EP43 – How to Price Your Product: Advanced Topics

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Do you struggle with deciding on prices for your products? That’s normal for a beginning entrepreneur. As evidence, consider the fact that this podcast’s episode with the most listens, beside the first episode, was Episode 8: How to Price Your Product.

Carter had the idea to revisit this topic because it was so popular. This is a useful technique in content creation: look at what has already drawn people’s attention, and then expand upon it or examine it from a new angle.

In short, give the people more of what they like!

The goal of this episode is to dive into some advanced topics regarding pricing. Think of it like a 201 college course, rather than a 101 course.

Carter and I come from different business camps–he knows more about customized pricing and B-B sales, whereas I specialize in B-C sales and mostly use inflexible pricing–so we hope we can cover a lot of the important points between the two of us.

Don’t Underprice Your Product!

Let me begin by giving you an example of what you should not do when trying to price your product.

Back when I was still working as a full-time Java programmer, I was building a piece of software that would teach people how to program with Java.

For a second opinion on how I should price the product, I asked one of my coworkers to put himself in the mind of a beginner and tell me what he would pay to access a Java programming course library. He said $5 per month.

Now, keep in mind that I have sold my core Java programming course for $1,000 in total. If I priced it instead at $5 per month, it would take 16 and one-half years of enrollment for me to make $1,000 off one customer.

This story goes to show that even an apparent expert in your subject matter doesn’t know squat about how to price a product.

Carter and I have had many years of experience in pricing. We have both gone from the symbolic extremes of charging $4.99/month all the way up to $1,000,  and we have hit just about every price point in between. We know the consequences of incorrectly pricing a product, and we understand the anxiety associated with choosing a price.

In the past, we have both experienced the fear that comes with pricing, because we have worried what people would think and how potential customers would react. But once you have gained a certain amount of business confidence, you realize it’s OK to charge what you think the product is worth.

If you price your product as low as possible, you are not doing anyone a favor. You lose out on a lot of possible profit you could use to grow your business, and you make your product look like it is worth very little. This is the opposite of what you want your customers to think.

It makes sense to drive prices down in a commodity-based business, but if you’re listening to this podcast, chances are good that you are not in a commodity business. Don’t price as if you are.

Take a look at your competition and see what other people are charging for a similar product. Then compare the quality of their product to the quality of your own.

Creep toward the price that feels right. A lot of trial and error is involved. This is only natural; don’t let it discourage you.

Dealing with Cheapskates

You need to remember that you can’t accommodate everyone with your pricing. If you’re servicing everyone, then you’re servicing no one.

Whatever amount at which you price your product, there will always be someone who asks for a discount. Some people think it should be 50% cheaper; others think it should be free.

You should never let these people guide your price.

If you know you have traffic to your sales page and good copywriting on the page, and yet practically no one is buying the product, then you may have a pricing issue. But typically speaking, you cannot let your customers guide your price.

If you do, then you will be cheating yourself, because people always want the price to be lower. Stand your ground, and learn to accept the fact that you won’t be able to sell your product to everyone.

Price Adjustments: Upsells and Downsells

Upsells and downsells are strategies for altering the price of your product in order to capitalize on a sale or salvage a failed sale.

In order to offer an upsell, you need to have more than one product for sale. I can use this strategy because I have multiple core products.

Here’s an example of how a typical upsell works. Say someone purchases my Java tutorials course. After purchasing, they are redirected to a page that offers to package two courses together (my Javascript and SQL courses) and sell them at half-price.

There are many different ways you can create an upsell, and this is just one example. Another is to offer a portion of your core product at a discounted price to someone who has just purchased your tripwire product.

About 10-20% of people will convert on upsells because they have just purchased from you and are therefore a very hot lead. When you offer a portion of a larger package for a reduced price, it seems like a great bargain to the customer.

While upsells are for people who have purchased your product, downsells are for people who said “no” to your offer.

There are different ways to determine when someone has refused an offer. Perhaps it is when they leave the sales page; for me, it’s when they have gone through my whole email series and have still not purchased the product.

When your potential customer has passed up your offer, you can then offer them a portion of the product or a stripped-down version for a cheaper price.

The downsell should ideally reduce the cost by between 25% and 75%. Don’t give it away for next to nothing just to make a sale: a 90% discount only devalues your product.

Again, accept the fact that you cannot sell to everyone, even at a discounted price.

Tiered Pricing

There is an old business adage that says, “No one likes to be sold, but everyone likes to buy.” This means that people like to feel they’re in control when they make a purchase.

Tiered pricing is a method for using this facet of human psychology to your benefit. It works by giving your customer their choice of multiple “tiers” of your product or service at different prices for each tier.

Carter primarily does tiered pricing for his clients. His team meets with each potential client and works one-on-one to determine what their goals are and what needs to be done to meet those goals. They then present a number of solutions or plans of action to the client.

In general, people don’t feel as good about a purchase if there is only one option. But when you give your customer the option to choose a pricing tier, it puts them in control of the transaction, and they are more satisfied with their purchase.

Tiered pricing is also great when you don’t know your customer’s budget. When you offer different tiers of your product, you increase the probability that the customer will do business with you, thereby building in some protection for yourself.

Software companies typically offer tiered pricing on their products, and they even implement a second tier by letting you choose your payment schedule (e.g. monthly, quarterly, yearly).

Just keep in mind that you shouldn’t overwhelm your customers with choices. Three tiers tends to be the sweet spot. If you give too many options, people will have difficulty making a decision, which could hurt your sales.

Try Split-Testing Your Prices

Devoted listeners of the podcast know how much I love split-testing, so it should be no surprise to you that I recommend split-testing your pricing if you’re having trouble making a decision.

Start by getting LeadPages, which will allow you to quickly create landing pages and do A/B split-testing. Create three variations of your landing page, with each one offering a different product at a different price.

Direct your incoming leads to one of the three pages, then track the traffic and conversion rates for each page. The data you collect will show which pricing option produces the best results.

If you are really stuck with pricing and need some advice, give the people at Clarity a call. You can speak to an expert for a reasonable fee and save yourself a lot of worry.

Above all else, don’t get stuck in the little details and waste your time. Just try something and iterate from there!

Trevor’s Book of the Week

Our book of the week is Ask, by Ryan Levesque. I talked about this book in last week’s episode, and it’s just so good that I have to recommend it again.

I ran the “Deep Dive Survey” explained in the book, and I learned my audience is comprised of two main types of people: 1) beginners to programming who want to start a career as a programmer, and 2) intermediate programmers who already have jobs as programmers and who want to add the Java language to their toolbox.

This is a remarkable result because I didn’t even know the second group was part of my audience, and yet they make up almost 50% of my potential customers. Intermediate programmers are unlikely to respond to marketing that targets beginners, so I intend to create a new channel specific to this audience.

The next survey mentioned in the book is the “Micro-Commitment Survey.” This survey prompts your respondents to flag themselves as one of your specific marketing segments. Then you can tag them in your email service and send them emails appropriate to their segment, and direct them to the appropriate landing page.


Unfortunately, we don’t have an app to showcase this week. Except something cool and useful next time.

Leave us a comment if you’d like to share your advice or experience with pricing. Second opinions are always valuable. And don’t forget to head over to UnitedBusinessLeaders.com to see what’s new with Carter’s business.



Ask by Ryan Levesque