What do you charge for your products? How do you determine the best price point to get the maximum revenue? Should the price be low so you can make your money on volume? Or high to get the best return on each item? Those are the questions many entrepreneurs would like to have answered. It’s tough to figure out what is the best price for a product because there are so many variables involved.
The key to your success is a little bit of art, a little bit of science and a whole lot of testing. (Did I just hear you groan?)
Marketing Experiments just researched the pricing issue to help you out. What did they discover about high price versus low price? “It depends.” Here’s a recap of what they found.
Unless you are selling a commodity or a product that competes in a market ruled by rock-bottom prices, there is always some flexibility in your pricing. So you do have the opportunity to test. Finding the best price for a product, service, or subscription is both a science and an art. A prospect’s perception of your product or service will play a part in determining their own opinion of the “right price.” However, the price itself can also have an impact on how the product or service is perceived, thus creating a kind of causal loop. Within this loop, you have to find the price point that brings you the highest revenues. A very small difference in pricing can have a huge impact on your revenues. This is particularly true if you sell high volumes, or if you sell a subscription which could continue for years.
And here are some key points to remember:
- For physical products, profit margin should always be taken into account.
- The average lifetime value of your customers and your ability to make additional sales to them will be the determining factors.
- Conduct reliable A/B split testing on your pages, and test for a long enough period to be sure of the validity of your results.
- Once you have found your optimum price point, try testing it again a few months later.
You can read the entire pricing report at Marketing Experiments.
What do you think? What other variables do you consider when pricing a product? Leave me a comment.