Compared to digital products, pricing physical products is easy. You will:
- Know how much it costs to produce the product; and
- Base your price(s) on how much profit you want to make.
Digital products are different, as you can’t price your digital products the same way as you do your physical products.
The lure of digital products is convincing:
- There are no materials other than the software used to initially create it (at a minimum you will need Microsoft Word and, perhaps, Adobe for PDF).
- No shipping costs.
- No manufacturing to deal with.
- No warehousing or other storage.
- You only need to create the product once, then sell an unlimited supply.
- And so on.
With this in mind it is easy to appreciate why people are interested in eCommerce, and there is a wide variety of digital products on offer, including:
- Online training courses and qualifications.
- Graphics and digital arts.
Although pricing is one of the four P’s of marketing, the concept of pricing physical products does not always translate to digital products. Therefore, it is important not to overlook, or understate, the role of pricing digital products and that it is different to pricing physical products.
Six Strategies to Aid You in Selling Your Digital Products
1. Price High
- From a simplistic viewpoint, when pricing your physical product, you base the number on how much it costs to produce your product from start to finish.
- In contrast, when pricing your digital product, it is about value.
- Smart pricing can boost the perceived value of your digital product.
- Why should your customers choose your eBook over the fancy hardcover at a well-known national bookstore?
- Would you rather sell one eBook for $25 or ten for $1.99?
- No matter how high you price your digital product, the cost of acquiring that customer is the same.
- Make as much as you can per cost of acquisition.
- As a merchant, you want your customers to value your product.
- What will they value more? An online course that’s $200 or one that’s $50?
- Your price signals to your customer your value, so do not undersell yourself.
- Of course, overpricing is as bad as under-pricing, so you may need to experiment to establish the right price point(s) for your digital product(s).
2. Value-based Pricing
- Digital products should be priced based on value not cost of creation.
- However, there is a difference between pricing high and valued-based pricing.
- Valued-based pricing is, essentially, considering how much value you are bringing to your customer.
- If you are teaching a challenging skill or providing a money-saving solution, your digital product may be deemed high-value.
- Your product should be viewed as an investment for the customer. So, how much is that investment worth?
- Use this as a starting point for determining the price point of your digital product.
- For example, if you are offering an eBook that teaches how to launch one’s own freelancing business, you will be able to offer a solid return on investment (the price of the eBook far outweighs the costs associated with making mistakes starting up the business).
- Price accordingly.
- Finally, consider watermarking your eBook (intellectual property) to protect your hard work.
3. Tiered Pricing
- Tiered pricing is popular.
- Customers value things differently or have different needs.
- Consequently, it is sometimes useful to create different tiers of products to meet these different needs/perceptions.
- Tiered pricing can enable to you sell to a larger segment than you otherwise would have with just one price.
- Some customers want ‘bells and whistle’ products, others just want the basic product. Think computer games: some customers just want the basic game whilst others will pay for the basic game, plus a digital map, forum icon, and freebie in-game equipment.
- Whilst it might be costly to create additional add-ons for physical products, these are very inexpensive in the digital space (not withstanding the time cost of initial creation).
4. Try Before You Buy
- Some customers will be very confident to buy a digital product before use, others less so.
- Therefore, you can aid customers feel confident in your digital product before they purchase by offering a try before you buy option.
- Letting customers try before they buy is a very good way to overcome any concerns they may have.
- Customers are smarter than ever and they do not want to throw money away on a digital product that they perceive will not be useful to them.
- The following can help those on-the-fence customers take the plunge:
- Offering a sample;
- Trial; or
- Another money-back guarantee.
5. Added Bonus
- Everyone likes a bargain and getting something for free.
- This is true for both physical and digital products.
- Adding a free gift with a purchase is an excellent way to give your digital product further value.
- For example, the eBook mentioned above could come with a free invoice template or some other useful template that can be used by the new business owner.
- The important part is to focus on the value component of the added bonus.
- You can add free and paid gifts and treats for your customers.
6. Psychological Pricing
- In simple terms, this is pricing a product at $4.50 or $4.99, rather than $5 or $5.00.
- Though small, this psychology trick has profound effects on how we understand prices.
Pricing your digital products is not difficult, however, do not fall for the mistake of thinking there is a one-size-fits-all solution to pricing.
Be confident in trial and error when establishing your price point(s).
The biggest mistake new merchants make is to under-price their digital product(s) – when you under-price your digital product, you cheapen it by reducing its perceived value.
Do not send this message to your customers unintentionally. Stay ever mindful of your eCommerce profitability.