How to price a product

How to Price a Product.

This is a common question faced by almost all Internet Marketers and it’s the one question I’m asked the most about.

Here I provide my reference list for pricing a product correctly:

Pricing is not an exact science. What I provide here is a 90% guide to finding the correct price of your product, but there is always a 10% uncertainty that you are slightly overpriced in achieving optimum sales, or underpricing yourself out of maximum profit potential. However if you follow this guide you should be very close to a good price point.

1) Do your research

• Check for all competing products or services and see what they charge
• If there are no competing products look for similar products for a starting point
• Define who you are going to sell your product to and figure how much they have to spend on your service (use surveys, ask them directly or talk to agencies who can sell your service on your behalf)
• Depending on what people are willing to pay, define which category your product falls into:

1. Premium product (High value brand)   Requirement – To launch a Premium product you need a well established quality brand name, or lots of initial cash to promote yourself as high quality. It can also be accomplished cheaper by association with other high value brands (although you will need good contacts for this to even be a possibility). Often a Premium product must do something other products do not, or be made of a quality far exceeding competing products.
2. Budget product (Aim to sell lots at a lower profit margin in order to make a reasonable profit)   Requirement – Product which people will buy on impulse and easy methods of payments. Often used by new Internet marketers in an attempt to establish themselves online or for products which offer only a minor improvement on existing products.
3. Mid Range product (as the name suggests, better perceived quality then a budget product but not in the high price range of a premium product)  Requirement – Good value product, with a memorable service or feature. Most Internet Marketers tend to promote in this product range.

• Once,  you have defined your product category and price point, do a small test round (attempt to sell 10 of your product, and then ask for your customers opinion on perceived quality, what they thought of your price point and what would make them pay more for your product)

This is a great starting point for pricing a product. You can spend an unlimited amount of time trying to prefect the art, but by clearly defining who you are targeting, finding out what they are willing to pay (comparing competing products or even asking your potential customers) then following up by a small test, your sure to do a good job.

For most people a small test is not possible for various reasons. In these circumstances there are alternative methods for checking if the price point is correct:

Ways to adjust prices once launched:

1. Many new products now have an early launch price, which is lower then their selected price. This allows the creator to create interest with a low starting price and secondly allows the owner to test different price points along the way tot he desired price. There are many scripts you can purchase to handle this for you.
2. Price raise. If you product is selling well then raising the price is easy. You don’t often need to justify the rise, if people are willing to pay or it, then it’s your right. Those who supported you early benefited by a cheaper price.
3. Lowering a price. Lowering a price is trickier as people will often think they have been conned if they brought at the higher price. A way around this is Relaunching. Relaunching can be used to revive an ill preforming product by repackaging it, changing a few features and releasing it as an updated version. Remember, if relaunching to lower a price, consider a ‘light’ version, where you simply remove a few features or sections of a book, and thus not isolate buyers who trusted in you and brought at a higher price.

For example. I am starting to promote myself as a ‘Productivity consultant’. In order to set a starting price, I firstly researched (using the Internet and the ‘phone book’) if there were any other ‘Productiviy consultants’ and what their charges were. There were none, so I searched for Strategy consultant as they are the closest match to what I want to do.

I then compared my experience to theirs, to give me an indication of whether I could charge a premium or Mid range price.  (Comparing experience and their price points I got a good indication of what I could try to charge).

I wil then this price point on my first 10 clients. After each session I will ask them what they thought of my service, ask them how much they would have been prepared to pay for my service and lastly, what if anything would increase the value fo my service further.

After this trial my price will be set, and be reviewed again after 3 months.

Pricing if done wrong can be disastrous. But if you follow my guide you should definitely be on the right path. If you have any questions, just leave a comment and I will try and answer it.

By, the way I decided to charge £100/hour for my initial starting point as a ‘Productivity consultant’ …