Aaron Hoos

As entrepreneurs start up their businesses, they quickly learn one of the most challenging aspects of business ownership: How to price a product or service so that it is attractive to customers but still profitable for the business.

Pricing is like a tug-of-war: All customers want to pay as little as possible for a product or service; all businesses want to charge as much as possible for a product or service. Somewhere in the middle is the right answer — a price that is attractive and fair to the customer and a price that is profitable and fair to the business.

Here is a collection of some of my best advice on pricing.

HOW TO PRICE A PRODUCT OR SERVICE
Understand how prices and pricing works: One of the first things you’ll need to do is understand how pricing products and services actually works. It’s not a matter of randomly assigning a dollar value! There is an actual science to the creation of a product’s or service’s price. There are two key elements that go into any price, and there are three kinds of price-based businesses. Read more about it in my blog post Prices and pricing strategies: How to price your offerings more effectively. (Don’t miss the pricing tactics at the bottom of that post).

How to monetize digital content: If your business is selling digital content, it is critical to understand how content monetization works. The web has enabled new business models to be developed so that people can earn money in various ways, but not all of these business models require pricing services or products. There are 5 ways to monetize your content and only 2 of them require pricing. Read more about the 5 levels of online content monetization.

Competing with low-price providers: One problem in many industries is the problem of low-price providers who enter quickly and undercut your prices. It’s a problem for everyone because most of these low-price/low-cost providers will only compete for a short time before they run out of money and have to fold. But along the way, they may potentially do a lot of damage to your business. If you find yourself competing with low-priced providers, check out my blog post: Pricing your sales funnel: How to avoid competing with low-cost providers.

A competitive analysis tool to find the best price for your product or service: What entrepreneurs need most is a way that they can use to find the best price for a product a service. By doing some simple competitive research, business owners can find the best price for their products or services in comparison to their competitors’ offerings. I’ve developed a tool for entrepreneurs to find the best price for their offering. Read about it at How to easily discover the best price for your product or service.

A customer-based, needs-analysis tool to find the best price for all of the products or services in your sales funnel: I’ve also reated another tool to help you know how to price your products and services while you are developing your products, based on what your customers are wanting to buy. By mapping out your products and services against customer needs, you’ll easily see how to price your products and services in the context of your sales funnel — pricing “entry” products for brand new Customers and then pricing follow-up products or existing Customers. In my blog post, you’ll read how product development, pricing, and sales funnels all work together to create a very profitable business! Read more about it at Product development, pricing, and sales funnel strategy made easy.

I was in a conversation with another business owner recently about blogs. We were discussing traffic and the large volume of people he gets to his blog, then he asked me how many visitors I get. I don’t like playing this game of “how big is yours?”. By comparison, I get considerably less traffic than him but my readers are highly targeted and well into my sales funnel by the time they get to me.

Metrics have always been a problem for small business owners. Too often, entrepreneurs mistakenly measure quantity over quality when it comes to metrics. They go for the easy-to-identify and easy-to-understand numbers and skip the real numbers that lie below the surface. Blog traffic is just one example. Twitter followers or Facebook fans are another. People spend a lot of money to get lots of Twitter followers or Facebook fans but then they don’t do anything with them. It’s not the number of followers or fans that count… it’s the level of engagement of your fans. That’s why replies and retweets are a far better metric for Twitter engagement than the number of followers you have.

In a recent article on Mashable.com entitled Making Data Relevant: The New Metrics for Social Marketing, social media engagement manager Prashant Suryakumar talks about the relevance of social media metrics and how business owners can learn more when they find the right metrics to use.

He lists valuable opportunities for businesses to use social media to discover and exploit opportunities, and what I want you to pay attention to specifically is the role of social media metrics in your sales funnel. Below, I’ve listed some of the areas of social media opportunity that Suryakumar explains (in bold), and then I describe how these tie into your sales funnel.

• Invest in data (to bring structure and understanding to the unstructured abundance of social media data): Data can so much about your contacts — from what stage they are at in the sales funnel to how likely they are to become a customer. With insight like that, why wouldn’t an entrepreneur WANT to move from a number-of-followers metric to something more meaningful?!?
• Real time monitoring (to keep your finger on the pulse of your sales funnel at any given moment): Watching the ups and downs of your business is so valuable in creating a predictable, sustainable business. But until social media became ubiquitous, it was difficult to have useful, real-time data. Now, you can see what people are saying and when, and you can respond accordingly… far earlier than you were ever able to before.
• Sentiment analysis (to see if people are generally positive or negative about your brand): Happy Customers tell their peers about you. But how can you make sure that your Customers are happy? Social media helps you watch all stages of your sales funnel to see how people are responding to your brand.
• New metrics (to move beyond followership to understand how group dynamics can improve your sales funnel): Selling to each contact takes a lot of work, and the people who are truly successful in business know that they can’t sell to everyone individually. What is needed is an endorsement from a key influencer. Trace the success of many entrepreneurs (especially online entrepreneurs) and you’ll see that a lot of it was tied to a key influencer who gave a hearty endorsement.
• Testing (to modify your activities and offerings based on immediate feedback): Ford’s Edsel is a great example of a product that could have undergone more testing. It was pushed out to the public and completely flopped. Today, social media gives an immediate avenue for businesses to try out new ideas before investing a lot of money in them. For example, social media allows you to quickly and easily identify what messages work well in a particular stage of your sales funnel.
• Behavior segmentation (to anticipate buyer profiles with information that goes far deeper than simple demographics): Your sales funnel contacts aren’t just made up of age and income statistics. They are living, breathing people who live very transparent lives online. Social media allows businesses to tap into that information to discover new connections (and thus, new opportunities) of understanding their target markets.

If you’re using social media as a tool for your sales funnel, it’s time to move beyond the simple number-of-followers or number-of-fans you have and go deeper into the data.

In a recent issue of Clickbank’s ezine GetRichClick, I read a great article about two business partners who owned a gym. Facing industry pressure to lower prices, they slowly transitioned their offline bricks-and-mortar business to an online one… a very successful online business.

Starting with a small product and relying on organic search (instead of pay-per-click), they built a large list. Although the target markets were similar between their gym and their online business, they had to build an entirely new sales funnel. They focused on the right things and eventually achieved a point in their business where they could sell the gym and focus entirely on their online business.

From this article, I’ve distilled some useful tips about transitioning from bricks-and-mortar to online:

• Start slowly with an idea that has some synergies with your existing business.
• Leverage the brand equity you already have and work to build additional online equity.
• Create a new sales funnel, run it parallel to your existing bricks-and-mortar sales funnel.
• Work hard, be consistent, and stick with it.
• Build a list.
• Get others to start selling for you (via affiliate relationships).

Read the full article here: Super Affiliate Shares Business Roadmap