You are about to learn something that at first will seem like a foolish contradiction of conventional wisdom–but you will soon realize just how powerful and profitable this single principle will be to your online earnings.
Ready? Let’s look first at the conventional wisdom.
When setting a price point for a product the assumption is cheaper is better–that if you make your product $10.00 you will get far more sales than if your product is $100.00 or $1,000.00. It makes sense on its face: There are many more people who are ABLE to pay $10.00, therefore the lower price point means more sales, right?
Here’s at least one place where the conventional wisdom is wrong.
Here’s the truth: It is much easier to get 10 people to spend $1,000.00 than to get 1,000 people to spend $10.
When setting a price point for a product set its price at the highest possible price point based on the sales materials and actual product value.
Can all products be sold at a $1,000.00 price point? Of course not. But given the right sales materials many products that are often sold for pennies can be sold at much higher price points.
One real life example I witnessed a few years ago.
Two people launched eBook products in the same niche about six months apart. They had slightly different topics but targeted the same market and had pretty much the same people promoting them.
The first product was a 25 page eBook with some good information, but at 25 pages the level of detail was minor. Lots of big concepts; very few concrete examples or application. It sold for $197.00.
The second product was over 400 pages. It was written by an obvious expert. It had step-by-step instructions with examples. It had everything one would need to apply its principles. It sold for $47.00.
They both made an almost identical number of sales–but the 25 page ebook made four times as much money.
When you package and price your product make sure to look at the highest price point your product can demand and make sure your sales materials command that price. You will make far more money.
Popularity: 23% [?]
12 Comments
Wow, I was already aware of this principle, but the example you use really hit home. The fact of the matter is a lot of people judge the quality of a product by how much it costs. If you are selling diamonds, you will sell much more at a $10,000 price point, as opposed to $10. When people see the cheap price, they just assume it’s no good. I guess the moral of the story is to not devalue your own product. Thanks for the great post.
- Dave
I tried out this principle the first time I bid on RentACoder - and it worked. It’s hard for me to comprehend though. I still feel like enough of a newbie that this tactic feels like bluffing in a poker game. It’s a lesson I’m still working on. I will say though, that the people I’ve heard this from are the ones who are actually making money, and I believe it did make me some money.
I’ve never thought about it like that before. But it does make a LOT of sense. Do you think this kind of principal works across all niche markets or is it more successful in some than others?
Maryellen,
There is a secret that I believe almost every financially successful person I know has–they started out seeing only their inadequacies while having to tell people how capable they were. And no matter how successful we get, we still come up against new challenges where we have to operate on “faith” that we can deliver.
Lightening,
In general it works with any market and any product as long as the price point is justified by the sales materials and the actual product value.
i guess the timing of the product offering matters here. 6 months is too long in this fast-paced industry. if you’re the first, obviously, there is no price standard yet and you can command a higher price.
Even as we sink further into recession this is an important post. There are two ways philosophies that are at play here. You either sell Volume or you have a higher priced product and sell less of it. Audience and niche factor as well, but in the end the quality of the product or service will undoubtedly rule the day. Thanks for the post!
Tom
Aaron — I agree that this is a fundamental marketing concept that can be a critical piece of the marketing puzzle.
On thing that I have noticed is that eMaterials (books, reports, courses, etc) tend to sell for $7, $47, $97, $197 and $497. Do you know why? Is that the result of split testing, or tradition?
Thanks,
Mark
Mark,
Likely both.
Back in ‘99 or so Corey Rudl produced a list of “best” online price points. In my understanding that was the first list and few people questioned it. He recommended price points ending in “7″. He also recommended a jump from $37 to $67 for example as he found $67 outsold $47 and $57 as price points for total number of sales.
Mark Joyner (and likely along side Shawn Casey) reportedly did extensive testing of all sorts of price points and settled on a “7’s and 9’s” price point “principle”.
Also as time went on it seemed $47 became somewhat of an ideal price point for many products–this likely changed as the last 9-10 years unfolded.
I have done very little micro price testing (testing a price of $37 against a price of $39 for instance) so I am not personally qualified to give you a clear answer on whether it is better to end in a “7″ or “9″ for a given price.
I tend to price products starting at $100 and up ending with “97″ (i.e.: $97, $197, $297, $497, $797, $1497, $1997, $2497.)
I also have had good success with $247, $147, $79, $47, $27 and $17 price points.
I suspect a 1-time purchase product would do well at $19.95 and $14.95 due to direct marketing conditioning, but it is hard to make much money at those low price points.
Wow — you have been doing this for a while. Thanks for the complete answer. Mark
WOW, I would have never guessed that its much easier to get 10 people to spend $1,000.00 then it would to get 1000 people to spend $10.00. Hey, Guys I’m all ears here.
Wanda
http://www.thinkandmakemoney.ws
Aaron,
This is vital information for any business person selling anything. Thanks for covering it so well. As a matter of fact, I’m going to copy it onto two of my blogs, giving you credit of course.
I think,these type of price tags may be ebooks,info products,etc. for online sale.I oftentimes observe this online. But, Aaron, is it applicable for other value product or off-line products?
Post a Comment