You created an e-book, tested various price points, and determined that you can sell it for as much as $100. But wait. Just because you know people will buy it at $100 doesn’t mean that’s the ideal price. You might be better off selling it for a lot less.
This may sound illogical, but it’s true – and it’s based on a direct-marketing principle (“price elasticity”) that says you can sell more of a product at a lower price but still wind up with the same amount of profit as if you sold it at a higher price.
Let’s say you tested your e-book at $100 and got 20 customers. That’s a gross of $2,000. And let’s say you also tested your e-book at $50 and got 40 customers (which, according to the principle of price elasticity, is highly likely). You still grossed $2,000 – but the $50 price point is much better for your business.
Although the gross is the same, the lower price brought in twice the number of customers. Remember, the bulk of direct-marketing profits comes from repeat sales to existing customers. So the more customers you can acquire with your e-book, the more profits you can practically guarantee for your business in the future.
The moral here? Test, test, and test again. Try out your products at different price points. Then go with the price that brings in the most customers.[Ed. Note: David Cross is Senior Internet Consultant to Agora Inc. in Baltimore.]