This is part three of the series of six on Pricing Your Product for Maximum Profit.
Table of Contents
- THE FOUR P'S OF MARKETING
- WHAT IS YOUR OBJECTIVE?
- PRICING MYTHS EXPOSED
- PRICE IS A PERCEPTION OF VALUE
- TESTING PRICE POINTS
- TEETER POINT AND THE SIX QUESTIONS
- PRESENTING YOUR PRICE
- PRICING RULES FOR ROUNDING OFF
- ADVERTISE YOUR PRICE?
- PRICE GIMMICKS THAT WORK
- SUCCESSFUL DISCOUNTING STRATEGIES
- 10 STEALTH WAYS TO INCREASE YOUR PRICE
- NEVER COMPETE ON PRICE
- CONCLUSION
5. Testing Price Points
All the price theory in the world won’t tell you what your optimum price is until you let consumers test it with their wallets. Mark Nolan was the author of “The Instant Marketing Plan” and he told a story about how he sold 100,000 copies of a book on free publicity he’d written for $29 each.
After selling a ton of these books he had a conversation with another marketer who asked him if he had tested his price at $49. Mark just stared at him as he realised that he’d been so busy selling his book and things we’re going so well that he hadn’t tested his price.
You should consider starting your test with four or five price points:
- What you think should be the price.
- The highest possible price you can imagine, but one to which you think that consumers would still respond.
- A low price that is a great deal for the customer, but less than you want to charge.
- A fourth and fifth price that is outrageously high and low.
At this stage you should be aware price elasticity. Read about a case study here.
Holding everything else constant, determine the sales from each price point. You’ll probably find that the price that obtains the maximum sales and profitability is higher than what you had originally intended.
You might also consider price testing a combination offer. By this I mean, what combination of items can I offer for the maximum sales at the highest price. This may be more difficult in the real world but one the Internet it is simple.
Just send one stream of prospects to a page with one combination and price and send a second set of prospects to a second page with a different combination and price. The combination could include different products bundles, different guarantees, different service features etc.
6. Teeter Point and the Six Questions
Ken Evoy, co-author of “Make Your Price Sell,” an online price determination product invented the term “Teeter Point,” which he has even trademarked. The teeter point is the price at which a consumer just can’t make up their mind. It’s the point at which if the price was raised a euro you’d lose the sale and if it was dropped you win the sale. You can change the word ‘teeter’ to wobble or balance, if you wish.
The trick of course is to find the teeter point. Ken asks two questions to two different groups of people to find the teeter point.
Question 1 – What price is almost too high to buy?
Question 2 – What price is just a bit too high to buy?
If the median for question 1 is €50 and the median for question 2 is €45, then your teeter point is somewhere between €45 and €50.
To determine a consumer’s buying habits Ken has asks two more questions.
Question 3 – What is the price you usually spend for (product name)?
Question 4 – How often do you buy (product name)?
This information is important because it helps you determine what a consumer might expect to pay for your product or service.
Other questions that are asked in Ken’s price survey are:
Question 5 – On a scale from one to seven, how unique is (product name)?
Question 6 – On a scale from one to seven, how important is (product name)?
The more unique and important your product and service, the higher the price you can attach to it.
The last question that is asked is:
Question 7 – What is a fair price for (product name)?
The respondent will normally answer with a price that is lower (but not always) than what they truly consider fair. However, combined with the teeter point questions, you’ll have a good indication the optimum price you can charge for the most sales.