Before we get started let me warn you that this is a long post, but if you create and sell your own products online (or anywhere for that matter), then this is a must read to avoid business defeat and overwhelm. Enjoy!
Ever since I have been learning about online marketing and in particular, how to price your digital products, the default response I hear people give others is to charge what you are worth. I’ll admit right now, I bought into that idealism for a while, but the honest truth with that advice is it left me feeling more confused about my pricing than I was before I asked.
Firstly, because of the self worth implications.
// How do we not take business personally, when we are attaching our self worth to our work?
// How do we grow in confidence when no one is paying?
// How are we meant to feel about ourselves when we haven’t yet reached the big 6 or 7 figures in business everyone else seems to obtain so easily?
Are we meant to value ourselves less, or just ignore how crushed we feel until we’ve made it?
While I subscribe to the vision of living a time and financially free life, earning more money than you can give away, and never having to worry about another bill again (hey, it’s where I have my arrow pointed!), charging what you are worth is not the only way to do that, nor is it necessarily correct. But it did get me wondering how many people are out there slapping a price tag on their products based purely on this widely believed concept, without taking other very important points into consideration.
Next time you want to price your product (and you need to go through this process for EVERY SINGLE PRODUCT), instead of attaching your self worth to something tangible, ask yourself these 7 questions to help you narrow in on the perfect asking point. They haven’t failed me yet.
1. Do you know who your market is?
If you haven’t done this exercise, then go directly to jail and do not collect $200. You are certainly not going to have a monopoly of anything if you don’t know who you are selling to. If this is the first time you’re hearing about this concept, then I would highly recommend sitting down away from distractions and figuring out who your target audience are.
This isn’t an individual profile, this is a general overview of them as a whole. For example they might be female small business owners, chiropractors, busy mums, child care workers, personal trainers, batchelors, trade workers, teachers, web designers. The list goes on. It’s highly possibly you have a combined market like busy mums with small businesses, or male physical education teachers. Once you understand who your market is, then you can better understand what problems they have that they want solved.
2. Do you know the priority of the problem for your market (your perfect customers and clients (PCC))?
Our target market most likely has more than one problem, which is fantastic, because it means we can create more than one product. But does THIS product, the one you’re about to release into the world directly address and solve a problem for your PCC? If yes, awesome.
Now just because it solves a problem doesn’t mean it is automatically worth hundreds or thousands of dollars. You need to understand that not all problems are created equally. Some problems are annoying but can be lived with, and others are growing every single day they are ignored. If you were to draw a standard garden ladder with the lowest step being not that important (aka: I can live with this) and the highest step being of the highest importance (aka: I need this fixed immediately), where would your product sit on that scale?
3. What does your pricing scale look like to your PCC’s?
What if that ladder was only 4 steps high? Where would it sit then? Get inside the head of your PCC’s, the ones you are creating this specific product for, and work out what does an entry level to premium pricing scale look like to them. A standard pricing scale most entrepreneurs work to is free ($0 – the first step), entry ($1 > $499 – the second step), mid ($500 > $1,999 – the third step) and premium ($2,000+ – the top step) but what most fail to take into consideration is does this pricing scale reflect accurately to your PCC’s own money mindset?
As an example, if you have created a product for a 29 year old middle class new mother named Sarah who is on maternity leave, and she’s trying to establish a business while her husband works full time, and the baby sleeps, so she can resign from her full time job and look after her new son from home, then while learning how to grow an online business is going to be highly important to her, it’s likely she isn’t going to have a few thousand lying around to pay a premium price to learn everything she needs in one go.
This gives you an advantage of being able to create several products that can help her, all at different price points, all of fantastic value that will all give her amazing results. As Sarah becomes more established and confident in her business, she’ll better be able to afford (and happily pay for) your higher priced premium products. Get creative with this.
4. Does your PCC care even about the price tag?
If you’re PCC is wealthy, or isn’t even paying for the product out of his or her own pocket (maybe their employer is paying for it), then do they care about the price? Most likely not, and if they do, it’s certainly not their priority. They are going to care more about the results they will get from buying this product, so if you have a product that directly targets a high priority problem that your PCC’s have, then it’s very likely they will pay a higher price for it.
The higher you price your product, the better the money mindset of the person buying
5. Are you pricing to your own vision, or someone elses?
When you think about your business and your brand, what do you see? Do you see a mass of women consuming your products at a lower price point, or fewer women consuming your products at a higher price point? Really think about this one. There is no wrong answer, it really comes down to your own vision and where you want to position yourself in the market.
6. Are you pricing your products on it’s value, or on the backs of others?
Because if you are comparing your price to someone else’s, then you’ve just engaged yourself in a race to the bottom. The only reason you should be priced cheaper than someone else, is if you have figured out a way to make what you are selling, cheaper than anyone else. Anything else and you have set yourself up for heartbreak. While it is advisable to be mindful about what others are charging and putting out into the world, it all comes back to your PCC, the value you are delivering to solve their problem, your overall business vision, and your brand positioning.
If you start on that race to the bottom, as Seth Godin puts it… “you might win, and that’s not a place you want to be.” Mind your OWN business with this one, inject who you are into your brand (it really is your point of difference) and focus on delivering awesome value every single time. You can’t fail.
7. Does the price feel congruent to your own money beliefs?
So you’ve created the best eCourse in the world to teach A-list celebrities how to create the most luxurious and organic self care products from the comfort and privacy of their own kitchens using the most deliciously sought after products, and you know you’re sitting on a gold mine. But does it feel right within your body to be charging thousands of dollars for it? If charging $3,000 for this eCourse feels completely unbelievable then don’t, because if you don’t believe anyone will pay $3,000 for this eCourse (that’s worth well over $10,000), then guess what, no one is going to pay $3,000 for your eCourse. You get in life what you expect to happen. It’s Universal Law.
Be gentle with yourself, price it at the higher end of where you feel comfortable, and as people buy at the highest point of your own money mindset and are absolutely blown away by the content, you’ll get brilliant feedback that you can use as testimonials. With a raving fan base your own money mindset will start to shift, and then you’ll start to feel more comfortable at charging a higher price for it the next time you release it out to the world. Just give yourself permission for your business and your confidence to grow, you have the rest of your life to figure out what you’re doing, just get it out there. I promise you no one is going to remember this in 10 years time. Launch and learn.
8. Are you pricing your product based on the value of what that product is worth?
If you are, cut it out right now. Seth Godin (if you can’t tell from this post, I think to be brilliant) nails the reason why with perfection.
The magic of small business is that you transact with someone else. Someone else is going to pay you more than what it cost you to make the thing you gave them, and they are going to pay you less, than they think it’s worth. Because why else would they transact? And that’s the magic of trade. The magic of trade is that both sides will win.
Because we have online businesses, and because we are in a position where we can create a product once and sell it forever-and-a-day without having to touch it again, we are able to divide the development costs (designer, copywriter + whoever you hired into the project) across the costs of hundreds or even thousands of sales. This is the advantage of online businesses. Look at your current list, look at your business growth, and price accordingly to suit.
The fact that you have read this far tells me you’re going to make it, that you care about what you’re doing in the world, that you care about your PCC’s. It’s all just a matter of time for you.
So tell me, what question stood out to you the most? Does this list of questions change anything for you? Do you need some help with creating an income action plan that takes pricing into consideration? Next time you are about to release a product out into the world and are confused about how to price your digital products, please don’t subscribe to charging what you are worth, but rather take a more business approach and answer these questions. You are running a business to serve others, not a popularity contest.
Big love and massive respect, no matter what your results say right now, you’re priceless.