Updated February 3, 2019 – I get a lot of questions about pricing in my line of work. That’s certainly understandable: most edupreneurs understand, even if only intuitively, that the level at which you are able to price your offerings while still driving sales is one of the most fundamental determinants of your business success.
Basically, the higher you can price without causing a major drop in sales volume, the more revenue you will generate. And, if you can keep your costs constant – or better yet, reduce them – while raising prices, the more money you will make overall.
What happens more often than not, though, is we feel controlled by what we perceive as the possibilities for pricing in our market. While it is true that the sky is not the limit – there are, of course, prices that will be higher or – we often forget – lower – than customers are willing to pay, it is also true that we have a lot more control than we think over pricing.
Based on years of consulting about pricing and on my own needs to set prices, here are my top tips for controlling your pricing rather than letting your pricing control you.
1. Be clear about your strategy
First – really, first – focus on what you are trying to achieve. Not on what the competition is doing, not on what you have done in the past. Your decisions about pricing can help you achieve a range of goals, from greatly increasing penetration in your current market, to entering a new market, to elevating your brand, to impacting the sales of your other products. Each of these goals requires a different approach to pricing. So, again, be clear about your strategy and the goals you are pursuing.
I discuss the importance of strategy as well as two other key “axioms” of pricing in the following video:
2. Work backwards
Don’t work forward from the costs associated with creating your offering. Work backwards from the value it will deliver.
If someone learns and applies what you are teaching, how valuable will the outcome be? That may be had to quantify, but you should put great effort into trying. Will your leaners make more money through sales or salary? Will they enhance their personal or professional brand? Will they save large amounts of time? Really probe to figure out all of the positive outcomes, and put a price tag on them.
As part of this effort, definitely talk to your prospective learners – through interviews and surveys – to find out what value they place on the outcomes. Based on those conversations and your own thinking, identify ways you could you increase value – particularly with relatively low cost moves.
Based on the value you feel you can credibly say you deliver, calculate a price that represents a high return on investment for the learner – 10x is a good rule of thumb – and then figure out how to produce the learning experience at a cost that provides a strong rate of return to you.
Yes, all of this is easy to write and hard to do, but it is certainly doable. Put this kind of work in up front and your business will be leaps and bounds better for it in the medium to long term.
3. Create a new category
Or at least do what you can to radically change your current category. TED did this with conferences. Starbucks did it with coffee. Your prospective learners will inevitably try to put you in a box – it’s just human nature. Once they do that, the next step is to say “things in this box tend to cost $X.”
Don’t let that happen.
Put time into figuring out what is distinctive or unique about you and what you do. How could you reframe, rename, reconfigure or otherwise modify your approach to stand apart from the alternatives in your market? If you can redefine the category, then “things in this box tend to coast $X” no longer applies to you.
4. Change the point of reference
Any existing category has an established acceptable price range and, as a result, your learners will have established points of reference that they bring to any purchasing decision. To the extent that you stay within an existing category, one of the main moves you can make is to influence your learners’ point of reference.
Arguably, the easiest way to do this is to put a “magnet” in your market?
By “magnet,” I mean introducing a high value, premium offering that is priced much higher than anything else you offer. Make sure your customers know about the offering – in fact, make it one of the first things they see. Doing this creates what is called an “anchoring” effect. Exposure to the higher priced offering helps to “anchor” reference point at a higher level, making the price for your standard offering seem much more reasonable. In fact, the higher priced offering helps create room for increasing the price of your standard offering – which is why I refer to it as a magnet.
Keep in mind that the “magnet” needs to be in the same category and address the same general issues as your standard offering. It can’t be something completely different or it won’t be perceived as point of reference.
5. Provide Options
Always remember that there is no single customer for your offerings. Some are looking for more value than others; some are willing to pay higher prices than others. To make sure you capitalize on the full potential of any given offering, provide multiple options at different prices.
You may, for example, offer a standard version that provides the core value you think most customers want, but also a pared down “basic” version that has less content, no live sessions, or other variations. You could also offer a premium version that bundles in extra content, or coaching, or access to community – you get the idea. You see this sort of thing all the time, of course, with software companies. So, take a page from course platform providers like Thinkific and Teachable and create options for your course offerings.
6. Improve your packaging
Pricing is perception. Period. We aren’t nearly as rational as we think we are when we set out to make purchases and variables like packaging can make a huge difference.
Naturally, courses aren’t actually “packaged” in any tangible way, but most course sales involve a landing page of some sort. Make sure that landing page:
- is visually appealing
- makes use of effective copywriting
- provides compelling images and social proof (e.g., testimonials)
- features a crystal clear call to action
That’s for starters – for more tips see Landing Pages 101 for Selling Online Courses. Improving your landing pages is one of the most immediate moves you can make to bolster your pricing.
7. Leverage scarcity and urgency
If you have never read (or have not recently read) Rober Cialdini’s Influence: The Psychology of Persuasion, drop everything, go get a copy, and read it today. Really: it’s that powerful and that important.
I already mentioned social proof above. This is just one of seven “weapons” of influence that Cialdini covers in Influence, a book that is backed up by volumes of research conducted over decades by Cialdini and his colleagues. Another one of these weapons is scarcity, along with it’s constant companion, urgency. There is a big reason that you continually see Internet marketers use phrases like “Limited number available,” or “Doors close tomorrow.”
The reason? It works.
When it comes to selling your courses – and getting the prices you want – scarcity and urgency are your friends. Consider not keeping enrollments open all the time. Rather, only open them up periodically, and really do close the doors at the end of those periods. Or make some of your options (see above) available only for limited periods of time. Or truly do limit the number of seats you will sell (particularly for any offering that are live or have live add-ons).
Again, you get the idea. Put some thought into how you can use scarcity and urgency to drive sales and possibly even to help you raise prices.
8. Make discounts count
As a rule, I am not a fan of discounts. Even used sparingly they tend to devalue your offerings, and used frequently, they can turn your offerings into a commodity. (This, by the way, along with lack of control over reference points, is a key reason I am not a fan of sites like Udemy.)
If you are going to use discounts, my bias is to use them to reward your loyal customers occasionally rather than as a tactic to attract new customers. (One exception may be when you are launching something completely new for which you have no established customer base.)
Also, make sure you discount enough for it to matter. Generally speaking, if you drop (or raise) prices less than 20 percent from the reference point, most prospective customer will not notice or won’t care if they do. (This does, of course, depend on the price of the product. Ten to twenty percent off of a very high priced product may be enough to move the dial.)
Keep in mind that the anchoring principle covered under “Change the reference point” above works with discounts. You may, for example, determine that your target price for a particular offering is “$X,” but publish a price significantly higher than $X and offer $X as the discounted price. This tends to work best if you are only going to run a product for a limited time (like, for example, an annual event) and/or if you very rarely have returning customers for the product.
9. Keep a “just testing” mindset
Pricing is usually not a “set it and forget it” part of your business. You will almost always need try out multiple price points for any given offering – initially, and over time – and most of the tactics discussed above will result in your making adjustments to your prices as well.
Be prepared to run pilots to help you test out pricing.
Try to pre-sell your offerings whenever possible – that is, secure payment for them (by, for example, offering some special bonus content) in advance of producing them. There is more effective way to ensure you have an audience that will pay at a viable price.
If you want to take things a step further, try using a technique like the Van Westendorp Price Sensitivity Meter to home in on the “right” price for your product. (Though, again, whatever results you get, you will still need to test them and adjust.). If you would like a detailed walk through of how I used Van Westendorp to set pricing for my company’s virtual conference, sign up for my newsletter below, and once confirmed, respond to the confirmation e-mail to let me know you want access to the video.
10. Just raise your prices already
I’ve put this last, but to be honest, most edupreneurs could probably start right here. Remember the points above about reference prices and discounting? Most people won’t notice or feel much impact if you drop a price by 10 to 20 percent. The same goes for raising prices.
In most cases, you can raise your prices by 10, 15, even 25 percent and it will have little, if any impact on your sales volume. What it does impact is your margins – in other words, raise your prices and you will, in most cases, automatically make more money.
This certainly goes for existing products, but it goes for new products, too – whatever price you are considering for your product, go ahead and raise it 10 to 20 percent. In fact, you may want to go significantly further and consider tripling your price.
Again, always test.
Those are my thoughts. You can decide for yourself if they are worth the price.