InternetBusinessManual.com - Product Pricing Strategy: Page 1

WHAT YOU SHOULD KNOW ABOUT THE PERCEIVED VALUE FACTOR:

People are price smart. They know what they will pay for an item before they will look at the price. People only care if the asking price matches their idea of what the product is worth.

However, if you present convincing evidence, you can get people to rethink their preconceived notions about what they would spend on that particular item, and their idea of what it is worth. Then you can sell items people wouldn’t ordinarily think about paying more than x number of dollars for at double or triple the price.

If you understand this principle about the Perceived Value Factor—–that with convincing evidence you can get people to change their mind about what they would ordinarily spend—–you can write your ticket to success on the Internet.

On the opposite end of the same spectrum, if you price your products too cheaply, people will become suspicious and doubt the value of your product.

Would you buy a Lexus that sold for $250? You would wonder if it was a piece of junk or stolen. The name of the game is to price as high as you can and still stay within prices accepted by the general public.

Also, it is better to sell 4 products at $200, with a profit margin of $120 each, than 15 products at $7.95, with a profit margin of $5 each.

If it’s your own product, and it’s unique, you can charge a much higher price for it, than for products carried by others besides yourself. True financial success on the web lies in carrying your own product that you can charge an ample profit on.

HERE IS HOW TO INCREASE THE PERCEIVED VALUE FACTOR OF YOUR PRODUCT AND GET THE KIND OF MONEY YOU DREAM OF:

• If you use only the best materials, make that clear in your sales copy.

• Detail the years of experience it took for you to get the knowledge to make the product.

• For an information product, break down the cost it would be for people to consult you directly for the same information.

• If there’s a lot of labor involved, mention that in your copy, even giving the number of hours per piece.

• Design your site to look like a professional institution so people feel like they’re trying to qualify for a loan, or applying for membership at an exclusive club, or visiting an established, legitimate retail business, depending on the type of items you are selling.

• Package products together and sell them as special kits, or if information, as part of a Members’ Only site.

• Bundle together premium incentives enhancing your product, and include them with every purchase. Say you make necklaces: advertise that each includes a deluxe gift box and velvet pouch, and you will increase the perceived value. Say you sell an ebook: package it with bonus downloadable reports or books. Say you sell a service: offer to make 1 free item or provide 1 free critique with a limited time or restrictions to make it feasible for you to fulfill.

• Offer add-on options for an additional price. Many people will buy these options, increasing your profit per sale. If you are selling information products, offer a list or reports which gives additional, helpful information complimenting the product they are buying. If you are selling a service, offer extra time or feedback or evaluation. If you are selling handmade crafts, offer additional items that they can choose to further customize their custom item.

Remember, don’t undersell your product. Give your product the value it is worth, and expect to be paid for that value.

Here is a formula for calculating what you should charge for your product:

Product Pricing Formula

1. Cost of materials x 2 or 3 +

2. Cost of shipping materials from supplier to you +

3. Cost of labor crafting materials and/or packaging +

4. Cost of any premium gift used as buying incentives +

5. Cost of long distance charges, if you offer toll free ordering +

6. Prorated cost of monthly advertising, internet access, bank charges, home office overhead (electricity)—–figure this by taking the number of orders per month and dividing that into overhead cost. If your monthly overhead is $280, and you get 30 orders per month, you need to charge $9 per product to meet your overhead expenses at least. This is why you should not sell nickel and dime items on your website because you won’t make enough to even cover your costs. Use the pricing information here and you stand a chance for Internet marketing success.