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The Keys to Pricing Your Product Right
Anne Field
(Business Insider)
Apr 27, 2010 -
You might be selling the most spectacular product in the world—but price it wrong, and you could still go broke. Too high, and you’ll scare off potential customers. Too low, and you’ll hurt your profitability.
Setting the right price is a complex task, involving everything from production costs to the budget of your key demographic. According to Pam Newman, president of RPPC, a Kansas City, Mo., small business accounting firm, the key is to not shoot from the hip. “Your pricing strategy should be part of an overall business-planning process,” she says.
To do it right, consider the following steps:
1. Understand your costs. That includes both direct expenses—i.e., what you pay for raw materials—and overhead, such as insurance and rent. With that information, you can then determine whether you’ll be able to cover your costs and generate a profit by charging specific prices.
2. Investigate the competition. If there are comparable products or services on the market, you’ll have to know how they’re priced. You might not charge that amount, but you’ll need to use it as a baseline. Then, determine what kind of value you’ll add and the level of quality you’ll offer. Do you want to reduce the price—and the level of quality— and sell larger quantities? Or, does it make more sense to sell products or services offering special features, at a steeper price? “The real competitive advantage for most small businesses is offering something unique,” says Newman.
One sure-fire way to add value—and charge higher prices—is to provide added services. Newman points to a bridal gown boutique that creates customized versions of standard, mass market designs. “[Those] dresses all have a ‘wow’ factor,” she says. And the business is able to charge a premium for that extra element.
3. Understand who your customer is. That means conducting thorough market research, either by hiring a specialist or doing surveys on your own. In either case, your goal is to get a detailed view of who your customers are and just how much they can spend.
4. Rejigger costs. Say you have to charge $200 an hour for your services, but the going rate is $100. If you can’t justify the extra price to customers, you’ll need to cut your costs so you can charge a lower rate. “It’s time to go back to the drawing board,” says Newman.
5. Frequently review your pricing strategy. “Costs change, and it’s easy for profit margins to go down,” says Newman. For that reason, reconsider your pricing strategy on a regular basis. If necessary, take such steps as renegotiating contract terms with your vendors. Or, if you’ve been giving some services away for free, you might need to start charging for them.
6. Slash your prices at your own peril. In a difficult economy, it’s tempting to cut prices to boost sales. But that means you’ll have a hard time raising them down the road. One solution is to keep general prices the same, but offer an additional value that doesn’t cost much on your end.
By doing so, customers might buy services they wouldn’t be likely to purchase at a higher price. Newman cites a women’s clothing retailer that recently offered a reduction on the price of alterations. “That move slightly reduced their profit margin, but it was still a highly lucrative service,” she says. “[It] encouraged customers to partake of something they might not have otherwise considered.”
According to Website Magazine, e-commerce merchants who are still unsure of what consumers want this holiday season can direct their efforts toward providing user reviews, security verification and fair pricing. In a word, 2011 holiday shoppers are looking for online retailers they can trust.
That was the fundamental message from ChannelAdvisor’s 2010 Consumer Shopping Habits Survey, the e-commerce solutions provider’s third annual report to help merchants prepare for the holiday season.
An eye-opening 92-percent of the participating consumers said that they read product reviews, and nearly half admitted that reviews influence their purchasing decisions one way or the other.
Shoppers also listed the top three most influential promotions that drive purchases as best price, free shipping and trusted seller status, and the top three indicators of trust were security verification, user reviews and website design aesthetics.
How To Write a Sales Letter
Let me be blunt for a moment – writing a killer sales letter that makes a ton of money takes time and effort. And it’s rare to hit a “home run” on your first attempt.
The best copywriters I know – they’re the best because they do it so often – so don’t be discouraged if you find it particularly difficult on your first attempt.
Over time, it starts to come naturally – as if it’s part of your DNA, or that it’s just like breathing or walking.
But when you’re just beginning, there are a few simple steps you can take to make copywriting a sales letter a much easier task, and get a much better result from your sales letters.
Step #1: Preparation Matters
Preparation is really the key to writing a great sales letter. And the fact is, 95% of the effort you will put into a sales letter happens in the preparation stage.
It’s not uncommon for top copywriters to spend several weeks preparing to write a sales letter, and just a few days writing.
So how do you prepare?
Well, the first thing that you can do is to get inspiration.
Look around in your industry, and beyond, for examples of written advertisements. Read as much as you can, and save the ads that you find particularly persuasive.
Next, copy them… word-for-word.
I know, it sounds tedious, but the best way to write great sales letters is by writing great sales letters.
Take the work of the naturals – Gary Halbert, Dan Kennedy, John Carlton, Harlan Kilstein – and copy it until it becomes a part of you.
Don’t believe me?
Then write a headline of your own… Then copy out 50 headlines from the pro’s… then go back and write another headline of your own.
Is the second one better than the first?
You’d better believe it!
There’s no better way to get your mind thinking about sales copy.
But I’ve got to be realistic here – most people who are reading this won’t bother spending the time on this.
They’ll think it’s boring, tedious, a waste of time – so they’ll jump straight into writing their own sales copy.
For these people, I’m going to throw you a lifeline next so that you don’t waste your time writing junk – that the sales copy that you write has at least a reasonable chance of making a buck.
Step #2: Work out who you’re writing to.
We’re still in the preparation phase right now…
Grab a pen and paper, and write down the answers to these two questions:
- Who am I writing to?, and;
- What do I want them to say yes to?
You might be selling a cool piece of site-promotion software to bloggers – so the answers to these questions might be “Bloggers who own their own blog”, and “Will you buy this software for $149?”
The more specific that you can be in your “Who am I writing to?” answer, the more targeted your sales copy will be, and the more of those people will buy.
Step #3: Work Out What You’re REALLY Selling
A wise marketer once said “Sell the sizzle, not the steak!”
People don’t buy “steaks”.
They buy the juicy, tender, sizzling steak that smells *mmmmm* good, and practically melts in your mouth – that’s what people buy.
It’s the experience of eating a steak – not the idea of a rough-cut chunk of bovine flesh – that sells.
Chances are you’re not selling steak though – so we need to find the juicy, tender, meaty, filling, mouth-watering parts of your product or service for your sales letter.
The easiest way to do this is to take out several sheets of paper, and start writing a long list of EVERY feature that a customer might experience when they’re buying your product… Everything from “no interest finance” to “batteries are included” to “12 month guarantee on all parts and labour” to “made from high-tensile polycarbonate” to “free delivery”
Be as detailed as you can – mention anything and everything (even if it’s not a particularly valuable feature… even if it’s a defect!)
Step #4: Why Should I Care About That?
Don’t assume that your customer knows why they need your weatherstripping feature, or your high-tensile polycarbonate feature, or your no interest finance feature, free delivery service, or whatever.
Spell it out for them!
Beside each feature you have written down, write the benefits of this feature.
e.g. “No interest finance – saves $1,000’s off the lifetime cost of purchase, means you can afford to buy now..” etc
Here’s a few more examples:
- Free shipping on all orders – means there is nothing extra to pay, you don’t have to drive to the store to pick it up yourself, you can make small orders…
- High-tensile polycarbonate coating – protects the widget for 25 years so that you’ll never need to replace it, allows the widget to operate under much higher temperatures than normal, prevents dangerous widget-shattering incidents…
- Teflon-coated bull-bar – protects you and your family from automobile accidents, and means that roadkill just slides right off…
You get the idea…
Step #4: Try Turning Them into Feature-Benefit Bullets
A feature-benefit bullet is a ol’ copywriting trick that just works ridiculously well.
Here’s the structure of a feature-benefit bullet:
- Feature Benefit
OR, the reverse feature-benefit bullet (to mix things up a bit, and make for more interesting reading:
- Benefit Feature
See what I did there? It’s not complicated at all!
Let’s use some examples:
- Free Shipping on All Orders Means You Save Money, With Nothing Extra To Pay!
- High-Tensile Polycarbonate Coating Protects Your Widget for Life, Saving You Money!
And the reversal:
- Save Money on All Orders with Free Shipping
- Save Money on Widget Replacement with our High-Tensile Polycarbonate Coating
Easy, huh?
Here’s a tip: It’s EASIEST if you go find about 50-100 feature-benefit points from other convincing sales letters, and copy them down one-by-one before you begin.
Once you’re done copywriting your feature-benefit bullets for your sales letter, put them aside and forget about them. We’ll come back later.
Step #5: Why should the customer care?
Have you forgotten about the product yet? Good!
I want you to think about the customer now.
Go back to the note that you wrote in Step #2 – who are they?
Put yourself in their shoes, and then answer two more questions:
- What’s in it for me?
- Why should I care?
(Answer them as if you are the customer)
These can be difficult questions to answer, so let me help you here…
Every product solves problems.
We buy a sandwich because we have a hunger problem. We hire a bookkeeper because we have an accounting problem. We read a guide on copywriting because we have a copywriting problem… (Or maybe you’re just filling in time here, and you have a spare time problem.)
Find the biggest problem that the product solves, and the biggest benefit that it provides, and you have your answers to these questions.
In most cases, the strongest problems that a product solves are around emotional appeals:
- Make Money / avoid losing money;
- Avoid painful (physical, emotional or mental) experiences;
- Save Time;
- Have Fun / enjoy times of leisure;
- Live in greater comfort and security;
- Become more sexually attractive to others;
- Become more socially popular;
- Become more attractive;
- Be envied by others;
- Gain Power or Status;
- Access something of Exclusivity;
Step #6: Only the Strong Survive
Great work so far! You’re nearly there!
You probably feel like you have more bullets now than Rambo – and in a way, you’re right. You want as much ammunition as it takes in your sales letter to get customers to say “Yes!”…
…But now, it’s time to take the big guns, and leave the small guns at home…
This is simple – go through your lists and circle only the strongest feature-benefit bullets, the strongest appeals, the biggest problems your product solves, and the most convincing arguments.
One of these should be your primary appeal – the #1 reason someone should buy your product.
The rest, you’ll simply touch on in your sales copy.
Step #7: Start Writing
Get out your pen and paper (or computer, however you write best), and begin your sales letter.
Tip: Don’t waste your time (and the reader’s) telling stories – get straight to the point.
Here’s an opening line template you can tweak for your own use:
“If you suffer from {problem that your product solves}, and would like to {solution that your product provides}, {Productname} might be the best solution for you.”
Step #8: Complete the Picture
The opening line is the hardest. Once you’ve written that, the rest of the sales letter flows.
Use short, sharp paragraphs of 3-5 lines, and write to the reader on their level.
The structure of your sales letter should be along these lines:
- Headline (the last thing you write)
- Opening paragraph
- Talk about how bad the problem is that your product solves
- Talk about it is about the problem that’s really bad
- Talk about it is about the problem that’s really Really bad
- Talk about it is about the problem that’s really Really REALLY bad
- Thankfully, there’s a solution!
- Offer the solution: Your product
- In what ways does your product solve the problem?
- What other valuable things does your product also do? (Include your feature-benefit bullets here – they’re the ammo that makes someone buy)
- What is your product valued at?
- Make a genuine time-limited offer (discount/special)
- Offer a guarantee
- Remind them why the offer is valuable, then remind them that it’s time-limited.
Step #9: Break Up The Text with Sub-Headings
We’re nearly there!
Looking over your sales letter, suddenly it feels like you’re drowning in a sea of text, right?
It’s time to add something called “eye relief” – little points that make it easy for someone to read your sales copy.
Each sub-head should be short, 1-2 lines, and relevant to what you’re writing about.
For example, to tie in with the sections from the sales letter template above, your sub-headings that you write for sections #3-#14 might be about:
- 3. What is the problem, and why does it suck?
- 4. What is really bad about the problem?
- 5. What is even worse about the problem?
- 6. What is the worst thing about the problem?
- 7. Sum-up the problem as if it’s insurmountable
- 8. “{Product Name} Solves All Of This and More!”
- 9. “Here’s How {Produt Name} Works To Solve All Of These Problems For You…”
- 10. “Plus, {Product Name} Does So Much More!”
- 11. “OK – So What Does {Product Name Cost}?”
- 12. “Limited Time Offer: Expires On {Date}”
- 13. “100% Satisfaction Guarantee”
- 14. “Remember: You Only Have Until {Date} To Secure {Product Name} at a discount and {solve} {#1 problem} forever!”
Step #10: Write Your Headline
This is where it’s handy to have completed Step #1, and copied down a few dozen headlines from the pro’s…
The easiest way to write a great headline for your product is to re-write existing great headlines for other products, and tweak them so that they suit your product.
A reliable template for headlines is simply:
“How You Can {Solve Major Problem OR Receive Major Benefit} {Very Fast OR Very Easily}…”
e.g.
“How You Can Lose 20 Pounds Overnight, While You Sleep”
A headline should be relevant, straight to the point, and attention-grabbing.
Write dozens, and pick the best one.
Step #11: Test Test Test!
As I mentioned at the start of this article, it’s almost impossible to hit a home run every time…
…But it IS possible to turn even the least successful sales letter into a winner with consistent testing.
It’s also one of the most valuable actions that you can perform as a copywriter – it will help you to see exactly how to improve your copy in the future, and give you far better results.
Split testing and multivariate testing are your friends.
People are now spending more minutes per day on Facebook than they are Google!
Americans are spending more time online and it’s translating to more dollars online as well!
