To keep pricing on a practical level, and avoid turning it into a gigantic study in itself, here are some basic pricing tips. Let’s say you have between two and five different product packages. You know different customers have different needs, and different amounts they’re willing and able to pay. You also know that a unique product potentially has a very high price – since there are no obvious substitutes or alternatives.
Trick #1 – Scale different services in terms of price and feature differentiation
To make this example easy to understand, let’s say you have
three different subscriptions:
- Basic: software license, 1 user and 3 features
Price = $9.95
- Premium: software license + 3 users and 10 features
Price = $19.95
- Unlimited: software license + unlimited users and all features
Price = $59.95
The reason it makes good sense to set up prices this way is to reach many levels of customer needs and buying powers. This kind of pricing also tells users they can upgrade as they grow, and that paying a bit more means getting much more. It’s a fair sort of system that most people can relate to.
Trick #2 – Use your pricing to lead people to the products you’re most interested in selling, and optimize your revenue
Often you have two basic types of customers: Those who are willing to pay a lot and those who want to pay little or nothing. In such a case you can set up your price plan like this:
- Meet only very basic needs. For example, the software cannot be used on a smartphone.
Price = $9
- Meet usual needs, and add some nice features for those willing to pay more. For example, user gets the basics and they can use the software on a smartphone.
Price = $19
- This plan builds on #2, for people who have money to spend and are willing to pay a bit more for special features. They get the same things as in Plan #2, and a whole lot more – but they only pay $1 more than for Plan #2.
Price = $20
The intention behind a price structure like this is to move people directly from Plan 1 to Plan 3. Plan 2 is really only a sort of decoy – you don’t really expect to sell many of these, since logic tells the customer that he should just go ahead and pay the one extra buck for Plan 3, and enjoy its many additional features. This gives the impression that Plan 3 is a real bargain, and makes it seem less expensive than it really is, while Plan 2 seems over-priced. All consumers, even you and me fall prey to impulse buys, and impulse upsells. Take this into account in your pricing strategy.
Trick #3 – Use pricing to make the product you most want to sell seem like an exceptional deal
Customers are normally going to compare prices among your various offerings. (As mentioned before, they will also compare to your competitors’ prices. But then, once you’ve put Grandma’s Secret Recipe into practice, you won’t have much real competition!) To make the services you most want to sell look like they’re exceptional deals, you can offer a product or package that will seem unaffordable to most – and much higher than the ones you really want to be the big sellers.
As an example:
- Basic Package: $19
- Premium Package: $29
- Unlimited Package: $129
Here, you would not include many extra features or benefits in the Unlimited Package (#3) – you just add a few, but price it much higher. What you really are shooting for is lots of customers choosing #2, the Premium Package.
The problem of limited information
The three examples above assume that you already have a good basic idea of the proper price levels for your various products. You won’t always know this, though. If you don’t, you may need to experiment a bit, adding extra features, or even making less elaborate, lower-priced packages, to see what customers need and will pay for – and optimize your offerings and pricings accordingly.
One way to do this is to test different price levels immediately after your launch. Do this before you have too many visitors, and word of your price levels gets around the market. Or you can simply introduce individual, small and valuable extra features which customers can buy separately, to add to the basic product they’ve purchased. (Note that customers who are well satisfied with the basic product are more likely to trust your recommended additions and upgrades, and buy them.) Upsell your customers whenever you can.