Price Testing Introduction
Testing different price points for your products is essential to make the most profit but also to generate most visitors to your blog/website.
Like with yesterday’s tip HEADLINE, the appropriate price can attract new customers.
The key factors on Price testing are:
There are several key factors that a business owner should consider when test pricing a product.
1. Product Value:
When pricing a product, make sure that your selling price is greater than it’s worth to ensure a profit but don’t price a product low in an attempt to possibly generate more sales with a low price. Remember that you run your business to make money and not lose it.
You need to find out your breakeven price. To do this you add all your expenditure; product cost, outsourcing, your own time (this is very important), general cost of pre marketing and this will be the Total Cost of your Product (TC). Then you estimate a sales price SP (this can be done at different price points). You divide your TC by your SP and the result is your breakeven number of units you need to sell to recoup the initial investment.
Other factors you need to consider under this point.
- Remember that if you are selling through affiliates you must reduce your sales price accordingly
- Remember your sales price is net of commissions to the payment processor.
- Remember to reduce from the sales price the cost of any advertising after the product launch.
- Be realistic on the number of units you will sell based on past experience, and/or market return on investment (ROI)
2. Perceived Value
Different markets/niches differ in what they find valuable. This is more complicated when a product has so many benefits. Also, you need to research your niche and see what sells. One of the ways to do this is by using the CLICKBANK marketplace.
You should also consider how people are presenting their product. I prefer reading about a product because I have visual memory. There are many people that prefer learning by videos or mp3s. Therefore consider presenting your product on the three formats to cover all potential customers.
The strategy of pricing products below the perceived value could arouse suspicions to potential customers. They might believe that you have misrepresented your sales letter. They might think that the product is defective or just isn’t in demand. Don’t sell your product so low that it becomes undesirable to prospective customers.
3. Numbers in Prices
It has been proven that some numbers prove to be more inviting to buyers when it comes to product pricing. You can test different numbers with your own target market. Test prices ending in 5, 7 or 9, for example.
Examples: 7, 17, 4.95, 9.95 or even the favorite of offline stores: 4.99, 9.99, 19.99
4. Conversion ISN’T Everything
You have to do some math to evaluate. You may find that a lower price results in more sales but your profits may diminish as a result of a lower profit per sale. Sometimes it’s worth taking on fewer customers for more profit…plus you won’t have as many customer service issues to deal with.
Option 1: Price point $7 = you sell 100 products @ $7 = $700 revenue
Option 2: Price point $17= you sell 50 products @ $17=$850 revenue
Obviously price point $17 will be best because you have more revenue and less potential problems to deal with in customer services.
Then, if your tactic is to build a list and increase your subscribers you might decide to go for Option 1 where 50 additional subscribers cost you $150 or $3 per subscriber.