I’d like to talk about pricing before I get into specific tactics and strategies.Price is crucial because affects your profitability, as well as your position in the market.On the practical level, the more money you get per transaction, the faster you will hit your sales targets…
Two ways to make $10,000 a month
1.) Make 500 sales at $20 each or
2.) Make 50 sales at $200 each
In the first scenario you would need 50,000 visitors if you have a 1% conversion rate.
On the other hand, you would only need 5,000 visitors in the second scenario witha 1% conversion rate.
That comes to 250 clicks per day x 30 days. That could be 20 Keywords or keyword themes that each get 8.33 clicks per day (say via AdWords)
- 20 keywords x 8.33 clicks = 250 clicks per day.
- 250 clicks per day x 30 days = 5,000 clicks.
- 5,000 clicks x 1% conversion rate = 50 sales.
- 50 sales x $200 = $10,000.
But that’s not the only reason to charge premium prices.I mentioned that your pricing also determines your position in the market. Higher prices often increase conversions because…
Premium prices add value to your offers.
A higher price raises your product’s profile.
It is perceived completely differently if you offer it for $200 as opposed to $20, (Or $500 instead of $50… etc.)
It literally makes your product more valuable to own (and more desirable)
The product can have the same function and deliver exactly the same result, but as soon as you raise the price, the product moves into a different category…
Here’s what happens if your prices are too low…
1.) The market dissociates you from quality… which is a very dangerous position to be in. It is virtually impossible to reframe that perception once it has been established.
2.) You attract price-sensitive customers
3.) You won’t make enough money to earn a decent profit and have money left to reinvest in your business for long term sustainability.
4.) You make less profits from the same effort it would have takento earn much more with a proper pricing strategy
It takes the same effort. The difference is positioning, and then confidence and guts.
It works in your favor to sell premium solutions at premium prices. Here’swhat happens if you have a premium product with premium margins:
1.) You attract better customers
2.) You have leverage to setup lucrative joint ventures
3.) You can outbid your competition on the PPC networks to grow your customer base
Robert Cialdini talks about commitment and consistency. A high ticket price trips the commitment and consistency button, because people are more inclined to use your product if they invest a decent amount of money in it.
So it is pretty obvious that I support premium pricing.
In my next post, you will find the answer to your obvious question.
How to frame a high ticket prices which actually leads to conversion?