Pricing your product requires both a little bit of art, and a lot of science.
When I first started online, many moons ago, I was in a massage therapy niche selling business-building products to massage therapists.
This was pre-video, so everybody at the time was selling an eBook or some sort of digital product. Everybody was pretty much around the $29 to $37 price point.
Instead, I came in and created a $300 to $400 home study course, not because I knew something, and not because I was so intuitive, but because the very first information product that I ever bought was a big home study course at that price. It had big binders and cassette tapes and diskettes and a lot of material.
Because I was so enamored with it, that’s what I created. And this home study course did well. Was that an anomaly?
I don’t know, but I do know that it opened my eyes to the fact that most marketers do not test their pricing threshold.
They either pick a number based on what they think their customers will buy, or they simply price their product based on what most of their competitors do. If these other competitors are not price testing, then nobody knows if they’re leaving a tremendous amount of money on the table.
The superior offer
Everybody always thinks the best way to create a superior offer is to lower the price and give more, but the reality is there’s only a certain percentage of the market place that makes their buying decision based solely on price.
The larger percentage of the market place makes buying decisions based on value or perceived value. When I strive to create a far superior offer to what’s already in the market place, I always lean in the favor of giving more.
You see, years ago when somebody ordered something, as the marketer you wanted a gigantic box of stuff to show up and plop down right on their doorstep.
They opened it and there were 28 different components and pieces and binders. There was this idea of giving as many different pieces as you can. It decreased the likelihood of a refund.
Today that’s not the key.
Today, when I say “give more”, I’m really talking about giving more of what they ultimately need and want.
For instance, you could send them a starter package. Or diagrams and an instructional video for how to set up something. You give them instructions or a cheat sheet.
This is not a huge package with lots of pieces; it’s just more value to them.
The pricing risk
The reality is, there’s risk in everything you do, regardless of where you price it.
If you price it too low, then you run the risk of leaving a bundle of money on the table.
If you price it too high — crazy high — then of course you run the risk of not acquiring the maximum number of new customers. So there’s risk in anything.
How do you handle that risk? It really depends on what your ultimate strategic objective is for the launch. What I mean by that is just to identify your objectives for the product.
Your launch objective
Your objective could be to maximize your revenue, or it could be to maximize customer acquisition.
You could also throw in some ancillary benefits like getting maximum partners to promote for you, because you’re looking to get maximum customer acquisition. If so, then you might price it differently.
I have this very same conversation with my team when we are getting ready to launch a product.
If we are considering the number of partners that we are going to accept and accommodate, our goal might be to have most of the sales come from the partners. We would choose a price that would be exciting for our partners, and the product would be more likely to reach more new customers.
If we aren’t going to go with a significant number of partners and instead promote it just to our house list, then we would price the product differently because we want to maximize revenue from the launch.
So yes, you should look at what your competitors are doing, there are a number of other factors to consider when choosing a price point for your new product. And you always want to test the price anyway.