Wednesday, April 22, 2009

Pricing strategy $49 or $19 - MEMBERSHIP SITE

This is a key question and in the past, I maintained the $19 price even though the value of the product is actually higher.

Now, I am testing this new system to see what happens...

Here are again the same results that I observed when I tested this in the past:
  • The increase of price from $19 to $49 means that 50% of customers or more don't purchase the product. The higher price is DEFINITELY a limiting factor for them - if if these reasons are sometimes not justified and the value of what they get is actually higher (that's subjective of course!!!)

Here are some more consequences for this price increase:

  • 50% less people accessing the material
  • 50% less potential new clients sign up coming from these existing customers
  • Less success stories and positive feed back + more refund requests
  • Less referrals from people who are turned off by the price and see this product as too "commercial" = Decrease in traffic (?)
  • Less returning visitors who are instantly turned off by pricing
  • Gap in ---> Feel good + connectivity + trust bridge with my audience

Some of these consequences are subjective and difficulot to measure but as I described in other posts, I did notice a serious shift in the response from my audience with a 80% drop in clients sign up for instance in the past...

So...

The conclusion is obvious!

The only element that justifies a price increase is higher income.

There is a second element that could justify it as well if results could be seen: it is the value perception!

That's something you hear people say a lot: higher price means that potential customers value your product more.

Might be true!

But they as well, perceive a stronger commercial intention behind that price.

In other terms, their buying resistance or defense system kicks in!

Yes! That's what I observe.

Now, underpricing a product is something most marketers consider a mistake.

In my experience, the first thing that matters is numbers, right?

Well numbers show that a higher price does NOT mean more income at all!

On the contrary!

All the marketing efforts, like traffic building, connecting with my audience, creating lots of positive energy around the vital brand all become much more challenging when the price is 2.5 times higher.

These are NOT final conclusions.

Yes! there is certainly a way to keep that price at $49 and still be successful - I know of a couple of strategic changes that would justify that price increase.

But... Right now, the best conversion rates can go from 2% to 1% just because of that price increase + lots of coaching signups are lost because 50% of customers don't enter into the site or connect with the product at all - They are first turned off by the price

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What about a price in between like $29 or $39?

Well, in my experience, you have 2 major price thresholds:

  • The first one is at $20
  • The second one is $50

At least, that's the way I function.

$19 is a no brainer - that's the type of spending that customers can make a quick buying decision.

Between $20 and $50, customers start seriously thinking about it.

It's no longer a decision that is taken lightly.

Again, you can question the effectiveness of those who think that way and argue that they "should" think differently about that type of product, right?

Positioning... You can spend lots of energy trying to sell a higher price.

Yes! Eventually you might get some good results!

But! These are marketing techniques people are usually turned off by.

This is a coaching audience.

People want to believe that you care rather than you are there to sell anything to them in the name of making money.

I already observed in the past that there is a VERY fine line between what is ok and what is not with my audience.

Some promotion is fine but take it one step too far and you TOTALLY shift the way your audience sees you and your services.

$19 or $49 are both statements.

In between it remains within a vague area and I believe that at the end the results would be similar (same income + proportinal decrease in sales)

All the tests I tried so far told me the same story.

the price threshold of $19 is still there compared with a few years ago when I started.

It is exactly the same.

Shifting to $29 puts your product alltogether in a new "price" category.

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So, why shift to $49?

Well... the only reason why I run this test is because I want to check what price is the best option.

I have many reason to believe that $49 could be a better hit but when tested with my audience, the results are there!

I see them!

I can measure them!

Theories are fine but results count more that concepts! REALLY!

At this stage I could either shift back to the $19 price or wait and test a few other elements in the sign up page

I'll cover that in coming posts...

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