LESSON #49: Pricing Your Product

In the previous lesson, we talked about your marketing funnel. But even after you’ve figured out how your products or services fit strategically into your funnel, it can be difficult to figure out the best prices for them.

Small price differences can mean big differences in your results, so it’s something worth spending time on…

(Watch this video…)

Join my coaching club

Main points:

  • Start high and drop down.

    – Look at your competition to determine an initial range.
    – Drop down in small increments.

  • Consider what is your most important priority:

    – Highest profit margins?
    – Maximum total profit?
    – Maximum number of customers?

  • Priority: High profit margins.

    – You can stop dropping down as soon as you’re making a satisfactory number of sales.
    – Avoid devaluaing your product.
    – Fewer customers can be better.
    – Less customer support.

  • Priority: Maximizing your profits.

    – Need to keep dropping down to test the downside and determine the sweet spot.
    – (See video for example)

  • Priority: Maximum number of customers.

    – Good for breaking into competitive market.
    – Good for high lifetime value customers.
    – Consider a Loss Leader.
    – Consider the differences of Free vs. Low Price

    Pricing Model Chart

    (See video for explanation of how the chart works, color codes, etc.)

    – Your optimal price depends on the objectives of your business!
    – You need to consider your back-end when determining your pricing strategy.

  • Other factors that may affect your strategy…

    1) Competition

    – Price below competition, but be prepared for a battle.
    – Penetration pricing
    – Price above competition IF there are factors MORE important to the prospect than price, such as quality, customer service, or convenience.

    “If you want to destroy your competition, figure out their USP and give it away for free.”

    2) Fair Market Value

    – Don’t base the price on what YOU think your product is worth. Instead, base it on the demand.

    3) Dynamic Pricing

    – ex. Airlines, Amazon.

    4) Ongoing Drop-down Pricing

    – Exit pops, 2nd OTO’s, etc.

    5) Firesale/Limited Time Pricing

    – Instead of dropping down in price, you drop up.
    – Must have a compelling “reason why”.

    6) Psychological Price Points

    – You just need to test it. $50, $49.95, $49, $47, etc.

    7) Continuity

    – If you can include continuity, you probably should.
    – Adds another dimension to your testing: average length of subscription at each price point.
    – Look at lifetime value of customer at each price point.
    – Not always more profitable than one-time payment (see video).

    8] Special Considerations for Product Launches

    – If you’re doing a BIG product launch, the drop down method is not ideal.
    – You need to launch at a price that converts.
    – Use test lists, PPC, surveys
    – Price it aggressively
    – Only one shot with prospects and affiliates
    – Split test psychological price points
    – Make ONE quick price adjustment ASAP if necessary.

    Action steps:

    1) Determine your pricing strategy.

    2) Determine your starting price.

    The only way you’re going to sell anything is if your prospect perceives the value to be equal to or greater than the price, so in the next lesson we’re going to look at building value through copywriting!

    As always, you are welcome to post your questions and comments below.

    Have a great day!

  • 82 comments on “LESSON #49: Pricing Your Product

    1. Ted

      Thank you, always excellent insights!

    2. Glen

      Great content Eric.

      How to do price point testing?

      How large data should we collect to conclude that it is a reliable result for our price point testing?

    3. Janet

      Thanks for another great lesson. Many of your pointers are also good for offline marketing.. I can’t agree more with you that it can be a real pain to determine the best price for the product.

      For affiliate marketers who are selling other people’s products, I guess their pain then is to determine the best “value bundle” they can give as bonuses!

    4. denise

      Hi Eric

      It has all now become clear!! really useful and just at the right time for us as we are about to launch into a specialist sector of the Dog Niche.

      As usual great information

      Blees you


    5. Innocent: Success Principles Online

      Great lesson Eric. I’m just preparing to change my price strategy for a product I’ve been selling for some time now, and here comes this lesson, which has assured me I’m on the right track.

      It’s an ebook I’ve been selling for $27 dollars, but I feel if I turn the information into a membership site and charge, say $7 per month, I will be able to make more sales, get more people in, whom I can market other things to. What do you think about this Eric?

      Also, between $4 and $7, which price will likely draw a buyer psychlogically?

      I’m very much looking forward to the next lesson.

      Again, thanks for giving these lessons!

    6. Tony Puckerin

      Hi Eric, Thanks, your rationale makes sense. I started looking at your video because right not the product I’m marketing has some issues and I think it has to do with price. We reduced the price a couple of months ago but it has not had a significant increase in the number of units sold. We are attempting to position the product on the high end but I suspect that the price variance between our product and other less reliable products is restraining sales. Your presentation allowed me to see it from another perspective. Thanks again.

    7. Terry Day

      Eric, I have a very good product and offer a ton of bonuses. I offer free email support and a money back guarantee. My conversion rate is not as high as I would have hoped for. Any sugestions would be appreciated. Thank you, Terry http://www.howtoshootdigitalphotos.com

    8. Travis Campbell


      Nice job taking a very complicated topic (there have been mounds of books written about pricing), and putting it in simple, bite-sized chunks.

      I appreciate what you said about understanding your priorities. If one’s priority is to build a list of *buyers* (a good priority for sure), then making a product with that in mind, which over-delivers, so that a back-end product will convert better, is a solid strategy.

      In my opinion, the single biggest priority in online marketing today, is building trust with your market (so that you can command profitable prices). This is something you do (and have done well), and are a great example for the rest of us. 🙂

      Keep it up.


    9. MIndy

      Hi Eric,

      What about pricing for services? My market is small businesses and entrepreneurs who need someone as their “back office” with QuickBooks, bookkeeping, Payroll, etc. I’m a recent Certified QuickBooks ProAdvisor.

      CPA’s with this certification tend to charge well over $100/hour and their non-CPA employees charge $97/hour. I’m just starting out. Someone told me that $57/hour was underpricing my services. I’m not a CPA, but I have a degree in Computer Information Systems and an MBA. Any thoughts would be appreciated.



    10. Eric Post author

      The more data the better. But at the same time we don’t want to “waste” traffic that could be going to a better converting price.

      The other X factor that can throw a fork in it, is the source of your traffic. Some sources will convert much better than others, so you need to make sure your tests are receiving equal QUALITY of traffic in addition to equal quantity.

      For most info-products… If you have a product that’s converting between 1%-10%, then I would say 100-200 visitors is enough.

      On the other hand, if you’re trying to create a CPA offer (which you will place on CPA network), or if you plan on doing mass media buying, or otherwise spending $100k+ on traffic, then you would certainly want to test thousands of visitors at each price point to make sure you’ve really dialed it in and perfected the offer before sending mass traffic to it.

    11. Eric Post author

      It’s true… the bundles and bonuses have become a huge source of competition among affiliates in certain markets (like our internet marketing niche).

    12. Eric Post author

      Glad to hear it, thanks!

    13. Eric Post author

      You would just need to test it to find out.

      The other thing I should mention is that you CAN certainly offer both options ($27 one time, and $7/mo) on your sales page. This might allow you to capture more customers at the $7/mo level, while not abandoning those who would prefer to make a 1-time payment.

      I like $7 better than $4.

      $4 just seems too small… like, why are they even charging for it?

    14. Eric Post author

      As you are probably aware, there are plenty of factors that can effect conversion rate.

      Hopefully you will gain some insight in the next couple of lessons which talk about copywriting and sales page format.

      Your sales page seems to have all the main ingredients, but there are a lot of things you can tweak to improve it. Currently the text formatting is too extreme, and the page just doesn’t FLOW. It’s like a bunch of disjointed sections.

      Your headline needs serious improvement… right now the focus is on “How would you like to”. But you need to focus on the BENEFITS and catch their attention with one sentence.

      So the good news is you’re on the right track, and plenty of room to improve.

    15. Eric Post author

      Thanks Travis, I was a bit worried when I finished the lesson and realized how much MATH was in it. So I’m glad it came off as simple and bite size 😉

    16. Eric Post author

      I think you can apply the same price testing methods and strategies to a service.

      If $57 is underpricing, then I think you would have no problem getting clients at that price.

      The problem with competing online with that sort of service is that you’re competing globally with folks who are willing to work for a fraction of what you command.

      Therefore, if you plan on competing by price I think you will have to consistently underprice your services.

      A better strategy would probably be to develop a strong USP and market yourself to a certain niche(s). Prove why you are the best choice for the niche.

      Beyond that, try to think like a marketer and figure out how you can build a true business instead of merely creating a job for yourself.

      Info-products might be one route…

      Think about this. Let’s say you do well and hire yourself out for $57/hour for 5/hours a day consistently. OK, so you’re making $285/day, but you have a job.

      Now suppose you create an info-product, and it sells 5 copies a day for $57… on autopilot. you’ve got the same income, but it’s semi-passive.

      OR… you could consider building a CPA business where you’re not the one doing all the work. Using a service such as…http://www.metisoutsourcing.com/ which would allow you to scale your business and take on an unlimited number of clients without working more hours.

    17. Internet Marketing ABC

      Hey Eric,

      thanks for this awesome no-fluff amount of information!
      I found it particularly interesting that you put the priorities at the beginning of the process. It’s so true, many times it can be a lot more worth to establish a list of proven buyers in a market to whom you can promote products later on.

    18. dele

      I have really been struggling with right price for long but am beginning to understand what it takes to price my product right.

      Thank you Eric

    19. Reed Hummer


      I actually have one additional point to make on the working of the InfoProduct Pricing Model Chart.

      What I come to upon analysis, is that the “Highest Total Profit” and the “Highest Number of Customers” are ABSOLUTE points, whereas, the “Highest Profit Margin” is actually a TRADE-OFF point.

      The Reason behind it is this –

      1) The Chart is Vertically divided in Five Equal Strata. If we suppose the entire height of the chart to be 100, then each stratus represents 20.

      2) There are two Curves – One, the “Total Profit” curve, and the other, the “Total Number of Customers” curve.

      3) The “Highest Total Profit” point is achieved when the “Total Profit” curve touches the highest Vertical point. Similarly the “Highest Number of Customers” point is achieved when the “Total Number of Customers” touches the highest Vertical point. Thus, both the “Highest” points depend on their own respective “Total” curves, and are thus ABSOLUTE in nature, being dependent only on themselves.

      4) However, there is nothing called a “Profit Margin” curve in the Picture. Thus the “Highest Profit Margin” has no “Profit Margin” curve to depend upon. Rather, it depends on the “Total Profit” curve. Now, the “Total Profit” curve reaches a value of 80% (the tip of the 4th stratus) at two points – one, at $87, and the other at $57. However, we have taken $87 as the “Highest Profit Margin” point, and Not $57, because we get More “Total Profit” at the $87 point. Thus “Highest Profit Margin” seems to be clearly dependent upon “Total Profit”.

      5) I feel that you have implicitly defined “Profit Margin” to be the Difference between the Selling Price and the Cost Price of ONE UNIT of the product (I guess that is how most of us would define it too). Based on that definition, if we move to the left of the $87 point, the “Profit Margin” will increase, but the “Total Profit” will decrease. So, we have avoided taking any point to the left of $87 as the “Highest Profit Margin”, because that would result in Lower “Total Profit”. Thus, “Highest Profit Margin” is clearly dependent on “Total Profit”; and hence it seems to be a TRADE-OFF point rather than an Absolute point.

      6) Further, the Trade-Off seems to be dependent on a SUBJECTIVE factor that you have often spoken about in this lesson – the OBJECTIVE of the business. Hence, the “Highest Profit Margin” point could occur at Not Just One but Many Points on the “Total Profit” curve, depending on the OBJECTIVE of the business.

      Just something amusing – the OBJECTIVE being the SUBJECTIVE factor…LOL…



    20. Reed Hummer

      Just thought I’d drop a line for easy recognition of the two curves.

      The “TOTAL PROFITS” curve the Green line. It is the one that rises up from the $97 baseline, goes up, becomes somewhat zig-zagged, touches the tip of the fifth (topmost) stratus, and then comes down and touches the baseline back at $0.

      The “TOTAL NUMBER OF CUSTOMERS” curve is the Red line. It is the one that rises from the $97 point on the baseline and keeps on rising, first smoothly, and then steeply, until it touches the very top of the fifth (topmost) stratus.



    21. Rob

      Pricing is a difficult one. For a Product I think you’ve covered the bases nicely. Here at THT we are thinking about pricing a service (SEM).

      Were contemplating a set price for Individuals, Small Businesses, and Larger Businesses. Another method we’ve thought about is a customized quote, depending on how much work each client needs.

      Maybe for Global customers Online we will have set prices and quotes for bigger accounts. and Local Customers we can offer quotes.

      But still, setting prices is hard, there’s always those good old competitors. Let us know what you think and your opinion.

    22. Helen

      Thanks Eric.
      I recently bought your last incredible offer but I realized that I gave a different email and now I got a subscription for the lessons because I´ve registered myself on a new email so I guess your system thinks I´m a new customer. So in order to avoid getting a whole bunch of new mails that I don´t need since I already got them and studied them, I was attempting to unsuscribe to these new subscription, but I just want to make sure it´s only going to be for that subscription. I did not want to put that on the blog but I did not find another way to communicate it to you. Please let me know if there is another way. Thanks!

    23. Helen

      Eric, this lesson on pricing is really cool, it really makes it more clear for me. Thanks!

    24. Terry Day

      Thanks for the information, Looks like I have some work to do. Thanks again, Terry

    25. Eric

      Thank you for these insights. As I was listening to your recording, I try to imagine what I’ve done with my pricing for my technology-based business and was contemplating on what to do next.

      I like the following points: start high, drop down; base your price on how your customers value your service/product; and figure out competitor’s USP and give them away for free. Very clever!

      Many thanks!

      Jong San Pedro, Philippines

    26. Wordpress SEO

      Hi Eric, I agree that you should consider starting high and work your way down if needed. Of course it depends how unique your product is and if the “enthusiasts” are in great enough number to justify a HIGH PRICE. It seems if the product is a specialty one a high ticket can mean a huge succes, especially with endorsements and testimonials from respected people. I’d be curious to see a chart that went ABOVE the 97 bucks and included high ticket products like 299 and 499 and 999 and 1999 etc. There are less sales of course but profits may go up if there is a reasonable volume. Take care! Mike

    27. Lyndsay Searle

      Hi Eric
      Many thanks for your tips
      I love your music by the way.
      Have I missed something in your lessons? I remember you saying get your website up and get it out there. I have been ready to launch my ebook for a while now but I do not know how to get their money in and how to send the ebook out. Will you be telling us this soon?

    28. Micah

      Hello Helen,

      You also have the option of changing the email address you wish to receive your Eric’s Tips newsletters at. Simply click the link at the bottom of any newsletter you have already received, to be presented with this option.

    29. Micah

      Hello Rob,

      Set prices are a good idea for smaller clients. This saves your customers some steps, allowing them to compare your service and prices with any competitors right away! If you make visitors apply for a quote, they may be inclined to leave, and seek a competitor that has all of the purchase details immediately available. You may want to provide quotes for larger clients however, as a customized discount could be offered to encourage their business with you!

    30. Eric Post author

      Thanks. Yes I will definitely be covering how to process payments and deliver the product.

    31. Eric Post author

      Yes it would certainly be worth looking at, if your product can command a higher price. The chart can accomodate any price points.

    32. Iva Marjanovic

      Great tips,

      I have always found that you should either go for free to build mindshare and get influence or at a high price point so people value your service. If you value yourself at low or free your customers will valus your time at nothig

    33. Will

      Hi Eric,
      Since your demo product is aimed toward inventors, I thought you might be interested in this inventors conference which will be at the US Patent and Trademark Office November 2-5, http://www.invent.org/iic/.

      Really appreciate the great job you’ve done on this series!

      All the best,

    34. Pingback: Copywriting - Internet Marketing Sales Copy & Salesletters | Eric's Tips

    35. Carolina

      what is the best way to apply pricing strategies for services?

    36. Eric Post author

      you can use the same pricing model, but you’ll want to aim for maximum profit margin.

      Particularly if you’re the one providing the services (trading your time for dollars), you will not want to drop down too low. You want to have a good lifestyle, so you should try to make as much money per hour as possible. So charge as much as people are willing to pay.

      On the other hand, if you’re NOT the one providing the service (if you have employees, contractors, etc), then you can treat the service as more of a commodity and aim more for maximum total profits. You know exactly how much it’s costing you to provide the service, so you might lower your profit margins in order to attract more business, etc. (Ie. If you were doing it yourself you might charge $100/hour. But if you’re paying a contractor $20/hr to perform the service you might charge the client only $30 – $40/hr)

    37. EarnMoneyFast

      I have been quite interested in learning why, at least with Internet marketing, prices ending in a seven convert so much better than anything else. At least in the English speaking world. Seven seems to be a lucky number of sorts – seven tips, seven free videos, seven day trial, $47, $97 etc. I don’t have any of my own statistics, and haven’t been able to source any – but I wonder if seven is as significant when marketing to other cultures besides those with their roots in Europe and Great Britain?

    38. Eric Post author

      That’s a very good question, and I think the only way to find out would be to test it. I’d be interested to know what numbers work best for other cultures.

    39. Groom Speeches

      I’ve been trying to find the answer why pricing ends in 7…I’m sure I’ve read the stats before..but no idea. Even done a google which went to the warrior forum, with everyone asking the same question.

      Certainly in asian businesses, numbers have powerful meanings. An example being owning the house at 168 anywhere street, will sell most likely to an asian family…and for more money than the house next door….but this doesn’t answer the question about 7 !


    40. Candy Collins

      Thanks Eric for clarifying this matter. It is rarely you can find any good info on how to price your digital product to sell for sizable profit online.


    41. Small Business

      Hi Eric,
      I aggre with you for some points, but some point I don’t.
      for example:
      * Point – consider what is your most important priority: high profit margin isn’t relevan right now for small business or for new product because you will loss biggest consumer share (mid-low consumer).
      * Regulation and fairness (you cant’ drop your price – it’s about morality)
      * factor that may affect pricing strategy. I just want to add a few factor such as:
      – other product price (subtitute product)
      – Characteristics of the product, some products are affected by other product price. just look at agriculture coomodities, it’s affected by various facor that un relevan with it.
      – the last but not least: consumer earning.

      Great home improvement idea

    42. Paul

      Interesting explanation of a tricky subject Eric. Our main priority at the moment is maximum profit as we are launcing our first product pretty much on a shoestring (both myself and my business partner were made redundant last year) so need to make some decent money quickly but I totally agree that in the mid to long-term a large list of LOYAL customers is the goal.
      One thing you didn’t go into was the sales page price drop – i.e. “this should be $xxx but for a limited time you get it for $xx” what are your thoughts on that strategy?

    43. Eric Post author

      It’s a good strategy, and should definitely be tested. I almost always use it.

      Two considerations to keep in mind…

      1) If you have a high-end clientele, this strategy may not be effective. They may not want to buy something that appears to be “cheap”, or if it looks like you’re desparate to sell it.

      2) According to FTC rules, the normal price must be legit. In other words, if you claim the normal price is $997, then you must actually offer it for that price. Or if you claim a $997 “value” then you must sell it for that price at some point, or your close competitors must sell it for that price.

    44. Fett verbrennen

      Great lesson… I bookmark this and will come back again…!!!


    45. Sean

      Good lesson… You made me aware of the numbers in a to me, a totally new way! Definately food for thought!


    Leave a Reply

    Your email address will not be published. Required fields are marked *