Pricing Strategy: Go High or Stay Low?
Guest Post by Paul Cooley
I got into a discussion with a customer of mine today at my coffee shop. He started talking about how people don’t appreciate things that are given to them as much as they appreciate things they pay for. This got me to thinking about different marketing techniques that I teach, as well as many others teach and brings up a question that I would love to get your input on…
Which is better in marketing, charging premium prices or rock bottom prices for your products/services? There are different rules of thought about these concepts which need to be addressed.
I understand both sides of the coin and have experienced them as well. So which is better? Which way should you market your product?
The rock bottom concept is to charge a very affordable price to get more people to buy from you. How many eBooks do we see for $7.00, $17.00 or even $27.00? I know I have seen a lot!
But what if you saw an eBook that was selling for $97.00? What would be your first thought? What would you expect from this book that you may not expect from the others at a lesser price? For me, I would expect more value from a $97 dollar eBook than I would from a $7 dollar product.
I look at my folder that has all the eBooks I have downloaded and it seems that the ones that cost me more are the ones I printed out and read through thoroughly, while many of the eBooks I have gotten for free or a lesser price, either have not read or never finished. Even though some of the lesser priced books really do have good content! It’s all about how perceived value and how your customers perceive the value of what you are selling is huge!
I must admit, when I see something like an eBook or a membership for $7, my mind immediately goes to a place that tells me “I’m not going to find what I am looking for, it’s not something that will meet my needs.†Which might not be true, but that is where my mind goes.
I have also experienced other’s attitudes from ones I have given free memberships into my training site, compared to the ones that pay. There seems to be more of an appreciation and more of an effort to be a part of it. I guess they want to get their money’s worth! 
I really like what Yanik Silver has to say in his “34 Rules To A Maverick Entrepreneurâ€. I love what he says in rules # 2 and #3…
#2 “Strive to create 10 to 100 times in value for any price you charge…â€
#3 “You must charge a premium price so you have a large margin to provide an extraordinary value & experience.â€
Now when it comes to #2 I believe that should be the goal no matter what, it doesn’t matter if we are giving something away or charging a premium price. We need to over deliver and provide content above and beyond what the customer would ever expect. What a great way to stand out from all your competitors and show them you are an expert and a leader in your industry.
When it comes to #3 this is where you must decide what your goal is, who your target audience is and is your product or service something you could charge a premium price for?
When you are just starting out and have written an eBook, it’s going to be hard to sell anything for $97! So you might consider giving away free eBooks or reports to people who opt-in to your blog to show them you know your stuff.
But as you continue on this entrepreneurial journey, you will need to make decisions about pricing for your eBooks, coaching programs, products, etc. I have been forced to weigh the options with many things I am doing, if I don’t examine these things, it’s going to cost me a lot more in the end.
Some final thoughts…
- You must know who your target audience is and what they can afford.
- Always over deliver and stand out from the crowd.
- Be unique, be professional, be you!
Some of the greatest things in life have come at a high price, let’s not take the prices we have paid to get where we are for granted. Let’s take what we have learned and add value to others.
I would love to hear your thoughts about this topic. How do you feel about the pricing of products you buy, or pricing your own products?
To your Success!
Paul Cooley
www.PaulCooleyMarketing.com
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I believe that you should have a variety of price points. You should sell some products at low range, some at mid range, and some at a premium. This way you’re giving people a sample of what you offer. Just my two cents on the issue.
Follow me @deannatroupe on Twitter.
I believe that you should test price around before you make a final price, its always to test different price, see which one sells more and which one profits more.
For me Paul, it’s a mixed bag. I agree with DeAnna that you should offer several price points within your services or products, but the question (for me) is this…
Do you take your higher priced product and scale it down for the lower price point, or do you do something completely different?
For services, it’s not as hard to guess right. There’s the *rate* you charge. Period. Well, except for friends and family. Or long term clients. Well, and the one you are trying to land. Okay, I am wrong. Services might be harder to get right.
As usual, you are forcing me to think it all though, so thanks for sharing this post.
Cenay’
You can test the optimum price for that product, but that doesn’t mean it’s the best pricepoint for your strategy.
For example you may measure “Earnings per click” at $37 and $77, and discover that you make 10% more at $77. But is $77 better?
Well if you have a higher priced “upsell” product then you might be better off with the $37 price point.
Why?
Because at the lower price point you may make a little less per click, but you will have almost 2 x MORE paying customers. In the long run this could be more profitable for you as you grow your product/service offering funnel.
But yes, be careful not to go too low just to get way more customers, as you’ll find the customers who are close to freebie seekers are possibly not serious about investing in higher priced and higher value offerings.
Thank you for all of your thoughts!
I love what you guys are saying. Peter, very true…
Great example… and I totally agree with being careful with the “freebie seekers”.
Keep up the great work!
Follow me @PaulCooley on Twitter.
Great question Cenay!
I know for me, I always try to qualify whomever my target market is,usually I offer a lower priced product and then have some kind of equal or higher continuity program.
I know it’s hard to give a definite answer to.
I think it really comes down to your target audience…
Let’s say if I am doing an e-course for people getting started in a home based business, I’m probably going to charge a lesser amount because I know most wont be able to afford a premium price, but still offer tons of value. Now if I was going to offer some kind of course to let’s say “guru status” marketers, there is going to be more of a premium price tag to it. Plus the content will be much more advanced.
Once again, I look at what Yanik Silver is doing with his Maverick Business Adventures…
You could go out and do the same things for a lesser amount by yourself, but he charges a premium price to deliver a premium experience that you would never have if you did it by yourself. I hope that makes sense.
I guess all of this shows the importance of really thinking things through and testing the niche you are going after before just jumping out and doing it.
Thanks again everyone for your comments!
Follow me @PaulCooley on Twitter.
It’s common for people to under-price themselves because they don’t have a framework or formula for evaluating and quantifying the value of their offerings. (We teach how to do both in our SMARTSTART programs.)
In my own work, I have my standard pricing (which would be affordable only to a small % of people or large corporations) and my philanthropic programs (which offer the same value and level of service to the mainstream folks at an affordable price — after all, why shouldn’t they also have access to quality information — startups need it even more I would think).
How we price our products and services says more about how we feel about ourselves and our work than it says about the quality of what is being provided in many cases.
But one thing is for certain, whatever the price my client or student is paying, I’m delivering a minimum of 10x the value — that’s been the key to my success and I’ve been in business and at the top of my game a very, very long time.
Funnily enough, I love my work so much, it doesn’t feel like work and I’d do it even if I wasn’t getting paid for it. Of course, working for free doesn’t put food on the table or a roof over your head so… I do charge and I’m worth every penny you’ll pay and then some.
Linda M. Lopeke
The SMARTSTART Coach
Great post! I’ve been testing some pricing strategy and found that higher price usually sells well in terms of ROI.
“Peter Koning” said above don’t look out only for the ROI also think about the backened profit you can earn with paid customers. That is also a great plan. I would need to test that as well.
Looking forward to more great stuffs.
This is pretty good. One thing I’ve learned from my dad: if you want good service, you need to pay the price. He always looks for a bargain with everyting and it drives me nuts!
first , giving things away really does create disinterst .
However , other pricing issues need to mostly consider the value of the service and the value to the provider. If you are conscious of that balance , mutually fair pricing ususally results
Great rundown Linda! You know Parth and Bert, I got to thinking about something else after reading your comments…
By charging a premium price, it causes a greater motivation to deliver premium content. Not saying that is right, but I think naturally we tend to think like that more. I remember when I was thinking about putting together a $7 club with some friends, I didn’t nearly put the thought or effort into the content as I did with a Membership site I am doing. After realizing I was thinking like that. I decided to make a change in my thinking, another reason I like Yanik’s #2 Rule. No matter the the price, over-deliver…
Follow me @PaulCooley on Twitter.
The other thing to bear in mind is that if you spend a lot of money on a eBook (for example) then you’re much more likely to spend the time trying out some of the techniques suggested in it.
Whereas a cheap book you’ll probably just browse through and never actually get around to doing anything with it.
I have this ‘free thing’ paradox with our new service as well.
People can build one way links for free. Well, many people are ok and they take it seriously.
But some, just because it is a free service and they already take it for granted, start thinking missing the point.
But, once you remind that one link of that kind costs $6 on the market, or once you put a paid option of building links – this instantly changes the attitude.
Clients start thinking “Hmm, this is what they might be taking from me – ok, let’s get some of the stuff for free, before they convert it into a paid version.”
Free vs Paid sometimes makes magic in the marketing.
people always think that if they pay more they will get better things, that might be true but not all the time.
thanks for your posting, great sharing for buying or selling strategy