Setting the Right Price
One of the toughest things internet marketers face is to pick the right price for a product. If your price is too low, you’ll be losing money. If you set the price too high, no one will buy. Setting the right price is very important for any business.
Daniel Levis says in his newsletter that price is when you and your customer both make the maximum profit. When a customer sees the price, he automatically determines the price of the product. It’s called the perceived value. That bar between the offered price and the perceived value of the product in customer’s mind is his profit.
The higher the perceived value of the product, the more chances there are that they’ll buy your product. If you manage to set high price, yet offer double, triple that or maybe even 10 times more in quality bonuses to your customer, you can expect some great sales and great profits.
The better the product you have, the more money you can ask for it. If your product or service offers tons more features than the rest of the competitors, you can set much higher price. But again, not too high, cause if you overprice it, you won’t get any sales.
How to Set the Right Price?
- Asking
One of the ways is to ask. I’ve seen when marketers simply send a message to their list and say something like: “Hey dude, how much you’d be willing to pay if I offered you that kind of product?” And then they give several prices, $29, $49, $69, $99, or over $100. One thing here is that some might simply click on the lowest price. Others might actually think about it and honestly say that they’d be willing to pay no more than $99. Others might push the price as high as possible so less people could get their fingers on that “super duper product”. Not sure how this works, but it’s worth trying.
- Testing
Another, very widely used method is to test. Simply do a split testing. If the mailing list software allows that, you can send each other email with a different offer. Like prospect A gets – 1, B – 2, C -1, D -2, and so on… When you try different prices, you simply know what works. Lower price will bring more customers. Higher price will bring less, but the profit can be much higher. Sometimes even when you increase the price from $69 to $149, you’ll see no reduction in sales. If you don’t test, you never know what works. You might be leaving money on the table for years. Don’t let that happen. Always test.
- Guess
That’s the most stupid method ever, yet so many entrepreneurs do that. I mean offline world too. Some are so dumb as not to even look what are the prices on the market for similar products. Guessing is a surefire way to failure. Never allow yourself to guess. Research, ask, test, but never guess.
November 6th, 2006 at 8:43 pm
In the “Asking” paragraph, you should consider conjoint analysis as an (almost) easy way to assess value to the customer. This analysis basically makes the customer choose between restricted alternatives, forcing them to expose their preferences.
For example, would you prefer paying USD90 with next day delivery or USD100 with 3-hour delivery, or USD95, next day, but with a special price?
November 7th, 2006 at 3:51 am
Thanx Leo for a comment.
Yah, I agree with You. It’s a great way find out what your customers want. Another example of what you’re saying I believe would be allowing people to pay a full price for a product, or in batches.
For example: “Pay $300 Right away & enjoy this product as long as you want!”, or “Pay $100 every month for 3 months if you don’t want to spend the whole sum right away…:
Sure, depending on the target market, it seem like majority would rather prefer paying by instalments instead of the single sum, but you might be surprised by the results. I for instance, don’t like to pay by instalments. One time payment is much better. I’d rather pay for a whole year, instead of paying every month for autoresponder service for example…