How to Price Your Digital Products + Tips to Avoid Underpricing Yourself
Ready to learn the art of pricing digital products? Whether you’re a seasoned creator or just starting out in the online business world, pricing your digital products effectively is crucial for success.
Like other creators, you want to set an ideal price for your product that doesn’t scare your audience away but at the same time doesn’t discredit the value of your product.
But you’re not entirely sure what that looks like.
Not to worry, in this article, we will show you how to price your digital products and find the sweet spot between your price and your customers.
How to Price Your Digital Products
If you’re ready to go premium, here are some guidelines for pricing your online digital products better.
Understand who your target audience is, what their needs are, and what they’re willing to pay for your product. This information will help you set a price that meets their expectations and maximizes your revenue.
2. Ask the right questions
Rather than asking “How much can I sell my digital product? you ask questions like “How much do I want to make from my product?”
This gives you an overview of the likely amount your product should be and what you need to get there. For example, let’s assume your goal is to earn ₦10,000,000 ($20,000) from selling your product.
To reach ₦10m ($20,000) in sales ask,
- How many copies of your product do you need to sell?
- How many people do you have to reach to hit that number? That is, if you reach 100 people, at least 10 people will buy your product. (Use a 10% conversion rate as it’s more realistic).
Let’s look at some pricing scenarios that explain this better.
Pricing scenario 1
Let’s assume you set your price at ₦1000 ($2).
Right away, we can tell that with a price of ₦1000, you’d need to sell 10,000 copies of your ebook to reach your goal of ₦10m. And to get 10,000 people to buy your product, you need to market to 100,000 people.
Let’s also consider that you’ll need to run ads to reach 100,000 people, which is a huge business expense that should be factored into your pricing.
And the time it’ll take you to reach 100,000 people.
With this, we can see that the price of ₦1000 ($2) may not entirely be feasible.
Pricing scenario 2
Here, we’ll experiment with a higher price. So, let’s increase the price of the product to, ₦50,000 ($100).
At this price, we’d need 200 sales to reach our goal of ₦10m.
Now that sounds better, but we still need to think of our conversion rate as well as our reach.
Research shows that across most industries, the average landing page conversion rate for a product around that price is about 2.35%.
This means; to sell 200 copies of your ₦50,000 product at a 2.35% conversion rate, you’ll need to reach approximately 8510 people.
Do you see what happened there?
Your audience reach has gone down dramatically from 100,000 people to 8510 people.
And right away, it feels less daunting to do the work required to reach 8510 people versus 200,000!
Now you see that this pricing seems fair enough for your product, depending on what it is.
Pricing scenario 3
Now, let’s consider a third price point. This time, we’ll just raise the number all the way up to, ₦1 million.
What happens if you decide to sell the product at ₦1 million?
Right away, you can see that you only need to sell to 10 people to reach the ₦10m goal. But convincing someone to give you ₦1 million is going to take a lot of work.
Also, at this price point, your conversion rate will experience a big drop. So, let’s assume that your conversion rate drops again – this time to 0.1% (which is 1 in 1000 people).
This means to sell 10 copies of your ₦1 million product at a 0.1% conversion rate, you’ll need to reach 10,000 people.
Clearly, you’ll see that even though we’ve bumped up the price 20X from 50,000 to ₦1 million, the number of people we need to reach isn’t 20X more.
So, it still holds true that as you increase your price, you need to reach fewer people to hit your goal.
But with charging a steep price comes a problem – which takes us to the next scenario.
Pricing scenario 4
Here’s the thing. If you’re selling a product for ₦1000, then it doesn’t require a lot of production.
For example, if you buy an e-book for ₦1000 and it’s not very well formatted, but it contains like one or two really good tips – you’ll probably still be a happy customer, right?
Now, if you buy something for ₦50,000 though, your expectations rise. This time, you want to see better production quality. You want to see something more unique, something more valuable.
But if what you see is just a crappy-looking PDF with one or two good tips, you’re most likely not going to be a happy customer.
So this just means that in production, as the price goes up, the effort it takes to deliver a product that will make people happy suddenly increases.
That is putting together an offer that justifies a price such as ₦1 million will have more logistics requirements (aka more work).
- Your design has to be top-notch.
- Your sales copy has to be professional.
- You’ll need a team to handle customer support.
- You need to have a lot of trust signals – testimonials, brand reputation, social proof, etc.
- Your product itself has to be super valuable and super high quality.
So while selling at a premium price can be very beneficial and profitable, it’s not very solopreneur-friendly, and certainly not advisable if this is your first online course.
Learn the art of pricing. Read this guide on How to Price Your Online Course to Make More Sales
3. Quantify the value of your product
The price of your digital product is directly proportional to the value contained in it. If your product will help your audience become better at what they do, say it. If it’d save them time on a regular routine, say it. It’d help them 5X their income, say it.
We’ve had cases of customers requesting a refund because they felt unsatisfied with the product they got from a merchant. Oftentimes, they believe they didn’t get as much value as they’d have hoped.
And on top of all that, the product was a bit pricy.
You do not want to be in this situation.
Hence, it’s important to quantify the value of your product. This way you can easily set a price that justifies your product and the time taken to create it.
4. Consider your alternatives
If your customer sees the price of your product, will they want to check out other alternatives because they feel your product is “unnecessarily pricy?”
Of course, your product isn’t the first of its kind. The only reason it differs from the rest in the market is because of you, the angle of your content, and your experience.
Compare the price of other alternatives to your product and use that as a guide to set your product price. These options are probably lacking in places your product covers up.
If this is so, then it’s good. Because when your students want to make a purchasing decision, they weigh their options.
Besides, who will see diamonds and go for copper?
5. Consider your authority in the market
Another huge factor in pricing your digital products is to think about your authority in the market.
Is your name or brand name easily recognizable to your target audience? Are you well-known for the skills you teach? Have you spent several years building your platform and growing your audience?
If you’re not yet perceived as an expert in your field, you may want to consider first giving out free content to build authority in the market before releasing a paid product.
However, if you’re an already established authority in your market, you want to keep the prices of your products balanced to serve both your premium and regular customers.
Things to Not Do When Pricing Your Digital Product
- Do not fix your product price based on the price of your competition. As much as you both may be competing in the same market, you have different goals and different customer behavior.
- Do not reduce your price to appeal to customers. Customers who complain about a ₦1,000 ebook price will happily pay ₦30,000 for another ebook if they believe it’s worth it.
- Avoid over-giving discounts. Discounts are a great way to attract and retain customers. But if you’re not careful, it can ruin your business.
- Don’t try to justify the price. Validate the value of your content. This means rather than saying “This course is ₦10,000 because that’s a fair price,” say “This course is ₦10,000 but the value and content of this course are worth over ₦100,000. That’s the right mindset to have.
- Do not set a high price for your product simply because you want to be perceived as a premium brand.
We can agree that successfully selling your digital product boils down to a few things:
- Great platform – you’ll need a great platform like Selar that can help you sell your digital products and services.
- Marketing skills – you’ll need to learn how to write your landing page copy, drive traffic to it, and optimize it for higher conversions.
- Great product – a good product sells itself. When you invest in creating a very valuable product, it easily sells itself.
But beyond all these, we’ve realized that creating a successful digital product is more about what you sell and how you sell it.
For instance, we noticed that many creators try to sell digital products that are too complicated and too complex to start out with.
We have also seen others who struggle because they put themselves in a position where, just like the low-price example above, in order to hit their goal, they need to reach an absolutely gigantic audience size.
So it’s easy – don’t complicate things for yourself.
Before you even create the product, start by asking yourself what your revenue goal is.
Then make sure you run the numbers so you can see what’s expected of you in terms of audience work and product work.
And if you do that correctly, you should be able to come up with an ideal pricing for your digital product.
Now here’s our question for you – what is your revenue goal for your next digital product and how much do you think you need to price it?