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The Art of Pricing

by Orator
41 replies
I'm at best a mediocre marketer when it comes to generating traffic, etc. I'm great at creating content, and ebooks. I've been more or less out of the game for a year or so while I went to college. In a couple weeks or so I will be launching my first information product that I consider my finest work ever.

What I'm having trouble coming up with is an appropriate price. This product is something I've put a lot of work into, and I've worked hard on the content part of it.

I'm a little leery about giving to many details now because warrior forum will be involved, and I don't want people to think this is some sort of stealth marketing tactic.

I was wondering what criteria do you use to price your products?
#art #pricing
  • Profile picture of the author CDarklock
    Originally Posted by Orator View Post

    What I'm having trouble coming up with is an appropriate price. This product is something I've put a lot of work into, and I've worked hard on the content part of it.
    Here's how I set prices.

    1. Make up a price.
    2. Pretend YOU paid that price for this product.
    3. Are you happy, or are you mad?
    4. If you're mad, the price is too high. Make it lower.
    5. If you're happy, the price is too low. Make it higher.
    6. If you changed the price, return to step 2.
    7. Lower the price to something that ends in a 7.
    8. Pretend you paid THIS price.
    9. If you are not happy, lower it by $10 and return to step 8.
    10. That's your price! Go sell it!
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    "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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    • Profile picture of the author Dave d
      Originally Posted by CDarklock View Post

      Here's how I set prices.

      1. Make up a price.
      2. Pretend YOU paid that price for this product.
      3. Are you happy, or are you mad?
      4. If you're mad, the price is too high. Make it lower.
      5. If you're happy, the price is too low. Make it higher.
      6. If you changed the price, return to step 2.
      7. Lower the price to something that ends in a 7.
      8. Pretend you paid THIS price.
      9. If you are not happy, lower it by $10 and return to step 8.
      10. That's your price! Go sell it!
      Wacky but interesting I might just try that
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    • Profile picture of the author Stuart Stirling
      Originally Posted by CDarklock View Post

      Here's how I set prices.

      1. Make up a price.
      2. Pretend YOU paid that price for this product.
      3. Are you happy, or are you mad?
      4. If you're mad, the price is too high. Make it lower.
      5. If you're happy, the price is too low. Make it higher.
      6. If you changed the price, return to step 2.
      7. Lower the price to something that ends in a 7.
      8. Pretend you paid THIS price.
      9. If you are not happy, lower it by $10 and return to step 8.
      10. That's your price! Go sell it!
      I like this a lot actually.

      If it's your first product, you'll probably tend to ask a lower price than
      you actually should. I did this for too long with my own products... maybe
      I still do

      How about showing a few other marketers your product/offer who's opinions
      you respect to get some advice. The main thing is to have the customer feel
      like they got a 'bargain'!

      That's why the 10 steps above would be good. You picture yourself as
      your customer.

      All the best,
      Stuart
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    • Profile picture of the author OLOORE
      Originally Posted by CDarklock View Post

      Here's how I set prices.
      1. Make up a price.
      2. Pretend YOU paid that price for this product.
      3. Are you happy, or are you mad?
      4. If you're mad, the price is too high. Make it lower.
      5. If you're happy, the price is too low. Make it higher.
      6. If you changed the price, return to step 2.
      7. Lower the price to something that ends in a 7.
      8. Pretend you paid THIS price.
      9. If you are not happy, lower it by $10 and return to step 8.
      10. That's your price! Go sell it!
      CDardlock great post
      This is for all of us. Tnx
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  • Profile picture of the author Colin Theriot
    Start at double what you think it's worth. I say this because even if you've worked hard on it, ESPECIALLY if you've worked hard on it - you're going to under-value it.

    So charge MORE than you think makes sense. If you sell 10 at that price, go up by 25% and start over. Keep raising the price until your returns/refunds are low enough, and you are making enough to make you happy and providing enough value to make your customers happy.

    If you are ever in doubt, DO NOT lower the price. Add more value to justify the price you've chosen. Then and ONLY then, offer a downsell where you REMOVE value in exchange for a reduced price.

    You're right, pricing can be hard to get your mind around when you're just starting out. I always lean towards charging more and adding value vs. trying to charge less to grow volume. We can't be Wal Mart.
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    • Profile picture of the author CDarklock
      Originally Posted by Colin Theriot View Post

      So charge MORE than you think makes sense. If you sell 10 at that price, go up by 25% and start over.
      Does anyone make a percentage- and conversion-based dime sale script?

      Every X sales, raise price by this percent.

      Every X hits without a sale, lower price by that percent.

      Never lower the price below what has made sales previously.

      Theoretically, that should converge on the right price.
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      "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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      • Profile picture of the author Colin Theriot
        Originally Posted by CDarklock View Post

        Does anyone make a percentage- and conversion-based dime sale script?

        Every X sales, raise price by this percent.

        Every X hits without a sale, lower price by that percent.

        Never lower the price below what has made sales previously.

        Theoretically, that should converge on the right price.
        No, but PM me. We should hire someone to make one for us and split the profits.
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  • Profile picture of the author Orator
    That... is amazingly logical Darklock, and while your picture scares me mate. I really appreciate sharing your method. I thought I read some where about selling something that ended with a 7, but I just can't remember the reason why though.
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    • Profile picture of the author CDarklock
      Originally Posted by Orator View Post

      I really appreciate sharing your method. I thought I read some where about selling something that ended with a 7, but I just can't remember the reason why though.
      Our intellect rounds to 5 but our emotions round to 10.

      So when you have a 7 or less, your intellect rounds it down to a 5 and then your emotions round it down to a 0.

      If you had an 8 or a 9, your intellect would round it up to a 10 and your emotions would leave it there.

      So when you're selling a $17 product, your prospective customer is responding to it the same way he would to a $10 product, but you get to put $7 more in your pocket when he buys.

      Sell an $18 product, and your prospective customer will respond to it like a $20 product. You might as well charge $27; the customer still responds like it's a $20 product, but you get more money.
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      "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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      • Profile picture of the author Colin Theriot
        Originally Posted by CDarklock View Post

        Our intellect rounds to 5 but our emotions round to 10.

        So when you have a 7 or less, your intellect rounds it down to a 5 and then your emotions round it down to a 0.

        If you had an 8 or a 9, your intellect would round it up to a 10 and your emotions would leave it there.

        So when you're selling a $17 product, your prospective customer is responding to it the same way he would to a $10 product, but you get to put $7 more in your pocket when he buys.

        Sell an $18 product, and your prospective customer will respond to it like a $20 product. You might as well charge $27; the customer still responds like it's a $20 product, but you get more money.
        This is the single most compelling explanation of the law of 7s I've ever seen. Kudos to you, and to whoever you might have swiped it from. I'll try and remember to give you credit when I explain it this way myself!
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      • Profile picture of the author Lance K
        Not sure about that reasoning. I've never paid $17 for something and felt like I paid $10.

        Also, if 7 rounds down to 5....5 rounds up to 10 anyway not down to 0.

        Originally Posted by CDarklock View Post

        Our intellect rounds to 5 but our emotions round to 10.

        So when you have a 7 or less, your intellect rounds it down to a 5 and then your emotions round it down to a 0.

        If you had an 8 or a 9, your intellect would round it up to a 10 and your emotions would leave it there.

        So when you're selling a $17 product, your prospective customer is responding to it the same way he would to a $10 product, but you get to put $7 more in your pocket when he buys.

        Sell an $18 product, and your prospective customer will respond to it like a $20 product. You might as well charge $27; the customer still responds like it's a $20 product, but you get more money.
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        • Profile picture of the author CDarklock
          Originally Posted by Lance K View Post

          Not sure about that reasoning. I've never paid $17 for something and felt like I paid $10.
          It's always just fascinating to watch people say "that's not true about ME" when broad generalities of behaviour come up.

          First, broad generalities are not true 100% of the time. That's normal.

          Second, most people are so incredibly bad at predicting their own behaviour, they don't even know what they've done after they've done it... let alone why.

          I am occasionally called upon to "show us some tricks" at a party - usually when I decline the invitation to play poker on the grounds that magicians don't play cards. (If we win, we cheated; if we lose, we're lousy magicians.) One of my favourite tricks when someone's being a loudmouth know-it-all jerk is to simply hand him a card, then convince him that he's selected that card from the deck himself and I can't possibly know what it is... while the rest of the audience remains completely aware that I had it face up less than a minute ago.

          Stage magic will teach you, better than anything else, precisely how stupid and gullible people really are.

          5 rounds up to 10 anyway not down to 0.
          Intellectually, yes. Emotionally, no.
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          "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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          • Profile picture of the author Lance K
            For the sake of fun, let's have a poll and see how many people have ever paid $17 for anything and described it as a $10 purchase.
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            • Profile picture of the author Bill Farnham
              Originally Posted by Lance K View Post

              For the sake of fun, let's have a poll and see how many people have ever paid $17 for anything and described it as a $10 purchase.
              I'm an American. I round it down to $16.99.

              Unless it's gas. In that case I round it down to $16.999.

              ~Bill
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            • Profile picture of the author CDarklock
              Originally Posted by Lance K View Post

              let's have a poll
              Yeah, because stupid and gullible people who don't know what they've done less than a minute later are certainly going to give an accurate answer to a POLL.

              Polls are magic, you know. When you give them? People always tell the truth and never make mistakes! :rolleyes:
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              "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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              • Profile picture of the author Lance K
                Originally Posted by CDarklock View Post

                Yeah, because stupid and gullible people who don't know what they've done less than a minute later are certainly going to give an accurate answer to a POLL.

                Polls are magic, you know. When you give them? People always tell the truth and never make mistakes! :rolleyes:
                I don't recall asking to take a poll of stupid and gullible people. Only people who made a $17 purchase.

                No need for the :rolleyes: emoticons, tone, etc. I simply disagreed with part of what you said. It wasn't personal. And I even said I'd reconsider if given supporting information. Take care.
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          • Profile picture of the author Lance K
            Originally Posted by CDarklock View Post

            It's always just fascinating to watch people say "that's not true about ME" when broad generalities of behaviour come up.
            It's not about MY behavior. It's that I find your broad generality about people making a $17 purchase and feeling like they spent $10 hard to believe. I'm open to reconsidering my opinion if you have some evidence to back up your statement.

            So while my response may be "just fascinating" to you, what I find fascinating is someone stating a broad generalization without providing any supporting facts and then getting defensive when someone disagrees.

            I simply don't agree with your generalization (at this point). Nothing more.
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            • Profile picture of the author CDarklock
              Originally Posted by Lance K View Post

              what I find fascinating is someone stating a broad generalization without providing any supporting facts and then getting defensive when someone disagrees.
              Not half as fascinating at this.

              Originally Posted by Lance K View Post

              I saw test results a number of years ago that said the best number to end with for online sales was 7 and the worst was 3.
              So... you've had supporting facts for two years.

              What's your disagreement, exactly?
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              "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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              • Profile picture of the author Lance K
                Originally Posted by CDarklock View Post


                So... you've had supporting facts for two years.

                What's your disagreement, exactly?
                My disagreement is EXACTLY what I said it was. I don't agree with your claim that people view a $17 purchase as a $10 purchase. Which I thought was pretty clear. And which has nothing to do with what you quoted from a past post of mine. Don't twist my words just because you're pissed/annoyed/whatever that I don't agree with your generalization.

                As I said earlier, I disagree with your statement that people think of a $17 purchase as a $10 purchase. Nothing more. And I'm more than willing to change my opinion if you can present additional information to support your generalization.
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                • Profile picture of the author CDarklock
                  Originally Posted by Lance K View Post

                  My disagreement is EXACTLY what I said it was. I don't agree with your claim that people view a $17 purchase as a $10 purchase.
                  That's not my claim. You don't even understand what I'm saying.

                  People TREAT the $17 purchase like a $10 purchase when they make the buy decision.

                  They are not aware of this.

                  Asking them about it is pointless.

                  Insisting that you don't believe it doesn't change it in any way, shape, or form. It is not my damn job to go research the matter for you and present citations YOU think are acceptable. If you don't believe it, check for yourself.
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                  • Profile picture of the author E. Brian Rose
                    Originally Posted by CDarklock View Post

                    That's not my claim. You don't even understand what I'm saying.

                    People TREAT the $17 purchase like a $10 purchase when they make the buy decision.

                    They are not aware of this.

                    Asking them about it is pointless.

                    Insisting that you don't believe it doesn't change it in any way, shape, or form. It is not my damn job to go research the matter for you and present citations YOU think are acceptable. If you don't believe it, check for yourself.
                    Price point psychology has been used for decades. A $29.99 product is viewed by the consumer as a $20 product, not a $30 product.
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                  • Profile picture of the author Lance K
                    Originally Posted by CDarklock View Post

                    That's not my claim. You don't even understand what I'm saying.
                    Maybe I don't.

                    Originally Posted by CDarklock View Post

                    Insisting that you don't believe it doesn't change it in any way, shape, or form. It is not my damn job to go research the matter for you and present citations YOU think are acceptable. If you don't believe it, check for yourself.
                    And just because you state it, doesn't make it true. It's not my job to prove your claim for you.



                    Originally Posted by CDarklock View Post

                    So when you're selling a $17 product, your prospective customer is responding to it the same way he would to a $10 product, but you get to put $7 more in your pocket when he buys.

                    Sell an $18 product, and your prospective customer will respond to it like a $20 product.
                    If the people who just purchased don't know what they did and why, how can you claim to know? That's all I'm asking.
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        • Profile picture of the author Colin Theriot
          Originally Posted by Lance K View Post

          Not sure about that reasoning. I've never paid $17 for something and felt like I paid $10.

          Also, if 7 rounds down to 5....5 rounds up to 10 anyway not down to 0.
          You're clearly a logical math-type person. I assure you that you're in the minority. It's not about reasoning, it's about how we use emotions to make justifications.

          It's not entirely a setup we're born with in our brains, but we're conditioned by the commercial landscape. If we're willing to get something for "under $20" then "$17" is an immediate "okay" because it's closest to 20 without pinging that anxiety associated with being our "high point".

          Prices with 7s tend to max out the "range" shoppers this way, and you get more sales than if you'd charged 18, 19, or 20. You may still well have bought anyways, but there are people whose math is way fuzzier.

          Yours truly included.
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          • Profile picture of the author Lance K
            I get that and agree. But I find it hard to believe that $17 relates more to $10 than $20. Sure, most would describe it as under $20, but I highly doubt many would describe it as $10.

            Originally Posted by Colin Theriot View Post

            You're clearly a logical math-type person. I assure you that you're in the minority. It's not about reasoning, it's about how we use emotions to make justifications.

            It's not entirely a setup we're born with in our brains, but we're conditioned by the commercial landscape. If we're willing to get something for "under $20" then "$17" is an immediate "okay" because it's closest to 20 without pinging that anxiety associated with being our "high point".

            Prices with 7s tend to max out the "range" shoppers this way, and you get more sales than if you'd charged 18, 19, or 20. You may still well have bought anyways, but there are people whose math is way fuzzier.

            Yours truly included.
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            • Profile picture of the author Colin Theriot
              Originally Posted by Lance K View Post

              I get that and agree. But I find it hard to believe that $17 relates more to $10 than $20. Sure, most would describe it as under $20, but I highly doubt many would describe it as $10.
              The effect is harder to observe at that particular price point, but as you go higher with it, $27 feels more like $20 than $30. It's $20-ish. It gets more observable in even higher amounts. $79 for most people "feels" in the $50-ish range. $80 or higher and they may as well be spending $100, because that's how they frame it.

              Only people who are naturally (or practically) good at math or with money will round the way you say most of the time. My own mother is this way, and calculates loose change in her head to the penny.

              Me? I tip 20% or over, because it's easy to calculate.

              But what really matters is does it work? If you have a product that sells for $10, mark it up to $17 and see how it does. I bet it does better income wise.

              You may lose some of the customers whose break point really WAS $10, but you'll get more money out of all the people whose breakpoint was really closer to $20, and they still feel like the got a deal, because they spent less than they projected.

              The strategy of the 7 is about how much it's not quite costing.
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      • Profile picture of the author scrofford
        Originally Posted by CDarklock View Post

        Our intellect rounds to 5 but our emotions round to 10.

        So when you have a 7 or less, your intellect rounds it down to a 5 and then your emotions round it down to a 0.

        If you had an 8 or a 9, your intellect would round it up to a 10 and your emotions would leave it there.

        So when you're selling a $17 product, your prospective customer is responding to it the same way he would to a $10 product, but you get to put $7 more in your pocket when he buys.

        Sell an $18 product, and your prospective customer will respond to it like a $20 product. You might as well charge $27; the customer still responds like it's a $20 product, but you get more money.
        Geez! Dude do you sit around all day and figure this stuff out!!??? (Although it is very good info! ) I ought to come down to Kent one of these days and take you out for a beer! I think you are spending too much time locked away in that basement! You need to get out more! LOL!
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  • Profile picture of the author Orator
    I appreciate your insight on mindset Colin. I've been working as a freelance IM contractor on forums and such. I'm use to selling my services pretty cheaply, I suppose that can be a dangerous mindset if it causes you to under value your own work. I'm also going to steal that Wal-Mart line. Thanks for your insight.

    Post Edit:

    Yeah Danny I will be putting a WSO about a month before I launch the product to the general public. I just didn't want to toot my own horn till everything was ready.
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  • Profile picture of the author Orator
    Nice Darklock that does explain a lot of pricing I've seen out there.
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  • Profile picture of the author Orator
    Interesting debate. Another question while this thread has some life in it.

    Reviews? Do they truly provide value, and if so how many should be given out? Thoughts?
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  • Profile picture of the author Lilach
    Very simple maths with pricing. Boring I'm afraid... RESEARCH!!!

    You really need to spend a great amount of time researching. What is currently out there on the market. How much are people prepared to spend? Do some market research, i.e. use a tool like Survey Monkey and ask people to respond, offer them a freebie as an incentive for their time.

    You also need to work out your costs, so you know what your break even point is and what the lowest you can charge is.

    It's important what ever price you go on, you don't go down. It never looks good, better to start off lower and go up once you've shown value.

    Lilach
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  • Profile picture of the author Orator
    I appreciate everyone's insight into this, I think I've come up with a price that will be reasonable and still leave me with a good profit margin. Now I just have to go finish the other minor stuff...

    -Final Content Editing
    -Finding Reviewers
    -Payment Processor
    -Website Outsourcing...
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  • Profile picture of the author Amy Carczak
    Price it higher than you think.

    Do you really think that the $1,000 or
    $2,000 products really deserver that
    price or do you think they get it
    because they asked for it?

    The other criteria is email marketing.

    People open an email based upon the
    subject line and not the price of the
    product being sold.

    Since the open rate is a constant, you
    need to charge more to earn more.

    Get it?
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  • Profile picture of the author JennSpencerIM
    To help answer the OPs question, I remember listing to Eben Pagan recently and he talked about a $1.00 bill and a $100.00 bill...what is the difference between the two? They both look pretty much the same, but there is more VALUE behind one of them. So I think you could really test out a product at any price and its going to sell based on the value you provide with it. Why doesn't Eben sell courses for thousands of dollars and other little guys with just as amazing products can't sell them for just a few bucks.

    Test your prices and see what works for your audience. I never like to be the highest or lowest in my field but that's just me. Others I know like to be the highest or the lowest. But I always test my products out at a few levels... $27, 37, 47, 67 typically and some stay at $67 while others are at $27. Depends on positioning and other products in the market.
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  • Profile picture of the author abednego
    CDarklock: Each time I click on a thread to post - you always beat me to it with something witty As much as I love reading your responses, do you ever feel like there's no point in actually typing anything out to begin with?
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    • Profile picture of the author CDarklock
      Originally Posted by abednego View Post

      do you ever feel like there's no point in actually typing anything out to begin with?
      While I may never educate the person to whom I'm replying, nor shed any additional light on the matter for some other reader, I can at the very least amuse people.
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      "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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  • Profile picture of the author Matt.Lake
    First of all, don't just presume you should end your price in a 7 because everyone says so.

    It's actually one of the biggest myths to pricing... no matter how good a "theory" there is to back it up.

    It ultimately comes down to testing.

    Very often, in *normal* markets, a price of $39.95 will sell MORE than $37.

    Maybe it will, maybe it won't. But you won't know unless you test.

    But think about it, how often do you see prices in the real world ending in a 7?

    All the big time companies and stores mainly use prices such as $29.99 or $29.95. Do you not think that says something? These prices have been tested with massive budgets and have worked for YEARS. Customers have become accustomed to them.

    So, when you go whacking a 7 on the end of your price, your prospect is actually more likely to stop and consider it... it looks weird.

    Now, on the other hand, if you're marketing to the *Internet Marketing* community, then yes, ending your price in a 7 will usually wok best for you because it works in the same way... that's what everyone has become accustomed to and is what is seen as normal.

    In conclusion, the advice that ending your price in a 7 is not the be all and end all... you should largely ignore it.

    If you're in a real market... go for something like $39, $39.99, $39.95 first.

    Then ultimately, test.
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    • Profile picture of the author davewebsmith
      @ Matt.Lake

      "All the big time companies and stores mainly use prices such as $29.99 or $29.95. Do you not think that says something? These prices have been tested with massive budgets and have worked for YEARS. Customers have become accustomed to them."

      Could well be that this would involve carrying less variants of cash for change in the retail sector ... Online doesnt involve ca$h
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      • Profile picture of the author Preben Frenning
        Originally Posted by Matt.Lake

        If you're in a real market... go for something like $39, $39.99, $39.95 first.
        Please define "real market". I'd say it's where people spend money. - And they spend money both off and online.

        You can't compare the "real world" with the online world. I hate playing chess online, but offline might be fun some times. I might read an aricle i get in a newspaper that I normally would never even have clicked on at an online newspaper.

        So there are many differences, though your statements might make sense at first. Remember that big-name marketers have tested A LOT with prices online as well. - Do what they do, and it'll save you the hassle of researching a whole lot by yourself.

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  • Profile picture of the author Preben Frenning
    The higher your price it, the more likely it is that your buyers will take action, since the info seems more valuable to them. (Especially compared to free)
    If they then get results, they're satisfied with the price.

    @CDarklock - Great explanation about the logic of 7

    "Make Big Promises; Overdeliver" - Seth Godin
    That is for repeat business

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  • Profile picture of the author Orator
    I think you might have a point Stuart, and I appreciate your insight. This thread has certainly provoked an interesting debate on the subject of pricing. I appreciate everyone's contributions, and thoughts.
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  • Profile picture of the author Anonymous Affiliate
    1) Check competitors to find out what are the niche's "comfortable" price boundaries or levels

    2) Once defined a reasonable price level within your niche as per your competitors' prices, split test three price points: One being 50% below niche average price, other being the niche average, and finally another one being 50% above niche average.

    You'd be surprised at the results you might come up from those split tests. Price is ALWAYS the element you want to split test first.
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