Glossary: Pricing Strategy

Every key term from the course, in plain English. When a lesson says a word you don't know, it lives here.

The Confidence Gap

The distance between what you charge and what you're worth. Almost every owner has one — it comes from fear of hearing no, confusing effort with value, and copying competitors' prices. Closing it is the fastest revenue win in this course.

The Anchor Ladder

A three-tier price structure where the top tier exists to make your core middle offer look reasonable. Most buyers pick the middle rung — the top rung's real job is reframing, not selling.

The 10% Rule

Raise your prices 10% every quarter until you meet real, measurable resistance. Small raises are invisible to buyers; big jumps cause revolts. Four quarterly raises compound to roughly 46% in a year.

Anchoring

The first number a buyer sees sets the scale for every number after it. Show the premium tier first, use was/now pricing, or put a higher compare-at price above yours — so your price reads as reasonable by comparison.

Charm pricing

Prices ending in 9 (or 7) — $47, $97 — that signal value and a deal. Works for volume and consumer offers; clashes with luxury positioning, where round numbers signal quality instead.

Prestige pricing

Deliberately high, usually round-number pricing ($500, $2,000) that signals quality. The price itself is part of the product — lowering it would cheapen the perception, not just the revenue.

Penetration pricing

Deliberately low pricing to win volume and market share fast. Only works with airtight costs and real scale — without both, it's just undercharging with a fancy name.

True cost

Every cost of delivering one unit: materials, fees, software, shipping, returns — plus your time at a real hourly rate. The number most owners underestimate, and the foundation every price stands on.

Floor price

The lowest price you can charge without losing money: true cost plus your minimum acceptable margin. Never go below it — not for friends, not for exposure, not for a "strategic" discount.

Margin

What you keep from each sale after costs, usually as a percentage of price. Targets: digital products 80%+, services 50%+, physical products 30–50%. Margin is what turns revenue into a business.

Lifetime value (LTV)

What one customer is worth over the whole relationship: average order value × purchase frequency × customer lifespan. A high LTV lets you price and spend completely differently than a one-time sale does.

Decoy pricing

A top tier priced high and loaded with everything, designed partly to not be chosen — its job is making the middle tier look like the smart deal. Honest as long as the tier is real and buyable.

Bundling

Packaging complementary products at one combined price. Raises average order value when the bundle is simpler to buy than the pieces — and the bundle price is obviously less than the sum.

Grandfathering

Letting existing customers keep their old price when you raise it for everyone else. Buys loyalty and goodwill; skip it when old prices sit below your floor or the gap breeds resentment.

Revenue per visitor

Total revenue divided by total visitors — the one metric that settles price tests. A higher price with fewer conversions still wins if revenue per visitor goes up. Do the math, not the feeling.