In the previous lesson, we talked about your marketing funnel. But even after you’ve figured out how your products or services fit strategically into your funnel, it can be difficult to figure out the best prices for them.
Small price differences can mean big differences in your results, so it’s something worth spending time on…
(Watch this video…)
Main points:
– Look at your competition to determine an initial range.
– Drop down in small increments.
– Highest profit margins?
– Maximum total profit?
– Maximum number of customers?
– You can stop dropping down as soon as you’re making a satisfactory number of sales.
– Avoid devaluaing your product.
– Fewer customers can be better.
– Less customer support.
– Need to keep dropping down to test the downside and determine the sweet spot.
– (See video for example)
– Good for breaking into competitive market.
– Good for high lifetime value customers.
– Consider a Loss Leader.
– Consider the differences of Free vs. Low Price
(See video for explanation of how the chart works, color codes, etc.)
– Your optimal price depends on the objectives of your business!
– You need to consider your back-end when determining your pricing strategy.
1) Competition
– Price below competition, but be prepared for a battle.
– Penetration pricing
– Price above competition IF there are factors MORE important to the prospect than price, such as quality, customer service, or convenience.
“If you want to destroy your competition, figure out their USP and give it away for free.”
2) Fair Market Value
– Don’t base the price on what YOU think your product is worth. Instead, base it on the demand.
3) Dynamic Pricing
– ex. Airlines, Amazon.
4) Ongoing Drop-down Pricing
– Exit pops, 2nd OTO’s, etc.
5) Firesale/Limited Time Pricing
– Instead of dropping down in price, you drop up.
– Must have a compelling “reason why”.
6) Psychological Price Points
– You just need to test it. $50, $49.95, $49, $47, etc.
7) Continuity
– If you can include continuity, you probably should.
– Adds another dimension to your testing: average length of subscription at each price point.
– Look at lifetime value of customer at each price point.
– Not always more profitable than one-time payment (see video).
8] Special Considerations for Product Launches
– If you’re doing a BIG product launch, the drop down method is not ideal.
– You need to launch at a price that converts.
– Use test lists, PPC, surveys
– Price it aggressively
– Only one shot with prospects and affiliates
– Split test psychological price points
– Make ONE quick price adjustment ASAP if necessary.
Action steps:
1) Determine your pricing strategy.
2) Determine your starting price.
The only way you’re going to sell anything is if your prospect perceives the value to be equal to or greater than the price, so in the next lesson we’re going to look at building value through copywriting!
As always, you are welcome to post your questions and comments below.
Have a great day!
Hi Eric:
Thanks for another great lesson and valuable insights well presented.
I have a question regarding implementation of the price testing process – – Is all this price changing and traffic/conversion counting done on your own website? What if my info product is on Clickbank? Do I “jigger” with prices there too? And if so, are traffic/conversion stats available? And how is a changing price structure percieved by affiliate marketers promoting my info product? Could they become discouraged and thus reduce traffic flow through reduced promotion?
Thanks again Eric. Gary.
And BTW, and for what it’s worth, the debate about the significance of “7” – -in the Bible, 7 signifies spiritual perfection and I believe that Judeo-Christian thought is imbued with that concept and people thus feel comfort with the number 7. In other cultures, particularly in the Orient, it’s probably a different number.
Yes it is done on your own website. See lesson #57 and #71 for info about tracking your conversions.
Yes if it’s on Clickbank you would change it there. If it’s a standard (non-recurring) product, then you can change the price anytime without reapproval as long as it’s below your max approved price point. If it’s a recurring product, that’s a little trickier because they have to approve it. So in that case you’d want to make as few adjustments as possible… probably only change it if it seems like it’s not converting as well as it should.
In general it will not negatively affect affiliates. If you’re drastically lowering a price, some may not like the smaller commissions. But the #1 main thing they care about is conversion. So if you’re improving the conversion rate they’ll be happy.
I agree about #7 🙂
Hi Eric, Never new that the mind would play a role in price display of prices. Looking forward to all lessons. — JAD
I have lost my user name and password
Hello Stuart,
Please contact our Helpdesk, and let us know what site or purchase you are attempting to access:
http://www.ericsupport.com/
We’re happy to help!
Eric, I’m REALLY enjoying this course.
Could I ask, would it be possible to be able to download a large graphic of your Pricing Chart?
Thanks
Warmest regards
James
Here you go:
http://www.ericstips.com/images/pricingmodel.png
i havent sold any of my ebooks on amazon yet the people who sold them to me say i cant change anything but have a sugested sale price should i start there and drop down i havent built a web site yet but im going to go with site build it or sbi what do you think
In regards to selling ebooks on amazon, I recommend looking for some good PLR (Private Label Rights) ebooks rather than resale rights. You can change PLR books, which means you can also convert it to Kindle format, which is ideal for Amazon. If you’d be interested in joining our coaching club, my friend Paul (one of the coaches) has experience with this and could advise you.
I do not recommend SBI. Instead it’s important to register a domain on your own and get a web hosting account. I explain this in lesson #23 and #24. I then cover several methods of building a website. WordPress is ideal for most people, and can be installed with a few clicks, using Hostgator web hosting.
Newbie) This Teaching Struck me Hard more than any
of the others, well, so far. I want to listen to it again. My New Product will be Give Away. (Set by the Seller) Then work for Upsells. GULP!
Back to why ending in a 7 – I think brick & mortar retailers and car delaers have used the 9 for so many years, that Americans are cynical about it. We all know that $299 is really $300. Eight is an even number, not catchy enough for Americans. So 7 subtly implies that we are not being ripped off.
Hi Eric,
My thirst for knowledge is definitely being satisifed with your lessons. I am sure that I am not saying anything new, but wanted to mention that you definitely have a gift for teaching. SEO and other points are thrown around out there, but no one gets into the detailed whys as you do. This makes perfect marketing sense regardless of the direction one goes in selling their products.
By the way, you mentioned something, briefly, that peaked my curiousity, that was a sidebar point. You mentioned, eBay, and not setting the value, yourself, but allowing the Buyers to do so in auction. Is there a point, in these lessons where you elaborate on eBay? Fascinating point..!!
Nedra
Hello Nedra,
Eric used to have a product devoted to eBay, but is no longer the owner or affiliated with it:
Thanks, Micah. That would have been a great series of lessons. Eric is such a tremendous teacher, with rare qualities to make all info easily understood.
I will look into the info that you sent, again, I appreciate the quick reply and information.
Nedra
Hi, Eric
always straight to the point.
Thank you
Hi Eric,
Very welcome with this lesson. As a newbie on internet marketing I am wondering if a free couching offer would be appropriate and for how long time? Probably not good for upper class customer that I would like to attract as prospects. Could you give me some suggestion, please. Thank you very much. Marija
In general, I would not recommend offering free coaching, because it’s something that demands your time. A better solution would be to offer some free coaching videos, which you’ve already made. Or perhaps a free webinar, which many people can benefit from simultaneously. From there you can get people hooked into your coaching.
Thank You for all you HELP!!! I feel I can actually trust you when im is so very shady. Take Care & Brightest Blessings!
Thanks for the great tip again, Eric.
Mark
Good Idea Eric, but What about the affiliates?
I can’t erase and diminish the price that easy if I have affiliates promoting my product.
If your product is an infoproduct, there shouldn’t be ongoing production costs. Any sale is still going to add to your profits.
While you won’t earn as much per sale, you can multiply the number of sales you make, by having affiliates.
Thanks Micah,
so you mean to change the price but leave the same commission ?
Not necessarily. Keep in mind that the goal here is to maximize your conversion rate and profits. Let’s say you have a $97 product converting at 2%. And let’s say you pay 50% commissions ($48.50 per sale). That means your affiliates are making an average of $97 commission for every 100 visitors they send. Now you lower your price to $47 and the conversion rate goes up to 5%. At 50% commission, now your affiliates are making $23.50 per sale. However, due to the increased conversion rate, they are now making an average of $117.50 for every 100 visitors they send, whereas before they were making an average of $97. So the affiliates will be happy. Generally, affiliates will not mind smaller commissions if they are getting more of them.
Great Eric, thanks so much. 🙂
WOW!! This is — without a doubt — the clearest, most reasonable explanation of pricing strategy that I’ve ever come across, and I’ve been LOOKING for good pricing info.
You’ve confirmed my suspicion that “free” isn’t always necessary, and that I can focus on selling low-priced products to build my list.
Thanks a million!
How would I figure out my competition USP? Is there any place you can point me, for this information or guidance?
Hello St. Clair,
What aspects of your competition do you wish to know? There are various products for researching Amazon products, Google AdWords copy, etc.
We might be able to direct you to something you are looking for.
Hello Eric – I decided to go the membership route (and sell ebooks and other products with member discounts). What are some tips for pricing membership? ( Ooh – are you going to go deeper into membership sites in later lessons?) I haven’t launched yet and am trying to pull it all together before my big launch (looking at October 1st)…thanks!
You are truly awesome and I appreciate the help you are giving all of us!
The same principles apply to pricing a membership site. You want to find that sweet spot of profitability and conversion rate. Generally, consumers are more price sensitive when it comes to recurring billing, so you would likely price it at less than what you’d price a one-time product. Think about when you look at your monthly credit card statement, what amount would get your attention or cause you to think twice about it? If the price is too high, people or their spouse may see it on a credit card statement and freak out. I think that’s one reason why so many programs are $19.95 or $29.95/month. Credit card statements are full of those size transactions so most people won’t give it a second thought. I have a couple of successful membership sites that are $97/month. They have a higher turnover than say a $29/mo site, but the result is better long-term customers. If you’re offering something like coaching, it may be beneficial to have fewer customers paying a higher price, rather than more customers paying a lower price. As you increase the price, you need fewer customers, and you will generally attract higher quality customers. If you can justify a price of say $497+/month… you only need a handful of customers to be earning a full time living.
Thank you Eric!!! I created tiered pricing, and was wondering if it was too low – free, monthly, yearly and 2-year sign up. The longer you sign up the bigger your membership discount on products. I know you have a coaching program, but have you ever thought about doing evaluations? Once I get my website up and running – I would love to have an evaluation…let me know 🙂
That sounds like a reasonable plan to me. Actually we do offer site evaluations in our coaching club… in fact it’s one of our favorite things to do on the webinars. We’d be happy to take a look at your site, and you can join the coaching club $17 for the first month.
Hi Eric,
It’s all about testing and working hard to find the best performance vs our goals.
Thanks again for this wonderful economic lesson.
Marc