Profit is a simple formula. It’s revenue minus costs. If you want to be successful in your business, you must give some thought on how you’re going to price your products and services so that you can make the profit you desire and need.
Pricing high is not always the answer, but neither is pricing low.
Let’s look at some different ways you can price your products and what you need to know to make a good decision.
* Know the Market – Create a spreadsheet to organize the price point of your top ten competitors. You need to do competitor research anyway, so you may as well collect their price points and so that you can understand what your audience is paying for, you can buy some of your competitors’ products to find out what the customer really gets.
* Know Your Audience – How much money does your audience have to spend? If your product is a luxury, that will mean something different on pricing than if your product is a commodity.
* Know Your Costs – How much does it cost you to run your business, and more specifically, how much does it cost you to create that product and sell it? If you can narrow this down to a per-transaction rate, including advertising, cost of the product, and tools you use to sell, you’ll have a better idea of where pricing should be.
* Know Your Needs and Wants – This may seem like a strange thing to add, but the truth is, if you’re not making enough money doing this, you may not have thought it out. Let’s say you want to earn a profit of 100K a year. What will that take in terms of selling this product? How many would you need to sell per day to earn that amount? Is it possible? Is it impossible?
* Price Your Products Competitively – Once you know what your competition is selling things for, you can choose to use their pricing and go slightly higher or even slightly lower. This is one pricing idea that many people use. That’s why you can go to three different burger joints and pay around the same amount.
* Test Different Price Points and Their Pricing Options – No matter what pricing options you’re leaning toward, remember that you can also test different price points and options such as tiered pricing or pay your own way pricing.
* Offer Additional Value – One way to focus on pricing is to find a way to offer more value without doing more work. For example, offering templates in addition to done-for-you content, might up the value even though it won’t make much more work for you.
* Give a Money Back Guarantee – Profit is important, but so is keeping your customer happy. Don’t make it too hard to get their money back on digital products. It’s okay to make some criteria on courses and physical products due to the cost, but when it’s digital, give them their money back for no reason.
* Price High – Another way to price is to price it higher than your competition. Many people like being the high priced and high value (by perception) guru in their niche. Is that you?