5 Counter-Intuitive Pricing Strategies

5 Counter-Intuitive Pricing Strategies

I hear a LOT of mindlessly parroted advice on how to price your products — A LOT.  I also get a LOT of pricing questions from ultra-confused students  spanning the spectrum from newbie to ultra advanced asking “What’s the best price for my market entry?  Back end product? etc.”

Well, the BAD news is (don’t shoot the messenger) …for YOUR market and YOUR product or service… really, nobody knows!
There ARE, however, some very important PRINCIPLES which should guide you. Oddly no one talks about them.  (I’m going to fix that in a moment.)

Instead, people spout out a lot of hard and fast, over-simplified “rules” which can lead you horribly astray, because the wrong price can totally kill an otherwise perfect offer.

So I’m going to tell you exactly how I PERSONALLY think you should approach pricing… what’s been very successful for ME, but please remember, in your market, for YOUR product or service, nobody knows (really!) So be brave and try breaking the mold to test something different when you think it might work.

Anyway, the first pricing principle is called the “Goldi Locks Factor”, and it’s actually the LEAST important.  It’s also decidedly not an original contribution, but it’s an important starting point.

PRICING PRINCIPLE #1: The Goldi Locks Factor

I’ve had front ends which converted above 1% at a $14.95 price, while simultaneously testing at ZERO percent at $9.95 AND $19.95.
If I hadn’t thought to rotate in the odd price in the middle, I would have given up on the project as a total loser.  But it turns out, the RIGHT price is often the crowning jewel on value perception, and I went on to sell $106K of that product without really touching the system after the price test.  That was one very valuable test!

To draw the analogy in plain detail, it’s kind of like the consumer is Goldilocks and your offer is one of the beds … there’s a price that’s too high, one that’s too low, and one’s that’s JUST RIGHT. Your job is to get that porridge crazed little girl into the  house with 3 beds ready to lay down in, and see which one she chooses.  Makes sense?
Now, this is the least important principle, because it doesn’t really tell you WHAT those three prices to test should be. (BTW you often can and should  go on to test more prices after the first  Goldi Locks test, but only if it doesn’t conflict with principle #5 below)
Let’s move on…

PRICING PRINCIPLE #2: Flood Your Store for Market Intelligence When You Begin

Here’s where things start to get counter-intuitive until you know better.  Because as crazy as it sounds, I’m going to tell you it’s actually NOT in your best interest to set the price right out of the gate which will make you the maximum amount of profit.
As a matter of fact, I firmly assert you’ll kill your business like this.  There, I said it, and lightening didn’t strike me down.  (My old Rabbi didn’t even call)


Because maximizing your profits on your offer usually means setting your price reasonably high.  In turn, this means you have LESS customers making you MORE money.

But Glenn, isn’t that what you WANT?  Isn’t that what your hyper-responsive principles are all about?  Are you on drugs this evening?
The answer is, it IS what you want after you’ve been in the market for a while and experienced 500 to 1,000 buying transactions.
The reason you don’t want it right up front is you’ll drastically reduce your buyer volume.  Which means you’ll drastically reduce:

  • The speed at which you can complete tests of other elements of your sales system (headlines, guarantee, bullets, copy, etc)
  • The speed at which you can optimize your adwords ads for profit per impression (I don’t know why I can’t get people to do that… it’s so much more powerful and when you don’t you’re just handing Google money)
  • The speed at which you can get buyer feedback on your product
  • The speed at which you can grow your buyer list to survey for back end product development
  • The speed at which you can develop a referral base from delighted customers

And as it turns out, the value of all the above is MUCH greater than the extra profit volume you’d get if you priced for optimum visitor value immediately out of the gate. Plus, early out of the gate you’re bound to have some issues with the product itself which need to be improved.  Issues which only BUYERS can point out to you.  And people are more likely to be aggravated with these issues if they’ve paid $100 vs. $30.

Makes sense right?

Net-net is, start LOW for high volume and a flood of customers so you’ll have a REAL business with lots of buyer feedback loops.
You won’t STAY low (see the next principle), but it definitely pays to start there, in my estimation.
Your natural question is “Uh, how low Glenn?”

The safest thing to do is do a Goldi Locks test at, a little below, and a little above the lowest serious competitor who maintains a first page Adwords presence.  So if the vendor selling  consistently in position 7 is priced at $49.95, I’d test $39.95,
$49.95, and possibly $67.  (Yes, I do start with the classic price points… but I don’t constrain myself to them in later tests)
This way if your product fails to sell, you can be pretty sure it’s not the price.  But if you’ve done your research with my systems, that usually won’t be your problem.  (The problem is there are too many directions which open up to you and you have to remain focused).
Now, the next pricing principle is actually the most important…

PRICING PRINCIPLE #3: Notify and Reward Your Loyal Customers and Prospects

Once you’ve been through 500 to 1,000 buying transactions and you’re very confident in your product and sales system, start methodically raising the price but…

  • Make sure to let your current list know about the impending price raise.  This is only common courtesy if they’ve been attending to and considering your offer.  Some will be angry when you tell them.  More will be angry if you don’t.  And in the end, if what your’e offering is actually GOOD for people and you firmly believe their lives WILL be better with than without your product or service, then the flood of NEW customers driven by the sense of urgency will be good for everyone.
  • If you’re providing a monthly service, make sure your prospects can LOCK IN the current rate, and make sure your current customer know THEIR rates are locked in and protected.  This way, you reward your early adopters.  (And you actually build more loyalty, not only because they’re grateful you’ve locked in their price, but because they don’t want to leave and come back at the new rates)
  • In many markets, particularly markets with a strong follow up sequence with a high volume of prospects “on the fence” at any one given time, you’ll find it preferable to raise the price gradually, in increments, in order to take maximum advantage of the “fence sweeping” phenomenon.  Also, this gives you even more time to continually improve your product, customer service, etc.

Remember, some people WILL get angry when you inform them. MORE will get angry if you don’t. You can’t please everyone. (Well, my dog actually CAN please everyone… it’s uncanny.  I haven’t met anyone who doesn’t like him)

PRICING PRINCIPLE #4: Your Price Probably Isn’t Too High, Your Value Build Is Too Low

OK, now, this starts to tie everything together.  And it’s THE reason you can NOT follow any hard and fast rules about price.
Price is perceived in the FULL CONTEXT of your overall marketing effort.  Which means a letter eating up PPC traffic will perform at a different price than a letter driven by endorsement traffic, or a letter driven by your autoresponder series only after months of previous follow ups.

(In fact, I’ve found it takes less and less effort to make the sale the more you build value into your free content and follow ups… I often wonder if there are some people who would buy at this point if I just put up a link that said “I’ve got a new product coming out next week.  $100 and it’s yours”)

But price is also very sensitive to how you’ve built value in your marketing materials.  (I’m just learning to do this better now, thanks to Terry Dean and Tony Ostian by the way.)

For example, I used to just put my private coaching board out for $397/mo without really bothering to work hard explaining the value.  I was happy keeping the membership VERY SMALL until I got the swing of how much time it took to manage it, and whether it really was going to serve the purpose I hoped: Teaching me how to supervise people until they were big enough to be candidates for Rocket Clicks, and working with a handful of people to watch a dozen or so markets fully implement my newest breakthroughs.

But now I’d like to fill it up, so I’ve gone to great effort to explain WHY this is the BEST value on the internet.  (It really is, but I’m not going to sell it to you here… just go to MY blog and click the coaching link to see the updated letter if you’re interested to see how this is done.)

As I started testing the value build section, conversion went up. So it wasn’t the right price for all time… it was the right price given the current value build, marketing support, and personal business goals for how I wanted the letter to perform.
The last principle is…

PRINCIPLE #5: Only Test Where You Smell The Green

This is a hard one to get.  Because it’s “hotter” to talk about the “ABC Principle — Always Be Testing”.
But if you were always testing everything you could be testing, you’d be doing nothing else. AND, there’s a COST in time, money, effort, and morale (while you wait to make progress) for every test.

So sure, the academic answer is–you never know if $9.99 or$9.95 is going to be the magic number (I’ve done tests where I’ve seen BIG differences between them).

But you know what?  If you reach the point that you’ve got a good volume of front end buyers coming through, you’ve done a few price raises, and now you see opportunities to expand your lifetime value for each customer several fold by developing your back ends…screw the price tests and go develop your back end.

Seriously, it’s REALLY easy to get OCD about the testing thing.  Testing gives us the illusion we’re fully in control of a world which is chaotic by its nature. This is why it’s VERY important to know how to do it. It’s also VERY important to know when NOT to,

I really hope I’ve given you some food for thought.
That’ll be $24.95 please!
Dr. G 🙂

By Dr. Glenn Livingston

Rocket Clicks CEO

This Post Has One Comment

  1. Jered Klima

    Hey Glenn,

    This is a great post that I am personally very pleased you put up.

    Although it confirms my idea of starting low and testing, it is nice to hear someone with so much experience repeat it! (The Goldi Locks Factor… Love it!)

    I hope everyone who is thinking about starting an internet based business, or is in the pricing battle with a product, comes across this article.

    Thanks again,

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