Price and Terms

How to price your product or service is one of the most difficult decisions you will ever make in your business. You will probably never achieve the optimum price. There are so many variables; the business, product, customers, and competitors are always changing. The way to determine the right price is with continuous testing.

For example, you can probably get a higher price than your competitors if you offer a money-back guarantee and they don't. But how much higher? At what point do customers decide that the higher price is not worth the guarantee? Is a free trial period a smart move? What about lower prices for longer signups? ($10/month, $95/year). How about if you offer a rebate? And what about paying for referrals who buy? What about having "sale" pricing periods? Tie-in sales? Frequent buyer cash back? The list of options seems endless. And how these options are deployed is dependent on your overall strategy. For example, are you optimizing for profit/cash now, or lifetime value, or total number of users?

How is the price presented? Just a word or short phrase can make all the difference in response rates, for example: "pennies per day" or "only". These things are easily tested, but few people take the time to focus on these important details.

When you consider the multitude of variables involved in the pricing decision, you will appreciate that you could probably increase profits significantly by paying close attention to pricing strategies.

What is the most important thing you have learned about pricing?

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