This article is part of the, “But WHY, Naomi?” series.
In my industry, it's not uncommon – and sometimes even expected – that training products like online courses and downloadable programs should run in the $1,500 – $2,000 range.
Take one look at my store, and you'll see that the vast majority of the products I offer cost less than 100 bucks. Even after being in the business for more than 10 years.
Throughout the history of IttyBiz there have been a few higher-priced offerings, but most of the time my products and classes have been fairly inexpensive in comparison to the industry norms.
Sometimes I'll get asked why I chose this particular business model for IttyBiz. There are a few reasons for this, and I'll answer them by comparing my particular model to other ones.
As I compare them, though, I'm not remotely implying that my model is better than the ones that other people choose. It's just the right fit for me.
Churn & Burn vs Collect Them All
Churn & Burn is a derogatory term for brands with only a handful of ultra-premium offerings. They cast a wide net, hit prospective buyers hard with sales messages, and make a high profit margin on a low conversion rate. Now, we can talk shit about these people as much as we want, but it’s a valid business model and the only real way to sell products in these price brackets.
On the other end of the spectrum, we have… Pokémon cards. The price of an individual purchase is insignificant, making repeat purchase easy and desirable.
Math time! $5 a pack X 30 packs a month X 4 years playing the game = $7200. That’s not nothing, folks.
I wanted to set my prices at a level that made IttyBiz products an auto-buy. On the first day of launch, it is not unusual for me to get an average time on page of 30 seconds. I can make 10 sales within a minute of the sales page going live. A minute is about how long it takes to click a link in an email, scroll to the Buy button, and input your PayPal information. When your reputation is solid, your prices are low, and your refund policy is fair, people can buy a product without even knowing what it’s called.
Most people don’t have to think too hard before buying an IttyBiz product, which is just the way I like it.
Armand Morin vs. The Visa Card
Once upon a time, I was listening to a teleseminar recording from a marketer named Armand Morin. I hadn’t created my first product yet, so my family of 3 was living off of my freelancer’s salary. (Ha! Freelancer's salary!)
He was describing a process he goes through during product launches in which, if a subscriber hasn’t bought the product after a set amount of time, he emails them to ask why not. He said he uses their answers to make better offers in the future and to know how to better reverse objections.
Then he said something that chilled me to the bone. He said he automatically throws out any response that says the subscriber doesn’t have the money. Why? “It’s $500. Everybody has the money.”
At the time of listening, I had $436. To my name.
I hated Armand Morin for years after this. I was livid. I felt marginalized. Disenfranchised. Misunderstood. I felt like he didn’t understand me, or the world, at all.
Much later, I was talking to a colleague who was considering buying Jeff Walker’s Product Launch Formula. The price of PLF at the time was $1,500. I was pretty sure my colleague didn’t have $1,500 laying around, so I asked him how in the hell he was going to afford it.
That’s when I discovered that there’s a magical plastic card that allows you to spend money you don’t have. I was in my late 20s before I discovered that normal people have credit cards. Consumer credit only became mainstream fairly recently in Canada, plus, I’m Romani. My father kept his entire net worth in a shoe.
In the intervening years, I have become more savvy about how the world of personal finance works. But in my heart I’m still a gypsy with $15,000 in a loafer. I just don’t like making people go into debt to buy my stuff. And I don’t like being cavalier towards IttyBiz owners with limited budgets.
Point of Sale vs. Investment Purchase
It’s very common for coaches, teachers and trainers to say they want their customers to make an “investment” in their products. They’re not only talking about money. The generally accepted belief is that the more we pay for a product, the more psychologically invested we are in using it.
I’m not going to lie – there’s a huge amount of merit in that argument. But it’s not the only argument.
On the other end of the spectrum, we have what’s referred to as the “point of sale” product. Magazines at the grocery checkout, jewelry and body sprays in women’s clothing stores, little gadgets at Best Buy – that sort of thing. These are the products that nobody set out to buy this morning, but they are nonetheless delighted to purchase.
Intellectually, I understand that coaches, teachers and trainers would only want “invested buyers”. And perhaps this makes me a dirty, filthy capitalist, but I don’t need a person's psychological investment in my product. I’m content with their $97.
I don’t believe it is my job to dictate what customers do with the products they buy from me. People buy training for all sorts of reasons. Sometimes they want to buy something now so that it will be there when they’re ready. Sometimes their husband has been a shit to them all week, and they need some retail therapy. Sometimes we all need a little novelty and a little hope.
As a consumer, I purchase at all points along the spectrum. I have shoes that cost more than my first car. I’ve been known to spend a little too much time in Hermès. But I also bought a banana hair mask from Fructis for $2.99 because I was bored and it looked fun.
As a marketer, I could have chosen anywhere on the pricing spectrum, but I've found my sweet spot is at the “disposable” income line.
Again, this is my preference, and there's nothing inherently wrong with charging more than I do.
If I were to give any piece of advice on pricing products, it would be to work towards one end of the pricing spectrum, and not place yourself in the middle-of-the-road. (This is about products, not services. Services is a whole ‘nother ball game.)
All things being equal, the people at either end of the spectrum tend to make the most money. In any industry with a wide spectrum of prices, the profit margin is higher on the more expensive items, but total profit tends to work out pretty much the same. This is why Honda is not eating Lamborghini for lunch, or vice versa.
I'm quite fond of my pricing model. Whichever one you choose, I hope you're just as happy with yours.
Click here to read more in the “But Why, Naomi?” series.
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