One of the first things you’ll need to do when you create a product or service is determine how you’re going to price it. There are a lot of thoughts about pricing and none of them are right or wrong. How you price is up to you. But, think about using a method that considers value and not just how much it cost you. This is one of the best ways to come up with the perfect price point.
Know Your Audience
You have to know everything you can about your audience, including how much money they have to spend on extra items in their budget each month. When you understand your audience you’ll not only know what type of products they need, but also how much they’re going to be willing to pay for them.
Identify Your Direct Costs
You must always cover your costs in any pricing method, because if you don’t you’ll lose money. So a great place to start is figuring out the direct cost of your product. But, if your product is digital, it’s going to be somewhat relative. For example, it might cost you 500 dollars to have the product created but you’ll not have individual per item costs to consider in your pricing.
Identify Your Indirect Costs
Sometimes there are costs such as marketing, advertising and other indirect costs that you should consider adding. For example, if you’re teaching a course that you had to get a Master’s Degree to understand, then you can add in something for your education.
Identify Your Competitors’ Prices
Take a look at your best competition’s prices. It’s more than likely that this price is something you should consider being around, because if your competitor is successful it’s a price point that’s working. However, you never want to get into a situation where you’re competing on price. You want to compete on value.
Consider Your Market
The market plays a huge role in pricing for pretty much every product. If you have a digital product, this is especially great for you because you don’t have incremental costs like you do with a physical product.
Understand the Value of Your Offering
Outside of direct and indirect costs there is also value. The value of your item is something that is perceived by your audience. For example, if you have an offering that will help anyone who follows it boost their income to six figures from zero, what is the value of that?
Ensure It’s Worth Your While
If the price you come up with feels too low, then raise it. You want the work that you do to be pleasurable for you too. If you under price your offerings, you’re going to end up resentful instead of happy.
Test Different Prices
When you come up with a price point, try testing different prices. You can do this by having different sales pages, or you can do it by offering different levels of service on one page with the various price points.
When you come up with your perfect price point, you’ll be able to work less and make more money. The reason is that your customers are focused on the value of your offering and you don’t have to concern yourself with selling high volumes if the price is right.