Choose a price that Sells!

PROFIT!

You have to make a profit or you won't survive. The right price is critical to your commercial future. It *is* your most important marketing decision.

Why? because misjudging your price points in this digital era costs dramatically more than it did in the past. Internet markets mature rapidly.

You have to be prepared to adjust pricing frequently or upgrade your product/service to maintain your price. The best price is never static.

So, what do you do? Get the e-commerce equation right... every time!

Great Product + Perfect price + Satisfied Customer... = *SUCCESS*

A lifetime of success, that is. A buyer decides if the price is acceptable by determining the benefits of the product and by considering the competition.

The seller prices to maximize profit, while considering the bigger picture business model (i.e., high price/low volume or low price/high volume).

The best price must pay for the cost of production, marketing and overhead costs, and still make a profit.

Let's say that Product X costs you $20 to make, market, sell, and distribute. But let's say that your customer is only willing to exchange $10 for it. This equation is definitely "off the rails" and will stay there, permanently, unless some major modifications are made.

"Hard Knocks" life lesson learned by this experience? The most important determinant of the best price is *always* what the product is worth to the customer.

This is the beauty of a MYPS! survey: You learn the exact price that people are prepared to pay for your product so that you can assess whether your product or service is worth pursuing or not -- saving time and money.

Before your prospective customer can tell you what your product is worth, she must understand what it will do for her. So you must be able to answer the question... What's in it for me?" That's where an effective Web site is absolutely necessary. A great site educates the customer about your product's benefits and features. It builds perceived value.

For example, if you are going for a high price/perceived value model for your product,the Web site must reek of money... no corners shaved. Every high-end detail must be polished to a shine.

Figure out your target group. Who is most likely to see the benefits of your product immediately? Does the copy on your Web site reflect that awareness?

And, you can't afford not to keep "tweaking" your site periodically. Market conditions demand surveillance. Perhaps you need to upgrade your product because your competitor has come up with an interesting angle. Or you need to counter-attack a mature market.

What if you discover an untapped segment of the population? Your site has to be able to capture their attention and make that visit-to-sale conversion.

Actually, your site has to go beyond that. It not only has to get the sale, it has to build perceived value in your product. If the customer "gets it" (in his or her head), both the perceived value and the Conversion Rate will be high. Follow the principles of Make Your Site Sell to double perceived value *and* your Conversion Rate...

DON'T GUESS. BE ACCURATE!

A theoretical best price for your product may look reasonable and saleable on that fancy spreadsheet or after a discussion with your hired pricing consultant. But it might be totally off-base to your customers' "personal" prices. And if it doesn't jive then you might as well leave the dance hall.

You have got to know confidently at which price point your customers are thinking... "Yes, this is worth it." Or conversely, at which point *price-resistance* kicks in. That's the price where your customer starts to think... "I don't need that as much as I thought I did."

This brings us to a critical concept that we call the TEETER POINT (tm). It's that price at which the consumer just can't make up his mind. Basically, it's a 50-50 proposition -- the credit card could stay out or it could be put away.

MYPS! develops a line graph for you that will show you where this Teeter Point is for your visitors-not-yet-customers.In order to identify this powerful point of consumer decision-making, you have to *know* your customers.

The *ideal customer profile* would highlight...

Write down the answers to the first four questions...

PRICING

Of the marketing 4 Ps (Product, Place, Promotion, Price), it's the only "P" that brings income INTO your business -- the other 3 Ps all COST you money.

Pricing extracts the value that the other 3 Ps build in your customer's mind. But exactly how high is that perceived value?

Pricing sounds so easy in theory, but ever so difficult to do in the real world. Actually, up to now, it's been impossible for small-to-mid-sized businesses to do it in the same manner as the Fortune 500.

All the way through this web page, our guiding e-commerce statement has been...

The perfect price is that price that maximizes your profits while building a lifetime customer through value satisfaction.

And perfect-pricing does more than just maximize profits -- it LEVERAGES them. Here's how... Let's say that you have a net profit margin of 10% (i.e., after ALL expenses, including overhead, etc.).

If you could increase the price by 10% *without losing a single sale*, you would obviously increase gross income by 10%.

But that 10% increase in price increases your *net profits* by 100%! And you'd still keep a happy customer who will return again and again. Talk about a win-win situation!

But there are two big IFs in there... ...

How can we be sure of those IFs? Where do we find the Perfect price?

Simple. Start where *all* business begins... ... with the customer.

Perfect-pricing does not always mean an increase in price. Let's say that you decrease the price of your product from $89 to $79. If that doubles sales, wouldn't that more than make up for slightly lower margins? How do you know IF that price decrease would increase sales? Again... start with your customer.

No "guess", no "ball park", no "gut feel" terminology is allowed. The most important determinant of price is *always* what the product is worth to the customer. You have to know that perceived value level *exactly*.

The reflection exercise helps you get inside your customer's head. Were you able to answer them all?

Quick review...

Make a reminder to yourself to come back to this assignment every once in awhile. Keep on your toes so that a competitor doesn't bump into your heels. :-) And don't forget about the Make Your Price Sell! Pricing Manual. It's a treasure-chest of pricing information. And it's free when you order the MYPS! server-side pricing software...

Read your answers again. Now, how do you know if your insights are correct? What's the margin of error?

Dr. Carol Ann Dorn, a McGill University marketing/consumer behavior specialist who worked to develop MYPS!, pinpointed six important questions that crystallize your understanding of the customer. We divided the six pivotal questions into three categories...

See how these questions build a comprehensive customer profile? Knowing your customer means knowing the right price to charge for your product. The Perfect price fits the customer's *AND* your needs (as the seller).

Now, how do you get the answers to find the Perfect price?

For example, let's say your customized MYPS! survey gets 100 replies from visitors to your Web site. These visitors are potential customers. MYPS!'s software shows you the results. In one of the bar charts, let's say that you see that your product has very little impact on your prospects. What did you learn? You need to make some changes quickly.

You must do something. If you don't make an impact, how are you ever going to sell anything? price doesn't even factor in here.

On the other hand, what if your sales are great and your traffic stats are high? Are you completely confident that you are maximizing your profits? No money being left on the table? MYPS's "three-in-one composite" line graph gives you all the information you need to identify the Perfect price.

At every single point, you see how many units of your products you will sell. You just have to match a peak on the graph to your business model (i.e., are you pricing to penetrate the market or are you skimming the cream?). You want high volume or high profit, without falling into the deadly No Man's Land. MYPS! illustrates "the lay of the land" perfectly.

Pricing. I can only give you a small overview of its role in the big "marketing" picture. It is definitely one Marketing "P" that you ignore at your (sometimes fatal) peril. The wonderful news is that if you do make pricing your priority, *you* will reap the benefits...

Now, that's an e-commerce puzzle with all the pieces together!

If you would like to receive the full version of The Pricing Masters Course , send a blank e-mail to: tpmsRB@sitesell.net