One of the most challenging aspects of running an online business is pricing. If you price your products or services too high early on the business may tank before it even starts selling. However, a highly competitive price which undercuts all the competitors may end up causing you to work hard without much reward. That said every industry is different and so you’ll want to approach pricing products or services primarily based on the industry. Below are a couple of pricing tips for startup businesses or those that are yet to see an increase in sales. It is important to make sure that you use these tips in addition to knowledge of your industry to maximize the results.
Take indirect competition into account
How you decide to price your products and services will vary dramatically based on if you are a B2C or B2B business. Regardless, it pays not to overlook indirect competition. Indirect competitors are vying for the same business dollars, and in some niche markets, there are just so many clients / customers in the market. Customers aren’t comparing pricing in a vacuum. So, for instance, if you’re offering legal advice there are potential clients who are also comparing the service you provide to so-called free consultation services. It is for this reason that it makes sense to find out who your indirect competitors are and then set a price accordingly.
Tiered pricing for products and services
When it comes to pricing, your products and services consider a tiered pricing structure. The tiered structure helps you figure out which features people find the most valuable and at what price points. You can then tweak your offering and pricing for maximum conversions. Even though first-time buyers tend to gravitate to the cheapest possible package, having the option to upsell or upgrade for existing customers ensures more sales. The other main benefit is that segmented market automation enables you to test various pricing structures without publishing those prices publicly.
Low or zero pricing your products don’t work
If you’re selling a product or service which is not of an online automated nature, then zero pricing is not a good idea. You’ll also want to price it as high as you can easily get away with it when enough people buy. Ideally, you’ll want to start with a high enough price and then gradually lower it as your business becomes more efficient. Trying to undercut when you’re starting out is a terrible idea, especially if you’re trying to sell a product so ideally build a better product.
Determine your profit margin
It does not matter what potential customers may be willing to pay or how much your competition is charging if you can’t cover expenses then it’s pointless. Pricing products or services online is only possible if you take margins into account. You should know the costs involved with servicing, building and selling the service or product. Once you know, all this then find out if customers are willing to buy.
Split test to validate if your pricing works
Pricing products or services is a critical decision and needs to be made based on actual data. Start by creating a landing page which describes your product or service in detail with the price. Make sure to add a credit card entry field and use an A/B testing tool to rotate the different prices. Then see which price points receive the most credit card information.