Pricing digital products is incredibly difficult…
even for people who supposedly know what they’re doing.
More so than services or physical products where you’re starting with a set rate for labor or variable costs based on materials and shipping, the price of a digital product is about telling a story.
Of course, it’s not the price itself that tells the story. It’s what the price makes you think of that tells the story.
For instance, if I see a ring with a shiny clear crystal and yellow metal that is priced at $25, I will assume that crystal is plastic and that the metal is an alloy. If it’s priced at $150, I will assume that the crystal is quartz and that the metal is gold-plated or filled. If it’s priced at $5000, I will assume the crystal is a diamond and the metal is 14k gold.
I don’t need tags, a salesperson, or a lengthy product description to give me a good idea of “what” the ring actually is. The price tells me a great deal. In an instant, it tells me whether the product is actually what I’m looking for or interested in.
The same is true of most offers — but especially digital products.
The story that is most enticing to your customers often dictates the price of your product. Sometimes that means pricing it higher and sometimes that means pricing it lower. While market and customer research can point you in the right direction, you often don’t know the “right” story and the “right” price until you experiment.
Another factor making pricing digital products a challenge is that, contrary to many assumptions, digital products do have costs.
There may not be materials that need to be purchased or labor that needs to get paid out for every sale but there are delivery costs, sales costs, support costs, and hosting costs. Some digital products have extremely large profit margins and some do not.
If you fail to account for those costs, you might have a product that sells easily and puts you out of business at the same time.
Now, I understand these things because they are my struggle as an entrepreneur, product developer, and marketer, too. Despite having received somewhat of a reputation for being “good” at pricing, I will admit that it is an art and not a science. And, sometimes, art misses the mark — a few times in a row.
Over the course of 2017, I took my company through a sizable pivot, away from being an education and coaching company and toward being a community and support company. We chose to sunset our signature program, Quiet Power Strategy®, and focus on our support community for digital small business owners, CoCommercial.
I’m thrilled with the results of the product we’ve built, the team we’ve assembled, and the community that has stepped forward.
But one area we haven’t quite nailed is price.
The 2 main reasons we haven’t nailed price yet are the two challenges I outlined above: the story and the costs.
Digital products tend to fall into 2 categories: high-priced courses that promise clear and measurable outcomes and low-priced resources that promise to sell you a high-priced course.
Membership communities, like our support community, are neither and remain challenging to sell because they defy those expectations. That said, I still believe that membership communities are a huge opportunity in the digital small business marketplace and the success of fitness apps like Aaptiv and MyFitnessPal confirm this. Further, I still believe that a support community is exactly the kind of value I want to create to serve this market.
To that end and to honor our company value for transparency, I want to share how we’ve evolved our pricing strategy over the last year. The truth is: we don’t have it figured out yet but that doesn’t mean we haven’t learned a lot.
Stage 1: Premium Membership
Our initial offer and price was a holdover from when we offered membership as additional support for our training and coaching programs at $59 per month.
The story we wanted to tell was that our community was full of people who were committed to both their businesses and the community. It was intimate, friendly, and super smart.
We also offered a 30-day free trial to entice people to check it out and make sure it was a perfect fit.
As we looked to scale the community quickly, though, we found this price was getting in the way. It was more challenging than it should have been to enroll new free trials and those who did enroll would often not convert to paying members or would request a refund when they noticed that charge for the thing they signed up for and forgot about hit their credit card.
Our numbers weren’t bad by any stretch of the imagination but they weren’t getting us where we wanted to go. Plus, we didn’t feel we had enough time with each new member to share with them all the community had to offer.
Around the time that I was realizing we might need to make a change to the pricing strategy, I received an email from our partners at Mighty Networks. Because we had a white label app in in the Apple App Store, we needed to adjust our pricing to conform to their standards. In other words, it had to end in 99 cents.
The idea of selling a membership for $59.99 per month really, really irked me. I like round-ish pricing. Ninety-nine cents might make sense when you’re talking about a $2.99 app or a $9.99 per month fitness service… it does not make a lot of sense when you’re talking about prices higher than about $25 and it does not say “premium membership.”
We needed to make a big change and we needed to make it quickly.
Stage 2: The Leaders Circle
Spoilers: we decided we needed to go with a lower price point. But we had plenty of happy customers at the higher level and we wanted to keep them (and keep them happy)! I believed we could do both by introducing some great new member benefits. Plus, plenty of bootstrapped SaaS apps have converted a premium-first business strategy into highly profitable companies.
I made the choice to invest in additional support for the community as we were ramping up membership by self-funding the expense through more hands-on coaching offers. This meant I had a fabulous new team member who could spend time actively working with the community and hosting events.
We announced 2 new weekly meetings: Flash Mastermind and Coworking Chats. Plus, we added monthly day-long community Work & Learn sessions.
Members were thrilled and churn slowed to a crawl.
Stage 3: Introducing A Crazy Low Price Point
As I mentioned, I’m cool with .99 pricing to a certain point. Plus, I thought we had an opportunity to tell a different story.
Instead of telling a “premium” story (although all those things are still true), we decided to tell a story about our community being like the other tools (largely subscription SaaS apps) you use to run your business. We’re there for you whenever you need us, we take care of you and anticipate your needs, and you don’t have to give up other tools to take advantage of us.
We decided on $14.99 per month.
It was a big change. The initial results were incredible. Our assumption was right: many more people would give us a try with this new price point (and the new story).
But in the end, the story still wasn’t right. Many of our fears — like that the quality of new members would go down or that people wouldn’t think it was good — were proved wrong. However, the rate of new trials was still too low and the cost of acquisition was still too high.
Cashflow was crunched and we started looking for other options.
Stage 4: A Similar Price Point — With A Twist!
I still loved the story we were telling about CoCommercial being that go-to tool that small business owners use, not for email marketing or landing pages, but for help and personalized support. But it just wasn’t quite clear enough… it lacked urgency… it lacked concreteness.
I also realized that I had missed the mark on how many of the SaaS apps small business owners used were now selling their wares. Instead of a low monthly price point, many had switched to an annual fee.
Why? Commitment, investment, cash flow.
The same things we need to make our community work (commitment from new members, investment in getting the help you crave, and solid cash flow to support our hands-on staff) were what SaaS companies needed too.
I also noticed that “free trial” just wasn’t resonating with our audience. They were used to spending thousands on online courses but didn’t “click” with an offer to get quality support free of charge for 30 days. Instead of being continually baffled by this (and truthfully, I get their concern), I decided to regroup entirely.
“Let’s make it a 30-day money back guarantee. Let’s make it an annual fee,” I said.
So in the next week, we’re rolling out some new pricing. The annual price for CoCommercial is going up to $200. And, because Apple is Apple, it still needs to be $199.99… but I won’t be speaking that out loud!
We’re doing away with our monthly plan and free trial as we experiment with this new pricing strategy. Instead, we’ll remove the risk by offering a 30-day money back guarantee and our team will work hard to help everyone who joins get more than they’ve paid for out of that first month’s experiences.
At the same time, we’re revamping our marketing strategy and messaging. The story that CoCommercial is there for you whenever you have challenges or questions about your business will remain. But the context will be much clearer. I’ll leave the explanation of that for another day — but I’m incredibly excited about it.
Stage 5: Who Knows?
I wouldn’t say that pricing your digital products is a negotiation with your audience. But it is a process. Just because a price is set doesn’t mean it can’t change.
Even if I wouldn’t recommend making as many changes as we have over the last year!
As you consider adjusting the price of your products — or services — in the next year, make sure you’re also considering the story you’re telling and the real costs you’re accumulating. Make sure that the price you set isn’t just a number but a full accounting of where you want your offer to be in the market, how it fits into your customers’ lives, and the story they’ll tell themselves when they see the price.
I’m not the kind of person who wakes up early to exercise.
I’m not the kind of person who is outdoorsy.
I’m not the kind of person who makes a lot of money.
You have a story (probably many) about who you are and what you’re about.
Those 4 were some of mine.
Have a minute? I’d like to share more–but it’s personal.
In January 2016, I hired a personal trainer because I thought I needed someone to hold me accountable for exercising on a regular basis.
I didn’t like the way I felt, the way I looked, or the amount of energy I had. It seemed like a reasonable solution to the problem.
Guess what? I went to the first 2-3 sessions of the package I purchased and didn’t show up for the rest.
In January 2017, I decided I was going to set my alarm for 6am and start the day with a workout.
I’ve massively succeeded. I feel more comfortable in my body, I love the way I look, and I have pretty boundless energy.
The difference? When I hired a trainer, I told myself, “I’m not the kind of person who exercises on her own.”
When I got serious about changing my routine, I told myself, “I am the kind of person who wakes up early to take care of herself.”
And, now I am.
I moved to the coast of Oregon 5 years ago.
Every day, I felt like a “city person” in our small fishing town.
I loved spending time outside in the temperate rain forest, at the beach, or in the state parks. But I looked at Sean’s friends–who would hike up a mountain and then ride their bikes 20 miles on the beach in one weekend–with jealousy.
They were “outdoorsy” people.
When I moved back to PA 2 years ago, I grieved the loss of the wild outdoors. I wanted mountains, beaches, and rivers. But I realized that PA Dutch countryside, deciduous forest, and rail trails were cool too.
We bought a Subaru. We got a bike rack. I bought hiking shoes.
And we used them.
One day Sean said, “I think we’re becoming the kind of people who go hiking & biking every weekend.”
I said, “We already are.”
When I started my business, I set my earning goal at about $30,000.
That’s how much I had been making in my previous job.
After all, the person I am–the interests I have, the skills I have, the way of thinking I have–isn’t the kind of person who makes a lot of money.
Luckily, I met a lot of women (and men) who were exactly the kind of person I knew myself to be (smart, ambitious, values-driven, philosophically-minded…) who were making a lot of money running fabulous businesses.
I changed my mind: I am the kind of person who makes a lot of money.
Not only that, I’m the kind of person who leads a company that makes a lot of money.
And now I do… and now I do.
What I’ve discovered is that, quite often, when I say, “I’m not that kind of person…”
What I mean is that “I wish I was that kind of person. Too bad I’m not.”
What’s more, I’ve discovered that I can be any kind of person I really want to be simply by changing my story and taking action to make it real.
Now, left to my own devices I might have been perfect (dis)content to limit myself to my preconceived notions of who I am and what I’m capable of.
But I make a point to surround myself with savvy, fiercely intelligent, healthy, and happy friends. They’re business owners who are constantly improving themselves, their companies, and their craft.
They’re the members of CoCommercial–an online community of small business owners serious about making waves in the New Economy.
Yesterday, during CoCommercial‘s The New Economy & Your Money virtual conference, I asked our members to consider their money stories.
They shared the “kind of person” they believed themselves to be.
And many, many of them realized that the kind of person they believed themselves to be was only a shadow of who they truly wanted to be.
They realized that by shifting their money stories, their entrepreneurial stories, or their personal stories, they could change the action they took and the reality they lived in.
Think about the reality you’re creating with the stories you’re telling yourself about the person you are.
If you don’t like the “kind of person” you believe yourself to be, take action to change it. When you do differently, you become something new.
When you become something new, it might be the person you’ve been all along.
Interested in surrounding yourself with the kind of business owners who can help YOU make this kind of leap?
Launching a new product isn’t likely to get you out of a slump.
Neither is having a blow-out sale.
There comes a time in every business when you need to generate revenue — fast. And it could be for any number of reasons — something didn’t play out as you had expected, unforeseen expenses, maybe you had to take some time away…
Your bank account starts looking a little lonely and you need to generate revenue quickly, and without resorting to coupons or deep discounts.
I always encourage my clients to look at their business as a money machine: it has different parts that may need to be added, greased up, or fueled, but once you get it working properly, you should be able to turn on the money machine and generate revenue any time you need to.
How do you reconfigure your business to be a money machine? A few dos and don’ts.
1) DON’T try to launch a new product.
Launching all the time, creating products all the time (even if you’re an idea person like me!), and selling all the time is exhausting. Beyond that, it’s not building a legacy for your business. It doesn’t give your prospects something to remember your business for.
But most importantly, constantly creating new offers doesn’t set you up for making more money in the long run.
Every time you launch a new product or program, you’re only tapping into a very small segment of your potential customer base (the Early Adopters). If you stop there, other customers might trickle in over time but most people won’t even know you have that offer available.
This is a great case study on this very topic by Jeff Goins.
That just puts your business back in the position of needing to generate revenue with another new product. It’s a vicious cycle.
2) DO send a sales email about your best-selling product or service.
Instead of a vicious cycle, your business needs a system for marketing, launching, and selling your best offers over & over again. And when that system also includes products that work together to create more value for your customers and your business than they could alone, it’s a Business Model.
When your business has that kind of system in place, revenue becomes predictable and more consistent. At the very least, you know when it’s coming. Best of all, you’ll find that your offers start to generate more and more revenue each time you enter a sales cycle because your customers are expecting them, planning for them, and eager to buy them.
What’s your No. 1 seller? There are people on your list who haven’t bought this product or service and likely would, if they knew about it. Even when we think “everyone” has bought our main product, there are people you’re connected to who still don’t know it exists.
Sometimes the best way to generate new revenue is to focus on old assets. What could you craft a fresh sales cycle for?
3) DON’T wait until you have the perfect “next big thing.”
I know you: you’re sitting on a great idea. You haven’t figured out how to make the time, find the money, or craft the sales process for that new product or program you have in mind.
Pro tip: don’t.
I’m not saying don’t make the thing, I’m saying don’t make the time. Because more time isn’t going to magically appear in your schedule.
Instead, write down everything you know about the first iteration of this product. Then write down all the reasons your best customers or most engaged audience members need it. Put those things together with a strong pitch and…
4) DO beta test a new product or service with a small group of hand-picked customers.
…present it to a select few you know will dig it.
In Quiet Power Strategy, we call this the Living Room Strategy, and it’s a simple way to test out a new idea on a few of those Early Adopters who will be thrilled to work with you. You’ll generate revenue while doing the work to create the product, instead of waiting for the product to be ready & waiting to get paid.
5) DON’T discount your prices.
It seems to me that whenever entrepreneurs need to generate revenue fast, their first thought is to discount — but really, that’s backward thinking. If you lower your prices, you actually have to sell more to make up the difference.
In addition, discounting, sales, and coupons train your customers not to buy. It tells them that if they just wait long enough, there will be a sale and they can pay less.
6) DO consider raising your prices or adding a bonus.
Instead of discounting, consider if there’s a way you can raise a price or add more value.
There are two ways you can approach raising your prices. If you’re regularly selling something that’s been on the shelf for a while, you can just raise the price to give you a revenue boost.
The other way to tackle this is by giving your customers a heads up on an impending price increase. There’s probably something sitting on your “shelf” that could use a 10–50% bump in price. Craft an email that lets people know the price is going up and they have until a certain date to get the item/program/service at a lower rate.
If you’re not ready to raise prices, you can run a promotion instead of a sale, and add a bonus to entice people to take action. Promotions are very different than sales, but they almost always motivate people nearly as much.
In almost every case, I encourage you to add value instead of subtracting from your price.
7) DO repackage and reposition.
Many times, businesses have several smaller products that can be repackaged as a bundle with more value. In fact, the repackaged product might be a more compelling offer than the individual products.
If you’re a jewelry designer, you might try to package up a necklace, bracelet, and pair of earrings. Simple, right? But the result is a greater value than the sum of its parts; it’s now a night-on-the-town kit.
If you’re a health coach, you might try to package a recipe book, coaching program, and one-off session with you. Again, simple. And again, the result is a higher value than the sum of its parts; it’s now the method, the accountability, and the day-to-day information you need to succeed all-in-one.
8) DO reach out and find a collaborator.
You can also bundle your products or services with someone else’s to increase value for both of your audiences.
For example, a yoga studio and a massage therapist could come together and create a package deal to help people de-stress. A handbag designer could pair up with a clothing designer to do trunk shows. A copywriter could pair up with a graphic designer to offer a single price for a finished ebook.
The possibilities are practically endless if you look at what else your customer might need.
The best collaborations often start from very small joint ventures. If there’s someone in your network you’ve been dying to connect and create with, this could be the time to jump on it.
By your powers combined, you could whip up a workshop or small event that will have both of your audiences asking for more. You get the chance to test drive the partnership, your audiences get value that they couldn’t have gotten from either one of you individually, and you generate some revenue to boot.
The trick here is to keep the scope small and the expectations for each party well-defined. That benefits both of you… and your customers.
The truth is, once you get the pieces in place, your business should be able to generate revenue any time you need it. Of course, that doesn’t matter much if the prices you charge don’t support your growth. Enter your email address below to get my FREE “Price for Growth” course:
PRICE YOUR OFFERS TO GROW YOUR BUSINESS
Yes! Please send me the 6-part free course on how I can set prices to tell the right story about my business, get closer to the life I want, and break out of my money rut.
For the latest episode of Profit. Power. Pursuit., I sat down with Grace Bonney, founder of the iconic design blog brand DesignSponge.
DesignSponge started in 2004, which means it’s seen the ups, downs, twists, and turns of the lifestyle and design blog industry. Grace has weathered all of these, plus big personal changes, too.
Last year, Grace moved to from Brooklyn to Upstate New York. Brooklyn had been a main character in Grace’s story and a huge influence on her point of view. So I was eager to find out how she had changed her relationship to her company, the site, and the world of blogging.
She said that in the city it was so easy to get caught up in the push to be #1, to land the big deals, and to be on top with page views. Moving upstate has put that all in perspective. The change was noticeable.
While she might not use these exact words, I loved how Grace talked at length about the craft of blogging and the craftsmanship of running a site like DesignSponge—from the way she approaches her team to the way she developed the concept for her forthcoming book.
Grace also shared her thoughts on creatives being paid for their work—something she’s been vocal about for years. Her views are nuanced and evolving and it was a real treat to talk with her about this important topic.
As always, I probed into how DesignSponge generates revenue, how the team is structured, and the role of collaboration in her company. Grace also shared about how her attitude toward “being the boss” has evolved over the last 11 years.
Pay close attention to how Grace balances ambition and the pursuit of what’s important in her personal life. She does it beautifully, and she should be a role model for creative and idea-driven entrepreneurs who don’t want to give up their lives to pursue their dreams.
Click here to listen to my interview with Grace on iTunes.
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Learn more about Grace’s forthcoming book on women in business here.
Photo of Grace by Christoper Sturman
With all the talk about how cheap it is to start a business today, it seems like that old adage “you have to spend money to make money” has gone the way of the fax machine. And, it’s true that you can put up a website and offer your product or service for next to nothing.
Yet, it’s also true that once you get started you realize the copious amount of ways you could be spending money: a designer, a virtual assistant, a trade show, an advertising account, a coach, etc… Even the little subscriptions add up fast.
I know many creative and idea-driven business owners who decry the expenses associated with running their businesses. But it seems successful business owners figure out how to not only become comfortable spending money to make money but become excited at the prospect of investing in themselves.
Running a Business With an Investment Mindset
Megan Auman, designer, educator, and metalsmith, is one of those successful creative business owners. I’ve always been impressed with Megan’s investment mindset and her ability to quickly make decisions about spending money (and even using debt) in order to further the goals of her business.
Megan has never been attracted to doing things the cheap way. She’d rather get results and get them fast by making investments in quality tools, materials, and opportunities.
When you listen to my interview with Megan Auman, take special note of all of the factors that go into making an investment decision. Spending money is fun—but it has to be smart, too.
Click here to listen on iTunes. Don’t forget to subscribe & leave us a review! Thanks!
When I talked to Sue Bryce for the Profit. Power. Pursuit. podcast, I wanted to find out how someone so open, vulnerable, and approachable could also be so confident and self-assured. Sue doesn’t just have presence and poise—she has a conviction about the value of her work that borders on bravado in the best possible way.
Sue has no qualms telling women, “I will take the best photograph of you that you’ve ever seen.”
Can you say that about your work? Do you?
There are so many creative and idea-driven business owners who love their work, delight in their ideas, but don’t have that conviction. It shows in the way they talk about what they do, market what they offer, approach sales conversations, and price their wares.
Sue says, “People who devalue money devalue themselves.”
And, I think the reverse can be said as well. People who devalue themselves devalue money. If you find yourself constantly cursing the need to sell, if you find yourself regularly decrying the almighty dollar, you might want to reconsider what you think about yourself.
When you find deep-rooted confidence in your work and in yourself, you can come into a much easier relationship with money. Sue does a lot of hard work on herself and her personal growth to facilitate that relationship. And that, I found, seems to be the connection between her openness and vulnerability and her unwavering confidence. It’s a beautiful combination.
Listen to Sue Bryce’s interview on the Profit. Power. Pursuit podcast and subscribe to receive new episodes automatically.