How do you price a product?

by solotr
28 replies
I have one of those napkin things on my computer some where that shows for getting consumers into your funnel, you start with a low priced product, around $17. My question is how do you know for an information product what price to charge?

My niches are really niches, 1500-5500 people but they do spend money on what I write about (or I won't do the report). The problem I'm having is the pricing.

I've looked at similar products, bought some of them and it seems there's two pricing models:
1. Make a sale at all costs, under $1 or
2. Price as high as possible and then go down from there, but start at $97.

I'm not saying I'm an expert at SEO, site building, blogging or any of it but I do know how to target my message specifically to the people I want to market to.

Other than running all over the net with 10 exact pages with different prices, is there maybe a middle ground? I'm not looking to make it up in "volume". The method I'm considering is using Writer's Market rates per page.

Any suggestions or advice is most appreciated.
#price #product
  • Profile picture of the author Alexa Smith
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    • Profile picture of the author DomainKing
      I find that starting high is not always a bad thing! After all you can lower the price if your sales are not on the increase.
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      • Profile picture of the author yesacpow
        First of all it all comes down to the quality of your product.

        With that said, you must understand that if your product is not top notch quality then you cannot sell it for $97. Otherwise your customers will think that you rip them off.

        Also if your product is of great quality then selling it at $17 will only devalue it so that it seems like any other ebook on the topic.

        What we often think is that selling at a low price is best but that is wrong. Sure you may not make as many sales selling a higher priced product but in the long run it will work out better. So if your product is great, start at a higher price.

        It would also be a good idea to test two price simultaneously over and over until you find a winner. For eg, $97 vs $77 etc
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  • Profile picture of the author DotComBum
    The '$1' model is great, but only when you are going to make money from back-end sales, OTO etc from it.
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  • Profile picture of the author rlrlphs
    You can price a product if it is very on demand and its importance to the costumers.
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  • Profile picture of the author TheWealthSquad
    True the $1 offer or free just pay shipping offers are based on making money on the upsell, one time offer, cross sell.

    To truly find out where you need to price it is to test it. Even large companies have to test. Depending on the value you place on it and the purpose of it. If it is a premium product don't sell it at $17 or it won't be valued. A simple ebook is fine for $17 or $27 but an 8 week home study course at that price would not get much respect.

    Price does influence perception. It happens in every industry. The only way is to test. You can start at either end of the spectrum. Moving up means you have more testimonials or a reason to raise it. Moving down means you have to be careful how you do it so you don't create the perception that it simply isn't worth the price you had on it and you want to increase sales.

    Pick 3 or 4 prices. Cover a wide range $17, $27<, $77 and $97 for example. Run a few hundred people through each page to see where the sales happen. Then determine if you are using it as an intro product (where you want maximum number of people because you are going to upsell them later) or it is a stand alone product where you want to maximize profit.

    PS No product should ever be stand alone Find a higher priced affiliate product to upsell them with as a OTO.
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  • Profile picture of the author solotr
    All good suggestions and much appreciated. I have found a few higher priced affiliate products to use as within the reports and due to the nature of a few reports a OTO may not be appropriate for a number of reasons...not too many OTO's you can do within the funeral industry.

    Think I'd rather maximize profit, so that helps in starting with my testing price. Again, thank you all.
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    • Profile picture of the author Troy_Phillips
      Originally Posted by solotr View Post

      All good suggestions and much appreciated. I have found a few higher priced affiliate products to use as within the reports and due to the nature of a few reports a OTO may not be appropriate for a number of reasons...not too many OTO's you can do within the funeral industry.

      Think I'd rather maximize profit, so that helps in starting with my testing price. Again, thank you all.
      I was kind of thinking the funeral industry would actually be the ultimate one time offer .

      You are only worth the price you ask. The only time you will ever see an offer from me that is below $100 is if I ever decide to do a wso.
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  • Profile picture of the author Clayton Jolin
    Actually, the price of a product is decided by how detailed it is.

    That said, one single thing can be explained in more than one way and with every other way, you just get into explaining things more deeper.

    Hope that makes sense.

    CJ
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  • Profile picture of the author Raiel Schwartz
    There are several factors that come in to play when you try to price your product.

    Objective: Why are you selling the product? Is it to build a customer base for a higher product? Is it to demonstrate your authority of a niche in a cost-effective solution? Your objective will determine your pricing. If you are trying to get wide exposure, you may offer a straight-to-the-point but very detailed report for as low as $7.00

    Availability of Information: If you are re-writing someone else's product, or if the informaiton you are selling is widely avaliable - then you are going to have to factor that into your pricing. "Hidden Information" and genuine inside secrets will always be worth the price.

    Perceived Value: Regardless of how good your actual content is - if you make your product look like it's worth $197 - then to your visitors it is worth $197 dollars. Good salescopy can allow you to sell for $197 and be justified in that pricing or make people laugh at you for even thinking about selling it for over than $47.00. Your approach, and how you visually represent your product can create a higher perceived value.

    I.E: Even though videos are easier to make then eBooks - because it's a direct information stream - videos are perceived HIGHER value then eBooks - even though it may take you 2 months to write an eBook while it takes 2 hours to "videoize" it.

    Niche Market / Traffic: Some niches are use to getting everything for free - therefore, they won't pay even $5 for an eBook because the idea is new to them. You have to price your product depending on the visitor type you are expecting or what niche you are marketing to. Check out your competitors, see what they offer and what their pricing is, and offer MORE then your competitors for just a *tiny* bit less (to not de-value yourself).

    Hope that helps - there are of course hundreds of other variables - but I feel that the above can help you a bit.
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  • Profile picture of the author Mr Money Maker
    Hi I did research on this........numbers are funny.......If I price an ebook of mine to sell at $28.50.....it makes people feel good inside.......if I price something at $26.98 even though its a lower price...the 98 cents at the end of the pricing number - looks meaner in peoples minds than .50 cents...and that's funny because $28.50 is much higher.
    If I charged $26.95 most people then think I am out to drain every cent I can from customers. Yes if I charge $26.95 people think I'm a greedy person. And then I might lose a new customer !!

    Numbers are fun.......so why does $28.50 sell so well........... because it's out of the norm, of the $28.95 's or the $28.98 's.........the zero on the end means......zero..........it registers in peoples minds as zero, and when you see a zero you feel better............so $28.50 is a good price for selling info online.
    People try and reason also why I want $28.50............some people think, hey he lowered his price down .48 cents from $28.98..........so if zeros work, then why not use $28.00 even................well people reason it this way, he's even greeder than the person who wants $27.99........I know many of you may think I am nutz.........well I am not......try it !! I sell and make at least 35% more money doing this.

    Also ......I don't believe in selling e-books and information for a cheap price like $9.95.....I found out people want to pay for something of Value and would rather pay more than less money, so I also offer them more in exchange.....so they get their moneys worth everytime !!
    I would never sell an ebook online like other people do cheap for $9.95...........it makes people think the product is cheap and not worth anything......I mean really can you learn to become a millionaire for only $9.95?.........LOL...I don;t think anyone is going to buy that one.....yet as funny as it seems, people will believe they can make a million dollars for $28.50....
    Because they think they piad for a better value !!

    Try it out sometime.........oh yes...but it helps to have a great product to sell also !!
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  • Profile picture of the author Adrian Cooper
    It depends on the product.

    Software sells for more than eBooks because people expect to pay higher prices than for books which people associate with the sort of price you would pay at Amazon for a "real" book as they put it, which is tangible and has production costs.

    Videos can be priced much higher because people like them and there is no physical benchmark.

    For the average niche eBook, my experience over many years suggests that $27 is good balance between acceptability and profit, with $17 being optimum for sales and $37 for a large, quality book.

    I sell my 560 page book - which I wrote myself - for $17 for the eBook version, and the paperback version on Amazon and all book shops for $37.

    Amazon discounts my book to $33 - actually I have several books on Amazon - and I promote it through my own affiliate link.

    Actually that is an excellent strategy because when people buy my book on Amazon through my Amazon affiliate link, they also buy more books and even tangible products that are totally unrelated - I do very well from Amazon that way.
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  • Profile picture of the author Kunle Olomofe
    Solotr,

    I think Craig.Michaels and Emmanuel Betinis gave you good IM advice for price fixing.

    However, it's not enough to answer the question in your OP which is...

    "How do you price a product?"

    That's a basic question that has been and will probably always give IMers nightmares.

    The reason is IMers don't think like average day-to-day offline business owner in terms of pricing. They only really see invisible factors (perceived value) or stringent factors (what kind of niche is it, do they spend money or not?)-- But neither of this is enough to give you an accurate answer to that nagging question "How do you price a product?"

    If the latter was enough, you wouldn't ever have to ask that question, you'd just follow the time tested formula of 'guesstimation'--which is how IMers come up with prices.

    So, if you REALLY want to stop having the 'Price Fixing Headache', here's the formula you MUST use (regardless of perceived value and other tangible and intangible issues)...

    There is 1 main thing you MUST know and factor in during your decision making process...

    It's this...

    HOW MUCH does it COST to produce AND deliver this infoproduct to EACH customer?

    It's a simple question but I bet you can't answer it without scratching your head.

    Still it is a question you MUST FIRST answer.

    Forget all the other IM advice you hear... (at least for sanity's sake and for now).

    Answer THIS question FIRST.

    I'll give you an example to help you out...

    Let's say the answer to that question for you is...

    It costs $500 to start up and $10 per day to produce and deliver your digital content. Over 30 days your cost will be $800.

    To determine your cost PER customer you HAVE to set an initial 30 day SALES LIMIT (this is where 99% of readers of this thread will run off, "LIMITS?! WTF?! I was told I can make UNLIMITED INCOME man, so tough!" Well, if you've been told that you were lied to... there is NO SUCH THING AS MAKING AN UNLIMITED INCOME. Even Bill Gates income has a limit!) So, be smart and make REALISTIC projections!

    Back to our example... let's say you decide to be SENSIBLE and put a CAP on your first 30 days of sales, you can also call this your first 30 day projections...

    As YOU have stated solotr, your niches are small and the prospects are between 1,500 - 5,500. Right? Knowing this figure puts you ahead of 99% of IMers because you NEED to have an idea at least of the SIZE of your audience. Without that how can you really determine the cost value of attracting ONE customer or how many customers are really out there that your budget can help you reach?

    Luckily, you know the size of your own market. You're way ahead as I said.

    So, say you go for the 5,500 prospect market.

    Let's also assume your advertising budget and general promotional reach can attract at least 20% of that audience over 30 days, that's 1,100 people to at least see or hear your sales pitch.

    Now, Marketing 101 comes into play and all that stuff you hear about conversion rates now becomes VERY relevant right now.

    Let's say from tests you've conducted or from your past efforts in similar markets or from market trends, you PROJECT a conversion-to-sale ratio of 5%.

    That means you will be aiming to SELL just 55 "units" of your product over that 30 day period, right?

    OK... We're almost there...

    If it costs you $800 to deliver 55 pieces of your product, your production cost PER CUSTOMER will be $14.55. Alright, now you have one MINIMUM price already to work with.

    Next step is SETTING THE ACTUAL PRICE the public will see...

    The industry standard pricing formula that will include a profit per sale for you was once suggested to me by a consultant I have utmost faith in to be around 25% of my cost.

    In this case that is just $3.63 (i.e. 25% of $14.55).

    So, if you price your product at $18.18 and LIMIT sales to 55 buyers, in 30 days you will make a total income of $999.90. Your TOTAL cost is $800. So your profit will be $199.90.

    This will be your private goal which is to make at least $199.90 in profit.

    If you decide you will not publicly LIMIT the number of items you sell, then anything you make on top of that $199.90 profit will be truly gravy. If you decide to publicly LIMIT the sales to 55 items and $199.90 is a good profit for you (assuming you decide to NOT be greedy), then SCIENTIFICALLY your ideal price SHOULD be $18.18.

    Bottom line is this, your MINIMUM no. of sales @ $18.18 should be 44 = $800. Any less and you will be running at a loss, wherein you have to act FAST to make up for that loss.

    Bottom line, price fixing isn't child's play or guess work. You HAVE to have your pre-release variables just right (give cushions to each number to stay on the safe side), to get the BEST price for YOU. If your business costs $800 to run in your 1st month and you decide that because Mr. A is charging $1 so will you that means you're aiming to attract AT LEAST 800 buyers which is 14% of your audience reach. If you believe you can do that, then go for it.

    If you decide to price HIGH at $97 (arbitrarily) because Mr. B is charging that amount, then you would only need to make 8 sales which is a mere 0.0015% of your audience reach, if the market will bite, then you'll be laughing like a lunatic all the way to the bank at every new sale.

    Bottom line, you MUST first calculate your realistic MINIMUM price point by following the above steps. When you know that you can plan...

    A. Special offers with confidence knowing what your losses or gains will be
    B. Confidently tell your prospects how you arrived at your price so they feel they are making an informed buying decision
    C. Aim for the BEST market for your business and your pockets if you want low spenders and there are tons of them up for grabs, you can go for the mass appeal strategy, if you want HIGH spenders, then you narrow your sales pitch etc to capture THESE folks.

    There's probably a ton more I can tell you about this, but you have enough to get you going.

    I hope you will take heed as it will help you STOP the guess work and stop the head and heart aches of fixing a price that works best for YOU...

    Good luck.

    Kunle Olomofe
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  • Profile picture of the author nevillealston
    The only thing I am wary about pricing stuff at a high value to begin with is the fear of not getting as many sales as I'd hoped for...

    Which is why I love the 50/50 rule....
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  • Profile picture of the author competitive
    I started my product at $97 and astonishingly to me it sold. Overtime I reduced it down to $50 and now I sell it for $40 which seems to be a good price. I must admit I never tried the $97.99 approach and it seems the even money price works for me.

    Regards
    Barry
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  • Profile picture of the author zankee
    10 or 20 times the cost of the product, split test different price points, Position the product differently. If you sell a need or a want, you will not be able to ask a price much more than that of a competitor. HOWEVER if you sell "a dream" you can charge anything you want
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  • Profile picture of the author Rob Anderson
    hi. this is a very interesting thread as you can never really get an answer. every answer is the right way.
    for example i hate the 9.99 trick, and all my products will always be 10.00 but i concede that it probably works. (well i really mean all my products would be $90.00)
    equally i agree that the price should be hooked to the value that you get - real value. if that were true i would have paid 10 x more for the profitlance course, and less than half for some of the others that i have since bought.

    i am releasing my first product soon, and have the same pricing dilemma. i think that the advice to split test is a good idea. but i cannot do that.

    so what i think i am going to do is to give away a copy of my product to about 5 marketers that i think that i trust and simply ask them to help me with the pricing. i run the risk of them copying it, but i dont think they will. why bothwr when they can simply become an affiliate and make money honestly.

    there are only two other e books on my topic that i know of, so maybe my price could be high.

    all i can advise you is never undervalue yourself. rich people didnt.

    another point to be aware of is the quality of your website. if it looks cheap you will need to sell cheap, and visa versa.
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  • Profile picture of the author rashamba
    I like the free cd method from Russell Brunson. You get their credit card info and then offer your main product as a oto when checking out. Less barrier to make a sale.
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  • Profile picture of the author jukeboxhero
    My best selling product is at $97 and it seems to convert well and be fairly consistent. Since i started promoting using adwords i've been regularly selling about 2 a day with no affiliate promotion.
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  • Profile picture of the author phil.wheatley
    As mentioned, all of the above is correct. Here's the definition of value - "the value is what somebody is prepared to pay for it". Now, often it seems people judege value by how big the ebook is, or how many videos etc. But if there was an ebook which showed how I could make my dingding double in size from reading one paragraph, I would happily pay the same amount for that as one which is 250 pages long to give the same result. I think the value should be based on what they will be able to do as a result of reading your product.

    Phil
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    • Profile picture of the author SOT
      Hi -

      Pricing is tricky! There have been some great answers to this thread. The only tactic I would caution against is the "start high and lower the price if you don't get sales". From my MBA studies, I know that this can cause lots of problems...

      Let's assume you sell your first 8 copies at $97, but you needed to sell 20 @ $97 to break -even so you lower the price to $77 to stimulate sales. You sell another 10 at $77 but then someone who bought at $97 checks back to your sales page and sees their "high price" purchase being devalued. They are likely to ask for a refund of $20, or possibly the whole $97. And if you lower the price still more to get sales, the problem is likely to compound. And at every point you will need to make even more sales to break even.

      It's been proven time and time again that if you want to sell more, you have to put the price **up**. That's why just about every sales pitch out there screams "lowest price only til midnight Friday", "after 50 sales, price will increase to ..." and so on. It stimulates pressured buying as people panic they will miss out. I know it works because I fall for it every time and I KNOW WHAT THE SALES COPY IS DOING! LOL! Raising the price as time goes on also gives your product perceived lasting value AND rewards the early buyers for making a decision early. The later buyers will feel irritated they missed out on the lowest ever price - so they hopefully will act faster next time - and refunds are minimised. All round happy customers - and don't we all want that!

      Cheers!

      Susan
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  • Profile picture of the author SRLee
    I have noticed one pattern in pricings.

    Why is it that people tend to price their products at $17, $27, $37 and so on?

    Why not $19, $29 or $39?
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  • Profile picture of the author SOT
    This MUST have been tested... so I would hazard a guess that it's because it works best with the psyche of the buyer...? ie more revenue to you?

    Susan
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  • Profile picture of the author phil.wheatley
    From what I remember, it's to do with the number 7, doesn't it have something to do with the bible, and lucky numebrs and stuff? $37 just looks and sounds better than $39.95 right? Notice even the high ticket stuff is $1997 ...following the same pattern. Oh hang on, don't the Chinese believe in having 7 fish in a bowl for good luck...or was that the number 8...opps, now I'm confused(.com)
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  • Profile picture of the author sohailwarrior2
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    • Profile picture of the author AdamHolland
      There's already so much great info here: split test pricing, compare to comparable products, etc..

      For me it comes down to 2 things: is the objective of the product to make a crap ton of money (ie, you want this product to be a true income month after month) -OR- you're using it as a "funded proposal" and you have a bunch of backend products where you make your REAL money..

      With option 2, I'd make the price so that I break even or even make a couple of bucks off of my advertising.

      Ex.) With the keywords of your product, let's say you can average $0.50 per click.
      1000 visitors x $0.50 PPC = $500 marketing cost for PPC
      1000 visitors x 2% conversion rate = 20 sales
      $500 / 20 sales = $25 ebook.

      I'd probably charge $27 or $29 to cover merchant fees, hosting, etc.

      ***OBVIOUSLY YOU'VE GOT TO KNOW YOUR CONVERSION RATES FOR THIS!!!!***

      Then after they buy, I can give them a OTO for a $47 or $97 product or whatever, and that's where I make my REAL money..

      This way you know you could spend $1000 per week on advertising if you wanted to, break even on your ebook sales, and then make your REAL income on your backend sales.

      Make sense?

      Adam Holland
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      • Profile picture of the author PDLaughlin
        Originally Posted by AdamHolland View Post

        For me it comes down to 2 things: is the objective of the product to make a crap ton of money (ie, you want this product to be a true income month after month) -OR- you're using it as a "funded proposal" and you have a bunch of backend products where you make your REAL money..

        With option 2, I'd make the price so that I break even or even make a couple of bucks off of my advertising.
        Great point Adam!

        If I'm promoting something that has a strong backend potential I'm happier than a big in slop to break even on the front end. However, if I working with a single solution type product and don't want to deal with backend stuff then I will mark it up 25-50% more than comparable products.
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