“What’s the goal of this offer?”
That’s the first question you have to answer before you can get into a pricing discussion.
Why is your business making this offer?
1. Is it to generate a maximum number of new customers?
2. Is it to earn the best return in serving your current customers?
3. Is it to create a long-term continuity income in your business?
4. Is it a one-time offer after an initial sale of another product?
5. Do you need it to break even or be profitable on a specific form of advertising?
And this is all before we even discuss what is the best fair value to the customer, your supply costs, and how the competition is priced.
Some of the most unusual instances I ran into initially was when we raised prices and saw sales increase.
It’s happened so many times it doesn’t surprise me anymore.
One product I had initially priced at $9.95 went up to $19.95…and sales actually increased. Took it to $29.95 and sales stayed steady. Went to $39.95 and sales still did well. Added a couple of additional bonuses and went to $49.95. Same thing…sales stayed at very close to the same rate.
Yet on another on my projects I’ve had an increase from $67 to $97 drop sales by more than half.
In another case where a client was paying for advertising, I’ve seen the increase from $67 to $97 only drop sales by 10%. In this case it made their frontend advertising profitable where it had been losing money up till then.
And that’s when the price change really becomes important. Their advertising couldn’t have continued without the price increase. They were losing money every day after optimizing their ads and their conversions until the price went up. Then with the optimization of the price, they moved their marketing into profits.
What if they had never considered the price? They would have dumped the advertising, all the sales they were generating, and the long-term value of those customers because they didn’t want to finance “going negative” on front end customer generation.
In another case I’ve had a client who was willing to lose money on the first sale to a customer. And they actually dropped their front end price to bring in MORE customers (at an initial loss). In their case though we were able to install an immediate upsell to put them very close to break even.
And then their backend offers brought in all the long-term profits. They were willing to lose money if needed at first because it meant long-term sales.
This is where it comes back to what is your goal. Since their goal was to get as many frontend customers in as possible, they were willing to drop the price to accomplish this goal.
Think about that with your next offer. What’s your goal? What does the price need to accomplish? How would a different price affect your business, your profits, and your advertising?
Of course this also involves the value of the product as you should be giving people much more value than what you’re charging for the product, but sometimes that’s hard to determine (especially for information based products and service businesses).
What’s the right price for your offer? I don’t know because it’s going to vary by what benefits you provide, what the competition is doing, and what goals you have to reach.
But a recent discussion with Glenn Livingston outright surprised me on this issue. He put together a new method for choosing profitable markets using totally free tools without needing any surveys in the initial period.
Part of his numbers involved estimating a frontend price for your initial offer…based on numbers freely available in the market already. I took the numbers he provided and checked them against my past history and client’s numbers as well…and it came out to be a good estimate of what price to start with in most situations.
The entire choose your market method along with how to estimate your initial price starting point will be available in the November issue of the Monthly Mentor Club going out in just a few days on the 10th.
Get in now, so you can get your issue coming soon and access all these benefits…