There are many different product pricing strategies available so deciding how much to charge for on your website can be difficult.
First, when planning a website consider how your website and online course is structured and how it is going to be delivered. For example, is there going to be a one-off charge or will there be recurring charges. Plus if there are recurring charges then what is the frequency: daily, weekly, monthly, yearly etc. This is the first part of deciding upon your pricing strategy.
Next, you need to do some online market research so you can then also gain other important information such as:
- Which segment of the market you're targeting
- The purchasing power of those customers
- What your competition is charging
- How much value your product provides
- How effective your marketing and sales process is
You'll then have the information needed to decide which one of the product pricing strategies below is best suited to your situation:
- Value Added Pricing
- Competitive Pricing
- Charge a low price, then raise it
- Charge a high price, then drop it
- Location Based Pricing
- Giveaway Your Product For Free
- $1 Trials
- Other Psychological Pricing Tricks
Value Added Pricing
With a value added pricing strategy, you price something based upon the amount of value that it adds to the customer's life and not based upon the amount of time and costs involved.
For example, if you were selling a course on how to lose weight, you would ask your customers "Imagine having ripped muscles, an energized body with a six-pack and being in the best shape of your life. How much is that worth to you? $300? 500? $1,000? $10,000? I can show you how AND at only a fraction of that price..."
With this approach, if you're charging a high price it will appear much more reasonable.
A competitive pricing strategy is very simple. First do competitor research to see how much they charge AND what type of pricing they offer (e.g. one-time payment, monthly). You will use this price as a benchmark.
Then simply adjust your price to be higher or lower than the competition - depending upon how much value you add, which segment of the market you're going for etc.
Charge A Low Price, Then Raise It
You might use this if you're working with an online course that is unfinished (and you're unable to meet a deadline). Instead of delaying the release date just release what is currently on offer but at a heavily discounted rate.
The key is to make sure that your customers know they're getting a special deal and that the full price will be charged once the course is finished. You need to let them know that this special discount is only available because of their loyalty and because you want feedback on the existing content that is available.
You can then use this feedback to shape the rest of the course as it is developed. Then once the course is developed, charge the full amount.
Charge A High Price, Then Drop It
When initially pricing your product, you might want to try charging an overpriced amount to see what the market response will be, though these initial sales might be harder to make. If you manage to make consistent sales at this high level then great - maintain the high price.
However, if you've been unable to make many sales then don't fret - you've still gained something of value.
This is because you can now state in your marketing messages "previously sold for
$200, now $50".
Then if you do decide to drop the price later on, ensure your existing members also get the same offer or get offered an upgrade/something of value in return. Otherwise existing members might question why they're being charged a higher price.
Location Based Pricing
Different countries have different currencies and so when a currency gets converted, the amount being charged will vary. People from different countries (or even within a single country) also have different purchasing power. Someone from India is less likely to be able to afford your product than someone from the USA.
So if you can detect where your website visitor is coming from, you can use some computer scripts to automatically change the pricing amount, sales text, images, links etc.
You can then offer different prices to customers based upon their location.
Giveaway Your Product For Free
Give free access to your product for a month to a small number of people in your market. You can do this as a special 'thank you' or in exchange for a review or for feedback.
In return, just ask them to truthfully tell you how much money they'd be willing to pay you for your product. You can then use this feedback to set your product pricing strategy.
To gain this type of feedback, just email your customers a link to a simple survey you have set up. I'd recommend using a free service like SurveyMonkey to create this survey.
Alternatively, you can offer your customer's free trails to give them a taster of what's inside your site. Or even better, a $1 dollar trial as we'll see next.
Why do people offer $1 trials?
- It gives the customer an idea of what's inside the program, at practically no charge.
- You have a reason for getting their credit card details.
- It cuts away the free loaders, so you're so with people that are at least semi serious.
But the last and most important reason is that as part of the offer, you can then raise it to a full price after the trial has finished. Many people won't cancel and so you'll end up making a sale.
This approach also works with free trials that don't charge a dollar. Simply require a user to enter their credit card details if they want access to the free trial. The customer doesn't get charged if they cancel at any time during the trial, but once their free trial time period is up - they get charged a full membership fee.
Psychological Pricing Tricks for your Sales and Marketing
Each product pricing strategy that we've listed above also has to combine with a sales and marketing message at some point. That's why I've included a number of psychological pricing tactics that you can use in your marketing messages:
- Compare to other products ("a 1 day training course would normally cost $200. I'm just asking for $50.")
- How much people have paid before ("My normal rates are $100 per hour.")
- "That's just $2 per day" instead of $60 for a 1 month product.
- "Just $9 a month" instead of $108 per year.
- "The same price as a cup of coffee".
- "The same price as a night out on the town".
- $1000.00 suggest higher quality than $999.95
Use Reference pricing
This is where you reference a higher price which makes your own product look much more affordable in comparison.
Amortized pricing breaks down the cost so it looks much lower.
Compare your price to everyday common items that people can relate to.
Fractional pricing works well with lower priced items. There's market research that suggests odd numbers such as 77, 95, 99 appear more valuable and affordable - this is why you often see these amounts in the supermarket.
Premium Pricing Strategy (Prestige pricing)
If you want something to appear as higher quality then use whole numbers (e.g. upmarket, luxury, jewellers).
(See the book Cashvertising for more info on how to advertise and market your prices effectively)
Whilst the above list gives you a fairly comprehensive tool kit for testing out different price points, there are still a few final points to keep in mind.
Firstly, what is your ultimate goal? If you're trying to maximize your profits then you might want to raise prices. However, if you're trying to gain more market share/customers then a lower price point might be viable.
Also keep in mind the lifetime value of your customer. You can often make more value on the backend than on the initial sale. You might be able to gain more value from a customer over a longer period of time if you treat them well and price your products fairly.
Backend pricing example
- First, entice a customer with a free or low value product sold on the frontend.
- Once they're signed up, you can then upsell the customer on upgraded membership features that are available.
- You now have a relationship with the customer and you have their contact details. Over time, you can build this relationship and then make sales on future products over the long term. See the sales funnels guide for more details about this.
Take Action Now
- Choose 1 or 2 product pricing strategies for your membership site using the above guide.
- If you unsure of what to do then simplify things by:
- Just having 1 paid membership level.
- Charge this membership level at a similar price rate and frequency as your competition (most likely around $10-$20 per month).
- Don't worry about all the other details for now, but test out different price points later on when you have enough traffic.
Once you've decided upon your product pricing strategy, the next thing we'll be looking at is the best software to use for your membership site. There's also the previous article on planning a website for those that need help with the structure of their online course and website.