Pricing Your Product
As much as we wish there was a Golden Rule for pricing your product, the truth is that its more art than science. You have to test, learn, and iterate.
However, bearing that in mind, there are some criteria and you can use to help you hone in on the right price.
1. Your goals
Consider the goals you've set for your product and their implication on price. For example, if your primary goal is to have an impact by raising awareness for a cause, you’ll likely want to charge less and focus on getting your product in front of more people. If the primary goal is to maximize revenue, then it makes sense to charge more.
2. Target market and product type
Its also important to consider who you’re creating for. While a children’s book might go for under $10, a business book could be quite expensive.
Here’s author Nathan Barry on how he thought about pricing for The App Design Handbook:
"My books are used by software professionals around the world to improve their products. Often these products are used by tens of thousands of customers. By teaching design skills to these professionals, their abilities and ultimately what they product improves substantially. This means their companies make more money and they get paid more."
3. Competitive landscape
This shouldn’t influence you too much, but you should be aware of what similar products costs so that you’re not too far off base.
4. What the customer is willing to pay
Regardless of how long it is, what your production costs were, how much work you put into it, etc., your customers will have a perception of your product’s value and what they’re willing to spend on it. This is where any work you've done to get to know your audience will come in handy. Consider their life situation, their job, their aspirations, what they do for fun, what’s important to them. How does your product fit in? You might even want to get out and talk to your target market about what they would spend.
There are a lot of strategies that you’ll find out there (price high but offer promotions, price low to gain market share, then raise prices later, etc.), but generally you should price at a point that feels right to you given the 4 considerations above. Here are two particular strategies that a lot of Gumroad sellers have had success with.
Pay what you want
Ever consider letting your customers pick the price they’re willing to pay? Its not as crazy as it sounds. We did an in-depth interview with Tom Morkes, author of The Complete Guide to Pay What You Want Pricing, and learned a lot about how effective PWYW pricing can be.
Here’s an excerpt from that interview:
"Anthony and Joe Vennare of TheHybridAthlete.com were selling fitness programs but with a catch: they let their customers choose their price. Interesting, but not necessarily remarkable, right? Until you find out they were making $400 - $600 per day using this technique. Think about that for a second. By giving their stuff away for free, while at the same time giving their loyal readers, followers, and customers the chance to contribute any amount they liked, they were making $146,000 - $219,000 per year.
Mind = blown.
That’s when it clicked for me: I didn’t have to charge to validate my book. Instead, I could give it away but with one subtle difference: I’d give my readers the opportunity to contribute back (as much or as little as they’d like). So I released the book as Pay What You Want, letting my readers know the book was free, but if they liked my work, they could buy me coffee (or maybe a nice steak dinner). In the first month, I made close to $500 from a free eBook (with a subscriber list of only 166 happy readers).
What was the average purchase price of Tom’s ebook (of the people who chose to contribute)? $15. Yup. And he was considering pricing it at $3-$5!
So PWYW pricing can be used both to validate interest in your product and people’s willingness to pay for it. But it can also be a viable long-term pricing strategy, as demonstrated by the success of TheHybridAthelete.com.
We’ve seen many creators have a lot of success (and even double or triple their revenue) by offering their product in multiple packages. The price of each package is flexible, but we’ve found a good starting place to be 1x (for your base package), 2.2x, and 5x. For instance, $9, $22, and $49.
Nathan Barry documented the sales vs revenue of his book, Authority, and found that while almost half of his sales were of his base package (the book alone), it only accounted for 16% of his actual revenue. The vast majority of revenue (60%) came from his highest-priced package.
Your audience is not a monolithic thing. Most people will just be casual consumers of your work, but a small group will get a huge amount of value out of what you do and be part of your enthusiastic core. With this approach, you’re simultaneously delivering a ton of value to your core (if they choose to buy the highest package), while still being accessible to your casual consumer (with the lowest package).
What should you include in the tiered bundles?
Here’s an example of what Sacha Grief and Tom Coleman offer for Discover Meteor:
The Book ($39)
Full Edition ($89)
- Extra Chapters
Premium Edition ($179)
- Additional Interview
- Discover Meteor T-shirt
As you can see, they add in extra chapters, interviews, and even a t-shirt for the higher priced editions.
Some other ideas are behind the scenes footage, autographed merchandise, sketches, templates, etc. For films you could have different prices for streaming vs download, like in the example of Ten Inch Hero. For albums we’ve seen bundles that include concert tickets and even a backstage pass. You can be infinitely creative.