Sell Based on Value, Not Price
Let's say you went to the store and saw two parachutes, side by side... one looks okay and costs 50 bucks. The parachute next to it looks HALF as good and costs 25 dollars. Which one do you choose?
The "regular" $50 one, right?
Then you notice there's also a 100 dollar parachute on the shelf. It comes with an extra emergency backup chute, a checklist for what you should check for before jumping out of an airplane, and a DVD with skydiving tutorials. You also get one free skydiving lesson included... and one free issue of "Skydiving Magazine." (Ok I'll admit, I've taken this analogy way too far.)
NOW which parachute would you go for... the regular one or the fancy one?
You might be able to get by with the regular parachute, but you'd feel a lot better if you had that checklist, the DVD, the magazine, and the lesson.
People will pay more for handholding. Don't try to sell the smallest amount for the lowest price, try to sell the most USEFUL stuff for the highest price.
But not at first. Put out a small product for a low price with a few features... if people buy that tells you it's worth your time to work on it... add value and increase the price.
That's exactly what I did with this week's launch of Time Management on Crack. 17 dollars JUST for the report.
After 150 people bought, I bumped the price to 27 dollars... and added videos with the same content as the book... so you get the same info with less work and in less time.
Another 150 people and the price is now 37 dollars... I added an additional three hours of video showing me writing a sales letter in one sitting, and gave a TON more details on productivity and articles.
When the price gets to 47 dollars, I'll throw in the recording of the 90 minute webinar where Jeanette Cates grilled me on everything time management.
Start with low ticket stuff... see if they buy... add more stuff and increase the price. But aim for that high price. A couple people missed the $17 offer and asked if they could still get that low price. My response: tell me what one bonus I can add to this package to make it worth $27 for you.
It's so easy to compete based on price, but you're killing your profits. Most people would have paid $100 for that $50 parachute you're selling... if you only included hand holding.
If you're worried about pricing too high, offer a barebones downsell.
p.s. You can still get Time Management on Crack for under $47... for now.
What do you guys think about selling based on value instead of price?
Filed in: Product Creation
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I totally agree with you on selling based on value vs price. However, it really requires establishing the value first. I recently quoted someone on a project and she was pretty surprised at the price.
Admittedly, it was a simple enough project; however the value to her business was far, far beyond what I quoted. Even though she acknowledged it would help her business she was still stuck on the price thing.
Online, I think this is a little easier with 17,27,47 dollar products etc, though you’re going to have a little more resistance with products that run into the hundreds or thousands of dollars. There comes a point where even if there is good value there, a customer still isn’t willing to pay beyond X.
Just my 2 cents. =)
Robert,
You never cease to amaze me!
yet another quality post chock full of great information and ideas!
Yep I agree 100% Jonathan, and for stuff like that you just have to be a good negotiator.
When I used to do PHP stuff, I used to break the quote down. Instead of saying this script will cost you $200, I’d say:
I spent 2 hours on the database structure ($50/hour) = $60
2 hours on the HTML design ($30/hour) = $60
3 hours on the logic ($40/hour) = $120
1 hour debugging everything ($20/hour) = $20
Total = $260
Those would be the actual hours I worked and about the rates I charged when I was new. Then I’d change up the price and I’d say that’s what I should charge, but how about $200?
Or I’d sell them higher and say I’ll also write a manual and record an installation video for an extra $75…
And if they have a budget cap like you said, then you might have to say let’s just make version 1.0 of the scirpt this month and then you can come back to me and apply your budget for next month to version 1.1 once you have some sales. Or applying to PPC campaign setup or blog setup or whatever instead…
Robert,
_____
SIDENOTE: T-minus 3 days and counting, so how’s the 30k goal coming now with the launch underway? :-p
______
As usual Robert you put a common sense perspective into the way we should think about marketing on the Net. Its easy to stay in the “7 dollar script” level of putting out reports and marketing reports instead of uncovering what REAL value you can provide that goes above and beyond the customers expectation and raise your and their expectations to a new level…
…not only does your customer come out a winner, but like you said, you are rewarded with greater profits and it can also be said that you end up with a “higher caliber” customer base too!
Kudos my friend…
Many Blessings,
Jerold
I understand what you’re going for with this model, but it doesn’t work for me. Well, not exactly true, I bought in at $37, but because I’ve made previous purchases, not because of the presented value.
When I bought it at $37, I didn’t know there would be more material added at $47. If I had read your blog frist, I might have waited to evaluate the added value. If I felt the value wasn’t there, I would now have to talk myself into paying MORE for something I could have gotten for LESS with little or no improved value. The buying proposition becomes more complicated. I may or may not have bought it. For me, it’s not a matter of money ($10), but if I had to think about “I really don’t need more internet marketing reading/viewing material,” it would have been easy to walk away.
I’m leary to practice this model. But only you have all the log files and can tell in 10 seconds if I’m totally wrong here. No matter what, you write great stuff!
I don’t get what you’re saying… if you buy in at $37, you’ll still get upgraded to the $47 bonuses for free. The $37 and $47 aren’t separate offers.
Maybe not this week or this month… but you can get to the extra material later. Or maybe you don’t even watch all the extra material, you just pick up a couple extra takeaways… that’s all you need.
Obviously I didn’t pick up from your blog that the added bonuses would be sent to previous buyers once the offer is updated. I should do a better job of reading and not scanning.
I’ve read the time management on crack pdf and have a good chunk of my day off tomorrow set aside to “just do it.” Already got some takeaways to act on. Mucho grass.
Fantastic post, and a great reminder, too! By the way –last night I skimmed over my printout of TMOC, and it is so full of useful gold, I’m amazed at what I received for the price. I always buy your products because you always overdeliver.
Thanks Robert – breaking things down like you mentioned is a good suggestion. It likely would have helped me parachute to safety in that situation I mentioned, or avoid it entirely.
Next time =)
Thanks for a new outlook on life Robert. From your reports, Jeanette’s webinar and most importantly from joining Daily Seminar I watched your 30 day video challenge last night and this morning before work I created 5 videos. I feel like I’m on a roll and you gave us such great ideas.
Thanks so much for everything.
Terrie
Hi Robert,
This messing around with price points is way too complicated for most people.
The agony of choice can be a bit too much.
I prefer to keep things simple.
JP
@Jerold… I just passed the 30K mark this morning! 🙂 Two days early. 30K in 26 days.
JP,
The offer isn’t complicated at all. They can either choose to buy now at a low price, or wait and buy at a higher price. There is only one order button to click on.
Nice to hear that you’ve achieved your goal Robert!
Would you mind sharing the best performing income streams for you for this month?
Robert,
Congrats on Hitting 30k!
how do you make your plan for what you plan to accomplish?
on the computer, I assume? or pen and paper?
Interesting post Robert,
I’m wondering if you made up the whole material ( also the videos and webinars) upfront or if you made them on the fly as you saw that your product was selling.
Thanks in advance for your answer
ciao
alexander
@Alexander: At first I take the shortest path towards having a shippable product… that means main product and sales letter only.
I had the webinar scheduled weeks in advance anyway, so I would have done that even if I didn’t have the product finished. I didn’t record the bonus videos until after I had a couple hundred sales, in case it bombed.
@Business Credit Zone: I made the plan over the phone with my accountability partner. We had a 10 minute time limit set to make the plan, I wrote a couple notes on paper.
@Alp: There was a SMALL amount from my day job and a membership site, a little more was from affiliate traffic (I did a few interviews and webinars this last month), but the bulk of it was product launches. I had one good launch per week. All you need to make $30K is $7500 a week.
What a great post. The insights into how you personally work in your business give me (and I’m sure a lot of your readers) juicy bites of info to take away and implement into our own. Thanks for posting Robert.
Regards,
Karl
I like your pricing model. I’m about to launch an information product as a subscription site so I think the step-ladder kind of pricing thing makes sense as I will be adding more content as time goes on. Initial purchasers get a basic product but because they got in early they stay in on the original price.
This is a good way to get foundation members. Who wants to subscribe at a relatively high price to a site with empty forums and the promise of more information coming soon? It’s important to get a good, solid membership at the start, even though it means sacrificing some of the profits.
Thanks
KayR
Excellent post! Very clear thinking and an excellent analogy.
I think this is a great idea. I would suggest though that starting out higher in the first place would do the same thing.
If you do a bit of research you should know something will sell. You’ll make more money and provide more value in the beginning to start.
Just my opinion!
Cheers,
Brad Spencer