How To Price Your Online Products And Services

Okay, so you’ve got an ebook, or a piece of software, or a service to sell.

What do you charge for it?

The answer has nothing to do with how much time or money it took you to create the product. It doesn’t matter if you spent thousands developing it, or if you knocked it out in an hour. Pricing online has nothing to do with product cost, and everything to do with maximizing profit.

Here are some of the factors that play into a pricing decision.

Similar Products

How much do similar products cost?

Your natural tendency might be to figure out how much similar products cost, and then lower your price a bit so you can undersell them. That works well for hard goods, but not so well for intangible online products. Sure, if someone is looking to buy a specific product, such as Microsoft Word, they’ll shop around to find the best price.

But if someone is looking to find the best word processor, the cost of the products plays subconsciously into their impression of the quality of the product. Under price your product and you’ve created the impression of a cheap product.

Pricing your product at or a bit above other similar products is the best idea. Go above their price point especially if you can point out how your product overcomes the shortcomings of other products.

How Much Does A Sale Cost?

You need to get traffic to your product page, and some percentage of that traffic will purchase.

For every person who buys, how much did it cost you to get that sale? Figure in not only your actual advertising costs, such as the cost per click for PPC campaigns, or the cost of sending out solo ads, or however you plan on advertising to your target market, but also your cost in time for doing the marketing.

All of these are estimates, of course, since you’re pricing before you know the numbers. You can read the blogs of people who have launched similar products, they often disclose numbers that will help you predict your own.

So you come up with your cost per sale…figure in how much profit you want to make on top of that, and you’ve got a possible price.

Have You Just Launched?

When you’ve just launched a product, it makes a lot of sense to give early purchasers a discount. By getting those early sales, you get some buzz in your target market. People will write on blogs about the product, if you have an affiliate program some percentage of those people will sign up for it, etc. You’re basically giving early purchasers a discount in order to get them to advertise for you.

The proper way to do this is to designate some time period as your “introductory pricing” period, and make that public on the sales page. When that period ends, raise your price to the normal level.

Don’t play the game where you artificially create a deadline one day into the future, or in the next 30 minutes, or whatever. Those sorts of techniques give you a poor reputation, and can affect your later launches.

So What’s The Final Price?

You might come up with different answers for a price as you look at similar products and how much it’ll cost you to make a sale.

The bottom line is the cost per sale. If you sell for less than that, you must have some way of making money off your customers after the sale. Maybe a one time offer, or whatever. If you make the decision to sell a product for less than your cost per sale, make very sure you have a good back end system in place to make up your losses.

For those of you who have products, how did you come up with your pricing?

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