inogen journey, I wanted to put some more tools in my toolbox. And so I did the Rady M B A program, which is at uc, San Diego down the coast from where I was in Santa Barbara. And just in one economics class, the professor was talking about pricing just sort of on the side more on a theory basis. But I took the M B A program for my business. I want tools. How am I going to grow my business, make it as successful as possible? I didn't want just the M B A to further my career on my resume. So I saw there that economic theory allowed people to optimize prices by really solving for prices. But in the textbooks it's done with quantity and on a theory basis. So I adapted that to the modern e-commerce seller, which was all on conversion rate and made a bunch of changes and then used it in Inogen and used that process repeatedly year after year to optimize prices. And we improved profit by millions by doing this. And so now I'm doing it in my new businesses and it's working well and I just want to share it with others.

Brett:

Yeah, this is so interesting because I think most people when it comes to price, they're more reactionary. They're looking at what competitors are charging, they just arbitrarily pull something that's kind of what do I think I can get away with? What do I think I can charge here? Rather than being strategic and mathematical and applying pricing theory. And to your point with your previous brand, this was responsible for millions and millions of dollars in profits by improving your pricing model. And little changes in price can have a dramatic impact on profits, but little changes in price can also have a dramatic improvement or change in conversion rate. And so really excited to dive into this topic a little bit, but where do you think most brands get priced wrong?

Byron:

Yeah, I think that probably the most common error is that they just set it and forget it, right? They think about price once and then never look at it again. But the second most common problem is that they're setting prices incorrectly. And I think largely using the methods that you mentioned, they're looking at co competitors. That's competitor benchmarking. They're doing cost plus trying to get their margins to a certain place. But all of those methods, I mean they're great when you don't have any data and you need to launch with something, but once you have data, you need to use a mathematical tool. And to be fair, I just don't think brands are aware that you can mathematically optimize price to maximize margin. I mean, it's not a just arbitrary point. You test and test a few prices one way to do it, but you're not going as far as you can. There's an actual method you can use to get to the right price point. There is a correct price which you can solve for.

Brett:

And it's really great that you said some of those tools, competitor benchmarking or cost plus. It's okay if you don't have data or you got to start somewhere, so you got to start somewhere. But yeah, ultimately is your goal to compete with your competitors or is your goal to maximize profit? Is your goal to get a certain margin on each item? Or is the goal to maximize total profits? Right? We don't live on percentages. We can't take percentages to the bank, but you can take cold hard cash to the bank. And so yeah, you can find mathematically what the right price is. So can you walk us through what does your model entail? How are you weaving theory with practical tools and stuff? So walk us through that a little bit.

Byron:

Yeah, you can really set up a few simple tests, which you need to gather the data, which you would then do calculations with. And you hear a lot of people say sometimes, especially now, just raise your price, see what happens, see if you're better off, which again is better than not doing anything. But I found that many times brands are better off lowering price because you get such an improvement in the conversion factor. And so as you said, it's not about maximizing the margin on a per sale basis, it's the total margin in the business. So what you need to do is run several price tests and pick higher prices, pick lower prices really as far away as you can, 10 20% or more. It kind of depends where your price point is and capture the conversion rate data at each one of those price points.

And there's tools out there to easily do this. Like the simple shop is one where you could see conversion data on a per product basis. You can get it in ga. Shopify doesn't show conversion rate by each product for some reason, but I'm hoping they're going to improve that. But then you're essentially drawing this relationship, which is actually the demand curve. Every business has its unique demand curve, which is also price elasticity. So that's how demand is changing. So in other words, how the conversion rate for your product is changing as the price changes. And so each one will have a different slope, a different shape of that demand curve. And once you have that data, then you can do some real math. And from there it's just an equation. You need some other points of data, but you're just doing calculations to find the right price and not between those test points that you did, but any price along the whole demand curve which will maximize profit.

Brett:

Yeah, it's super interesting. So not just what the prices you tested, but look at that demand curve and the concept of price elasticity. It's brilliant and it does unlock new thought processes and a new level of profitability for you. I remember actually this is one of the areas in college really sticks out in my mind. The price elasticity of demand and understanding that for some things are very elastic. Heart surgery as an example, you need heart surgery. Does it really matter what it cost? You're going to figure out a way. It could be 10,000, be a hundred thousand, be 200,000, you're going to figure it out if you need it to save your life versus gasoline. I don't know, the two gas stations next to each other, one's 10 cents a gallon cheaper. You're probably going to do that. Why wouldn't you 5 cents, even 1 cent a gallon cheaper? If you notice, maybe you would take that into account and that's inelastic, right? And so what you've got to do though is you've got to price, you've got to have enough tests of price to build that demand curve for your business and then you find the sweet spot along that curve. Am I understanding that correctly?

Byron:

Yeah, pretty much. And almost every brand in e-commerce is pretty elastic, which means it will vary. The conversion rate will be sensitive to price changes. And so almost every brand can benefit from doing this exercise. And you need to understand what that price elasticity value is for your business. And then you can find out what the optimal price point is doing a bunch of math.

Brett:

And now that I just said that, did I inverse those? I know what I described was good, but I think I described one as elastic when it was not elastic, and so I didn't want to spell you out. Econ class concept is the same. I swapped the words, whatever. So yeah, demand is inelastic for heart surgery, demand's going to be what it is,

Byron:

Elastic

Brett:

For gas, so

Byron:

Correct.

Brett:

Thanks for not calling me out, but there was something in there that you said, I was like, oh, wait a minute. Yeah, I said that backwards. How many tests are we maybe going to need to run and for how long can help map that out?

Byron:

So at a minimum, you want a higher price point than your control and a lower price point than your control. So you have three distinct points where you're using your control price as well. Ideally I like to do more, but it kind of comes down to the brand's ability to track data, to simultaneously run tests. So you're doing these simultaneously. Ideally, if you're not set up to do that, you can do them sequentially, then you have to take into account seasonality. You have to have some normalization factors that put the data back so you can compare it with the prior data, but that's all doable. This is all better than not looking at price at all. So we're better off no matter what. And a lot of people get all concerned about is the data statistically significant and all that. Of course you can use calculators online to find out if it is and the amount of data you need to run for it to be stat sig and all that. I try not to get too hung up about that because again, you're all better off no matter what, but I tend to run a test for at least one month regardless of the volume that a brand's doing. So ideally you're simultaneously running three different price points for at least a month

Brett:

Would be control, higher price, lower price, run those all three simultaneously, ideally for a month.

Byron:

Correct. Then you'll have plenty of data to do the calculations.

Brett:

And when you're running these price tests, are you mainly suggesting someone does this on their Shopify store or on Amazon or both or does it depend on where they get the most volume in any insights there or does it matter?

Byron:

You can do it anywhere for a glimmer wish. Amazon's doing great for us right now. That is our best channel. And so we're leaning into Amazon. I've done all of the data using Amazon data. You can get to conversion rate data in Amazon, you can change prices, you can do some price AB testing, but you don't need to wherever your most volume, the volume is for your business. I recommend doing the process, but you can do it everywhere.

Brett:

Yeah, super interesting. Cool. And so anything specifically for a Shopify store owner? I know you mentioned can see conversion rate by product. So if we are running a Shopify store, that's where we need to lean into GA or some other tool

Byron:

You can use ga. I use, I think it's $5 a month and no relation on my part, but it's called the simple shop.com and it's just an overlay and it will show you everything you need to know, conversion rate data by product and a bunch of other helpful info. So it's a pretty inexpensive solution.

Brett:

And then you're getting the data, you're running the calculations, and that's going to basically the calculations you run, is that going to give you one price? Is it going to give you a price range? What is that going to spit out for you?

Byron:

It will give you the exact price to maximize total profit. Now, there's two separate processes actually. You can maximize total revenue or you can maximize total profit. And those are two distinct price points. That's not the same price to accomplish both. And so if for some reason you want to maximize revenue, you're valued on revenue, not on profit, it could be

Brett:

An exit and you want to show that top line growth and there's some real business reasons to do that

Byron:

Potentially,

Brett:

But you're going to maximize profits.

Byron:

So you could do that. And I like to do that anyway just to see where that point is. But most brands are going to want to maximize profit, so it will give you the exact to the cent price. Now from there, I recommend doing some fine tuning just math, and then I talk about in a course I have where you can bring in consumer psychology and some other factors where you do want to finesse that mathematical price point a little bit sometimes to just fine tune it,

Brett:

Yeah, get it to maybe end in an interesting number. You do the dot nine 9.99 or 0.97 or 0.67, whatever, what you do in there to optimize. And then you're also taking into account other things like how's this going to impact my sales velocity on Amazon, which could impact rankings, which has a bit of a virtuous circle I guess because it's looking at conversion rates, it is taking that into account.

Byron:

It is, and it's also taking into account in the equations you need your marginal cost, so that's the cost for one additional unit. And so you're not including fixed costs in there like rent and overhead and actually not even including advertising costs, which a lot of people would include, but just that cost really of your product, any processing costs, fulfillment costs. So some of those Amazon fees are going to go into that as well. But you need your marginal cost and eventually you get your marginal revenue from your demand curve. And so to get marginal revenue, you have to do some derivatives. So I don't want to scare people, but there is some math involved, but I have a calculator to make it easy. So you don't have to do all that hard work, but you're setting marginal costs equal to marginal revenue. And that is what is from the textbook that when you do that, profit is maximized at that point. And so it's just how you manipulate the data to get it into the economic theory to maximize profit.

Brett:

Nice. So you need to understand it for the most part, but yet you don't have to run all the calculations yourself, just get the inputs, use your tool, and then it will spit out the answer. Now, once you get that optimized price and it's to the penny, and then you maybe tweak it a little bit to use consumer psychology and things like that and to make it look right after you do that, now how often are we going back and looking to run a test again and maybe change our price or reoptimize,

Byron:

Right? I'd say at least twice a year. And this will depend on a lot of factors, how much volume the brand is doing, if there are changes, competitors coming out, other products launched right now, just the economic environment, so uncertain, I would probably be doing things every quarter because everything, what this process is using is real buying decision. That's why it's so much better than any other method. It's how people are spending money from their own wallet. That's the data you're using. So everything's included, the economic factors going on, large macro factors where your competitors are priced, even using the cost of your product, your cogs, because that is changing as well. So all that data is factored in to these decisions.

Brett:

And man, with things changing rapidly right now and inflation still happening in uncertainty, this process is coming up with your demand curve and it's very possible. In fact, it's almost a certainty that demand curve is shifting a little bit right now because of outside factors, because of competitive factors, because of economic factors. And so running these calculations on a quarterly basis makes a ton of sense. Any other, I know we could get into more of the nitty gritty or break down the formula, but that would be difficult to talk about in a podcast. And so we're going to plug the course. I know you've got a special discount for the listeners. We'll talk about that in a minute. But any other insights on how we should be thinking about price or any mistakes that we left out? Any other general thoughts there?

Byron:

The biggest thing was that I would just encourage brands to look at price mean. Everyone is so data-driven on ad performance or they're doing a C R O experiment and they're just diving into the data, but then again, they haven't looked at price in five years on their main selling product. So take that same mindset you use that you're so analytical with on your paid ads and apply it to pricing. Just so much value. It's one of the easiest things you can do now that you know that there is a process to do it, to improve profit for your business, all of that profit's just going to flow straight to the bottom line. And it's best for almost every brand out there. I could almost guarantee you're at the wrong price point right now.

Brett:

And man, how much easier is it to go out and adjust your price than it is to AB test landing pages or split test your bullet points on Amazon or hire a C R O firm and go through that process? All those I would recommend, I've had recent podcasts, guests and episodes dedicated to C R O and how to improve ux, and that's all valuable, but it's a lot easier to adjust price. And I think we forget how much price impacts conversion rate and then again, how much little price changes can impact profit one way or the other. And one other thing that's interesting about price is it can impact your ad performance, right? I'm a Google shopping guy from the very beginning of Google Shopping, and we see it all the time. Back when we used to do SKU level bid adjustments and pulling data at the individual product level, you could see it, you drop price and Clickthrough goes up and you drop price and more people see the product, you drop price.

And even before any of that happens, Google starts showing the ad more because they know that if the price is lower, more people are going to click and more people click, that makes more money for Google. And so yeah, there are things that shift here, and so it makes all the sense in the world to look at this the right way and also to know that you're probably at the wrong price point. Honestly, this is interesting. This has me thinking about pricing from a service standpoint. So a service model, and actually just to click on that, just this is mostly for my benefit, but I know we have other service providers, other industry people that are involved that are more service-based. How do you apply pricing in a similar pricing model to a service?

Byron:

And you can also apply it in a B two B scenario as well. For an actual product, it gets a little tricky because then you tend to go into quantity rather than conversion rate. But if you a service where you are displaying prices, you are measuring that in a conversion rate scenario where you're probably capturing a lead and then converting that lead. It doesn't matter if there's a Zoom process in the middle of that or a phone call, you're still having the conversion data. I did all this at Enogen using phone sales. It was before e-commerce. So you can apply the process to pretty much any selling environment you may have to make some tweaks. I'm happy to talk to brands if they have unique situation of how they could apply this to their own store SaaS or B two B, whatever it may be. It can definitely work.

Brett:

Yeah, really cool. Let's talk a little bit about Glimmer Wish. So you mentioned it, I know you're running with your wife and your daughters. You have more fun with that than you did your previous business even though the previous business went public. But where did the idea for Glimmer Wish come from and what do you guys sell?

Byron:

So my daughter came up with the idea, she was 10 at the time, and she always wanted these just fun looking haircare skincare products in the store. And then my wife would look at the label and see, oh, this just has all these terrible chemicals in this product. You're not getting this. And so it was my daughter's idea, well, let's make fun products. Kids want these ones that she saw with clean ingredients that moms will approve of, right? Because the clean products were boring. Nobody wants something in cardboard and it smells like lavender or something,

Brett:

Or patchouli or something.

Byron:

Yeah, exactly. So we custom mold, mermaids, unicorns in these fun shapes, these fun bottles, all with clean ingredients. We do haircare products and skincare, and we launched to the market about a year ago, and it's going great, and we're just having a ton of fun.

Brett:

What a cool concept. And I love that your daughter's the one that came up with the idea because yeah, most shampoo bottles, conditioner bottles, haircare product, it's just a tube or it's, it's a cardboard sleeve or something, which by the way, there is a market for that. We have several brands that create clean products and someone who's really interested in avoiding plastics or whatever, they're going to gravitate towards that. But what about kids, man? They want cool products. And it is actually easier as a parent to get your kid to brush their teeth or put conditioner in their hair, take care of self-care if it's fun, if the packaging is fun. But most of that stuff, for whatever reason, I'm sure it's cost related and probably a few other factors, but most of that stuff is garbage, right? It's garbage that you don't want to put on your body or in your body. And so yeah, it's a really cool brand. And I'm looking at one of the unicorn, the unicorn conditioner right now, which is super fun. And I'm also, now I'm looking at your pricing, got me thinking how long did it take you to come up with your specific pricing? And so actually, do you mind if we talk about the pricing?

Byron:

Sure.

Brett:

Cool. So I see some of these, the unicorn shampoos, $22 unicorn conditioner, 22 body wash is 18, mermaid haircare, duos 44. So those are ending in a low number. And I know psychology or some of the teachings in the past were like, Hey, end in seven or higher or whatever. So talk about these prices and how they compare to maybe where you started.

Byron:

Yeah, well, I'm definitely using what we talked about for my own business as well. And like we said, Amazon's working really well. So that's where most of our data is. We're on Shopify too, and trying to grow that channel, of course, but Amazon's about 60% of our revenue, and so most of our data's there. It's easy to test things on Amazon. And so we launched at around $17, $18 and use the traditional processes. You don't have data. So yeah, we did competitor benchmarking, we did cost plus, and our cogs were high when we came out of the gate, so we kind of had to price it up there a little bit. But once we had data, ran the process and found out our optimal price point to maximize total business for the company was around $22. So we went with that. And then once you run that, you implement those prices, then you verify, okay, am I getting the right conversion rate, which the process predicted I would get? And that's the,

Brett:

So you got to go back and check it, right? Process said this price point, this conversion rate, but does that actually happen? So you got to run it and then verify the data.

Byron:

And so we did. And then the fine tuning, that's an interesting point because I think here the consumer psychology has shifted a little bit and it's what happens. Everyone used to price at 1999 would be kind of the price point. And you're seeing a ton of brands now, especially in the beauty space. So I think kind of geared at this audience, which we're in our customer are moms buying the product, moms are buying the product, and they're buying all these other products and related industries. Everyone is moving towards just rounded off, just give me a price, $20, don't say 1999. I think other industries that still works, but the latest trend is to just give me a flat price, even one number that I can take to the bank.

Brett:

A lot of people are saying, yeah, I get what you're trying to do. I know this is a pricing tactic. And so yeah, now people are just like, give me, I want clean ingredients. I want clean pricing. Exactly.

Byron:

Yeah,

Brett:

No

Byron:

Gimmicks.

Brett:

Yeah, really good, really good. Byron, this has been fantastic. You got me motivated to talk price more frequently with customers and take a closer look at that because one of the things we talk about a lot back to the C R O discussion is we run a lot of top of funnel traffic as an agency, a lot of YouTube, a lot of Google shopping, a lot of search and more. And so we love conversion rate optimization companies and specialists because if you can improve your conversion rate a little bit, now that changes the economics of your top of funnel campaigns. Now we can go harder on YouTube and we can push performance max more and we can grow the business. Same is true though with price, we start to get more profitability or we optimize price for conversion rate, which leads to profitability. Same thing. That has an impact on top of funnel lines. I know I mentioned Google shopping a little bit ago, but it has an impact on all your ads. So big fan of this. So for those that want to check out the course, how can they find it? We'll link to it in the show notes of course, too, but how can they find it? And then I think you got a special deal for everybody as well.

Byron:

Absolutely. So the course is profit professor.io, go check it out. It's just my passion project, just trying to help people and definitely want to do a discount for your listeners, 50% off what we can do. Just use code O m G

Brett:

Code O M G, and that's at Profit professor because he's taking you back to school. But he doesn't in a polite way, even when he is a guest on your podcast, if you make an error in describing something, he'll kind of let it slide and be gentle about it. But a profit professor, really, really good stuff. So use that code, omg, get 50% off, I think impossible for this not to pay for itself and not to help you tremendously so likely. This is a lever you are not pulling either not pulling frequently enough or not pulling in the right way. And it's another way to optimize your business. Byron, so glad I had you on. This is really, really good. Can't wait to share this with the e-comm world. And any parting thoughts, anything you want to share? I'll also shout out to girl dads out there like myself, I got six daughters. I got to go buy some unicorn shampoo now. I think that's going to make some people very, very happy. But any other asks, tips or anything to close on?

Byron:

Well, as you're looking at the course, just know I'm available. I want to help people. And I love just connecting with brands too. If you want to reach out, hello, at profit professor.io is the email address. Happy to help you through the course or just talk, see how we can help each other. We're all in this together. So I want to thank you too, Brett, it's been an honor. I love the pod. I listened to every episode and it's just been great to be here

Brett:

Now. It's going to be both super exciting and potentially a little bit weird to hear yourself on the podcast.

Byron:

Absolutely.

Brett:

But you did a great job, really informative. Love this. Can't wait to share clips and share the whole episode. So Byron Myers, ladies and gentlemen, Byron, thanks for taking the time and we'll have to do this again sometime.

Byron:

Sounds good. Thanks a lot.

Brett:

Awesome. And thank you for tuning in as always. We'd love to hear feedback from you. What would you like to hear of on the podcast? And if you haven't done it so far, we would love that five star review on iTunes. It helps other people discover the show. And with that, until next time, thank you for listening.

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