I’ve been helping online entrepreneurs set up their digital offers full time for almost two years now. And I’ve noticed that the most successful folks share certain traits. Not so much in terms of their personalities, but rather in their business processes.
I say ‘digital offers’ (as opposed to ‘membership sites’) because while doing research for this piece I realized that several of the most successful clients I work with don’t actually run membership sites per se. That is, they don’t all sell subscription products.
And it’s no wonder. It can be quite a challenge to continue providing enough fresh, valuable content to justify charging your members for it on a recurring basis. In many niches, there’s only so much you can teach your members before you start covering the same ground.
This is a key insight.
If you’re thinking about starting a membership site in the hopes of earning recurring revenue, it’s wise to pick an offer that inherently lends itself to freshness.
- Weekly stock picks
- weekly wholesale product sourcing picks
- Monthly group coaching calls
- Monthly design templates (which is what you get if you sign up for the OptimizePress ClubHouse)
And I’d be remiss not to mention the foremost membership site model of our time: the Software as a Service (SaaS).
More and more people are getting into the SaaS game simply because of its enormous potential for profits, seven figure exits, and ability to positively impact a large group of people.
If, on the other hand, you choose an offer that doesn’t really lend itself to a subscription model, you’ll likely spend the last week of each month racking your brains in a desperate attempt to come up with the coming month’s content. This is an inefficient use of an entrepreneur’s already-limited time.
But enough foreplay.
In the following series of posts I’m going to share with you the ‘best practices’ that many of my most successful clients use. The vanguard post in the series is called “Why You Should Embrace Premium Pricing”.
Why You Should Embrace Premium Pricing
My most profitable clients price their front end products and trainings at no less than $197. No less, I say! More often, they sell their wares north of $497.
This “premium” pricing strategy applies to back end products as well; e.g. group coaching calls, mastermind memberships, intensive one-on-one coaching, live events, member dinners, etc. In fact, many of these back end offers are priced in the thousands of dollars!
Now you may be thinking, “how can I possibly justify charging such a huge sum for my products and services…?” Stop being a wussy.
if you can identify your customers, really connect with them, find out how to help solve their problems and then proceed to solve those problems better than anybody else, they’ll pay what you ask. Or as NYT best-selling author Ramit Sethi puts it “price becomes a mere triviality”.
The caveat to this is that you must be incredibly competent, experienced (i.e. you should be a true expert in the thing you’re teaching) and you must know how to get results for your clients and members. It’s aaaall about results. Everything else is puffery.
Premium Pricing = Better Customers
Another common fear about premium pricing is that it will alienate a ton of potential customers. And that’s true. But this is a good thing!
The customers who are willing to pay premium prices are generally much more serious about learning from you. They have something at stake: the prospect of “losing” a bunch of cash.* In a word, they’re better customers.
*Fact of human nature: we are much more motivated by the fear of loss than by the prospect of gain. I’ll say it again. We are more motivated by the fear of loss….than by the prospect of gain.
Why is it that we value advice we’ve paid $997 for much more than advice for which we’ve paid only $97…? It’s the same advice; it just has a different price tag.
The problem is that $97 isn’t enough money for most people to feel a pang of dread at the prospect of that money going down the drain. If you pay $97 for a video course on growing your own tomatoes and then lose your enthusiasm for tomato growing, you’ll subconsciously weigh whether it’s worth it to force yourself past your reluctance or write the $97 off as an impulse buy.
You would then likely decide that while it would be groovy to have your own juicy, freshly grown tomatoes to chop into salads, make into pasta sauce, and not-so-casually boast about to the annoyingly competitive squash-growing couple next door, it’s really just too much hassle. After all, you can buy delicious, organic tomatoes at the grocery store.
And thus you decide “screw growing my own!”
On the other hand…
IF you pay $297 for that same course, is there any way in hell you would let yourself basically flush that money down the toilet without some lycopene-rich, bright red tomatoes to show for it? Not bloody likely.
And it’s not that your enthusiasm for growing tomatoes is any stronger. But the prospect of losing so much money is simply too much to bear. So you force yourself to grow at least one batch of tomatoes. Then you can tell yourself “See…? Money well spent!”
Knowing the above, how much more likely is it that your clients will actually listen to and value the good advice you give them if they have a bunch of money at stake? Mhmm…
And how much more likely are they to actually take the actions that are in their own best interest if they’ve invested a good chunk of money?
Premium Pricing = An Act of Compassion
So pricing your products and services at a premium is, in fact, an act of compassion. You are making it extremely painful for your customers to justify wasteful behavior. You are incentivizing them, through the fear of loss, to do the thing that’s going to get them the result they want; the results they sought you out to deliver to them to begin with. And you’re not giving them an easy cop-out when their initial enthusiasm wanes. Because all initial enthusiasm wanes.
There’s a reason that the US military allows people to change their minds and un-enroll right up until the moment they ship to basic training. But once you ship…your ass belongs to Uncle Sam. And then un-enrolling becomes very, very hard. If they let you leave once you got a taste of basic training you can bet there’d be an epic turnover. But they don’t give new soldiers an easy out, so most of them do what they’ve gotta do and make it through. Vic’s next gig: consulting for the US military…?
Premium Pricing = Better Customer Service
Premium pricing also allows you to accept fewer customers, earn more revenue per customer, and deal with fewer customer service requests. It also increases your capacity to hep the members of your tribe because you’re less prone to spreading yourself thin.
Premium pricing also carries a number of psychological benefits for the vendor (that’s you!) If you’ve never sold a $1000 dollar product, the very notion may be so far outside of your reality as to be laughable.
As I wrote in my book, the market will often tell you that you’re charging too much but it will almost never tell you that you’re not charging enough.
You’d be surprised at how much people are willing to pay you if you’re giving them what they need. Notice I say “need” as opposed to just “want”. You are the expert and thus you know best what a client needs so that they can get what they want.
For instance, if you’re selling an eBook on how to pick up girls, you’d certainly want to appeal to what the customer wants in your sales materials (e.g. “pick up chicks easily”, “pick up hotter chicks”, “more chicks”, “younger chicks”, etc.) but give them what they need in order to make that a reality (e.g. “move out of your parent’s house”, “get a better job; or a job”, “work out”, “start talking to people and sharpening your social intuition”, “learn to dress well”, etc.)
It’s on us as product creators and marketers to create the alchemy that transforms a burning desire into the motivation to do what it takes to fulfill that desire. Contract work aside, we can’t simply give people the result they want for their lives. We can only skillfully lead them to it.
Premium Pricing = Big Confidence Boost
Selling premium-priced products also convinces you that you’re worth it. And if you aren’t worth it – that is, if your content or the results you promise aren’t up to snuff – your customers will let you know. They’ll let you know with refund requests, critical comments, frustrated emails, negative reviews and through other unpleasant but priceless pieces of feedback.
And while receiving angry emails and seeing minus signs in your Paypal account sucks, it’s much better to release a 1.0 version of your content and then craft the 2.0 version according to real feedback from your customers, rather than spend months crafting the ‘perfect’ 1.0 based on imagined feedback.
In the case of a critical response to your offer, you’ll be forced to craft a better offer. You’re essentially saying “hey, gimme $997 in exchange for this course.” Then they give you the $997, try the course and respond with “hey, that sucked. Gimme my $997 back.” At this point you cry a little. Then you say “Ok, no problem. Could you please tell me what you liked/didn’t like about the course?”
You regroup, recraft and relaunch.
And in this manner you will eventually (ideally) produce something that not only are people happy to pay $997 for (because they’ve told you exactly what they’re willing to pay for via their feedback), but something for which they’d pay double that amount.
The fear of losing a bunch of money that you’ve just earned, pissing off all your customers, trashing your reputation, and feeling like a failure is a powerful motivator to go back to the drawing board, do it better, and bring your A game the next time around. There’s that psychological quirk again…
Speaking of psychological quirks, there’s another one at play here. It’s called commitment and consistency (C&C for short). C&C states that when we make commitments or present ourselves a certain way, or set certain expectations about ourselves, we tend to try very hard to remain consistent to the image we’ve presented.
So if you present yourself as an expert who gets awesome results for your clients and then you fail to deliver the goodies, you’ll be incentivized by shame and fear of damage to your reptuation to put in some hard work in order to align yourself with that image and those expectations.
By the way, I’ve been meaning to ask you a question, dear reader: YOU CALL YOURSELF AN EXPERT?!
…How did that feel? Did you feel a twinge and a voice inside saying “damn right I’m an expert! I’ll show you, Dorfman!”
Sometimes our customers and clients challenge our expertise. But because we have this egotistical drive to remain consistent to our self-image, we can use it to continually improve our level of expertise, refine our skills and knowledge, and grow our businesses by providing tremendous value to people.
Premium Pricing = Money On Demand
Yet another benefit of premium pricing: it’s much easier to get a positive ROI on your advertising spends. This is particularly true of PPC channels.
If, for example, you’re driving traffic to your offer with Facebook ads, then spending $100 to sell one unit of a $47 DVD still puts you $53 in the red. But spending even double that amount to sell a $497 DVD with a back-end upsell to a $2k group coaching…? Well, that’s a different story, in’it?
I bring up paid advertising specifically because the problem many vendors run into is that the volume of traffic they can generate through other channels is typically quite limited. And thus, so is their income potential.
But paid traffic allows you to basically print money on demand, assuming of course that you have a great offer that converts, and assuming that you (or somebody on your team) knows how to run profitable PPC campaigns.
One strategy that I’ve seen work for several clients is to drive targeted Facebook traffic to a landing page, collect opt-ins and then to present a one-time offer (OTO) right on the thank you page.
This is ‘softer’ than simply driving traffic directly to a sales page. Plus you get your prospect’s email address. And since your OTO is priced at a premium, it’s easy to hit a positive ROI on an ad spend of even several hundred dollars.
Another proven strategy is to set up a launch funnel and drive PPC traffic to it.
If The Gurus Jump Off A Bridge…
Looking at it from a different angle: you’ll rarely see the top gurus in any niche selling low priced products. Does Eben Pagan sell $17 ebooks? How about Frank Kern? Sure, these guys sell products in the Make Money Online space but I’ve come to the understanding that premium pricing is a viable strategy in any niche.
An exception to this rule would be the release of brand-building and lead generation tools. Jeff Walker comes to mind because he recently released a book (a proper book) called Launch.
Compared to a digital product launch, Jeff’s book probably won’t make that much money. But it will certainly bolster his personal brand. It will extend his reach into countless more homes and minds. Plus, he’s using his book as a massive lead generation tool to get prospects into his funnel for his flagship course, Product Launch Formula (highly recommended by the way). And last time I checked, PLF was selling for 1997$.
Further, because Jeff treated the release of his book like a launch (the very same process which he teaches you in the book), he made it to the #1 spot on the New York Time’s best seller list for his category. This can lead to media appearances and all kinds of positive exposure for his brand and his products.
Many vendors fail to take advantage of the abundant channels available to them for gaining exposure. There’s writing books, podcast interviews, media appearances, HARO, press releases, niche outreach, Reddit groups, Facebook groups, forums and so much more.
A brand needs a certain critical mass of saturation. When your prospects “see” you just about everywhere they go, they become comfortable with you, assuming your marketing isn’t incredibly obnoxious.
This makes them more likely to listen to you, trust you and buy from you. And that’s the idea behind retargeting. Ever have the same ad follow you everywhere you go? Google, Facebook, websites, forums, everywhere! That’s retargeting at work.
Premium Pricing = Disproportionate Payoffs
Getting back to the topic at hand: I’d argue that creating a $1997 product doesn’t take that much more effort than creating a $97 product. Let’s say it takes double the amount of effort. For just 2x the effort you can sell your product or service for 20x the price. That’s literally an order of magnitude ROI!
I’ll wrap up this article on a somewhat philosophical note. Premium pricing isn’t just a business tactic. It’s part of being a rockstar at whatever you do. If you do what you do really, really well, and you teach it really, really well, and you get amazing results for your clients and customers, then you earn the privilege (and the responsibility) of charging rockstar rates.
Thanks for reading! Leave a comment below. I want to hear what you think!