"We also had a big argument about the price point: Some people in the business thought it should be 50p to get a big sale," said Matt Kelly, editor of the print paper The New European, in an interview this week on the FIPP site.
"I was very determined that we kept the price (£2) as high as we could, because I never thought the price point was going to be the defining factor in this paper's success. I thought how well we nailed the spirit of the audience was going to be the defining factor. I wished we'd charged a fiver for it now as I really don't think it makes a difference to the audience, as the people who buy it, get it completely and they love it..."
I love the phrase, "How well we nailed the spirit of the audience." I think Arno Langbehn, CEO, of SIPA member B. Behr's Verlag GmbH & Co. KG, was saying much the same thing when once asked about the risk of creating a new product.
"Much of that risk comes when the interview [of your customers] remains superficial," he said. "Interviews in customers´ offices help us to understand their behavior in their environment." By focusing on the real pain points of their customers, Langbehn's company developed more than 60 new products in 2015—and nailed the spirit of their audience.
Here are more tips about pricing and reading your audience:
Learn what your audience deems special. At a 2016 SIPA workshop that Langbehn co-led on innovative product development, he brought bags of M&Ms to help make a point: that people will pay significantly more for something special. He showed an M&Ms store in New York that considerably raises prices for their special packaging and personalization—and thrives.
Be a strategic partner. One of the mantras for Krystle Kopacz, CEO of Rev, is, "don't underprice. In media we're so used to discounting, and then not accounting for all costs." She tells a story about visiting a client and "finding out their marketing budget was completely tapped... But then we found out that this would actually come from the company's sales budget, which had a ton of money in it. So [you need] to ask the right questions..."
Be ready to shift gears. Bob Coleman of Coleman Publishing once told me that the initial pricing for his new certification course was $995, with $795 early bird. The course quickly proved very successful so he "bumped to $995 early bird for the second course." List is $1195. "How did we come up with the price?" he asked. "It had to be high enough to reinforce this is professional, high quality content, but low enough to have the decision maker commit to enroll all staff."
Offer a lower initial price point. Brenton Flynn, publisher, Investing Daily, told a SIPA audience last year about not having success with a $700 product. So they went to a much lower buy-in of $60, and it worked. Some 20% of the people who paid $60 then bought that same $700 product, discounted to $600 after the buy-in. "Think about how you sequence your offers and price points," Flynn said. "That generated thousands of new subscribers for us."
Demonstrate trust. A new study titled The Consumers of the Future: Influence vs. Affluence says that "transparency builds trust, and... trust can create opportunities for more favorable pricing." Getting close to your audience "is about more than understanding their product needs—you need to understand their values and ethical concerns. Then you need to mirror those concerns..."
Link your company to a good cause. That same study shows that people will pay more for environmentally friendly/socially minded brands. I paid $200 for a bicycle ride last weekend in central Virginia—part of the reason I didn't mind is because the money was going to different charitable groups in the area. This was validated by people I spoke to on the ride.
Give options but tilt towards the one you want. "Options help in making a purchase decision," consultant Nancy Harhut has told us. "With one option we may not be quite sure—2, 3 or 4 options are best; 5 or more are a bit much and could give analysis paralysis." Add a special benefit to the option you'd like people to choose—special access at an event or a book or new report.