I was browsing the archives of Dr. Mani's blog today and came across this article about pricing (discussing something he learned from Dan Kennedy):
That lesson in pricing remained one of my most profitable in the 15 years I've been creating and selling infoproducts online. It distills down to this simple principle:
"Price lesser than value -- and educate your buyer about the value."
At the time I learned this, my launch for a new program called "Smart Niche Minisites" was underway. It was being offered at $49.95. Based on what I learned, I made some changes -- and raised the price to $147. Sales conversion INCREASED!
What Dr. Mani says makes a lot of sense. If the customer knows what your product is worth, and your price is lower than that, you've got the right price.
So how do you implement this advice?
First, you've got to know how much your product is worth. You can't just say, "it's a make-money eBook, and make-money eBooks sell for $47, so it's worth $47". You've got to figure out how your target market would value your product if they understood what it was.
The prices of similarly valuable products in the same market can be a good guide, because they'll tell you where your prospects' price anchors are set. If you feel that price fairly reflects the value of your product, then great -- you've got less work to do. If it's significantly too low, you'll have to break free of their price anchors.
Once you've established the value of your product, pick a price that's a little lower.
Then, figure out how to get your prospects to recognize the true value of your product. You could compare it to more expensive alternatives that offer similar benefits. You could show them how your product will help them, and how much the help it gives is worth -- for example, if it has the potential to take a $500/month business to $1,500/month, then it's delivering $1,000/month in value.
One final comment: remember that the price you ask for your product suggests how much it's worth. In Dr. Mani's example, his $49.95 price was telling prospects that the product delivered sub-$50 value. Some people simply don't want to waste their time on sub-$50 value products. They'd rather buy something more expensive that delivered more value.
So when he tripled his price, he appealed to a different set of buyers who may not even have bothered looking at his offer at the lower price.
Of course, he still needed to show why his product was worth what he was asking (or more, actually). But the higher price helped to get the attention of the right people and set up expectations. Since his sales pitch convinced his prospects that the product would fulfill those expectations, they bought it.
The big lesson: don't be afraid to ask for what your product is worth, as long as you can prove it.