Online entrepreneur Sean D'Souza earns enough that he and his family take three months off work every year. He doesn't necessarily work more to earn more. Instead, he experiments with different pricing on his eCommerce offerings — slowly, methodically and regularly — to earn more from his online store and get the income his family needs.
D'Souza, formerly a professional cartoonist in his native India, now lives in New Zealand most of the year, where he operates PsychoTactics — a website that helps clients better understand how their customers think. His products include training courses, books and a membership site.
"Most of us are afraid to raise prices," said D'Souza, speaking at Copyblogger's annual Authority Rainmaker conference in Denver. "But try lowering prices. See what happens to your life. Immediately, your income goes crazy and you're working twice as hard."
D'Souza doesn't see that as a good thing. Working harder means forgoing leisure hours you'd have if you raised prices. Also, when you sell too cheaply, you lose time for developing expertise that commands a premium. That's true regardless of your offer — whether it's for a service, a product, or even some sort of training course. Raising prices reverses the equation, D'Souza argues.
How do you start earning more money from your online store? D'Souza describes a three-part strategy that any business can follow:
1. Communicate Value.
Customers don't buy based on price; they buy based on value. They'll also pay a premium if they know that they're getting a good deal. D'Souza explains it as the difference between a web designer who sells a new site for $500 and another who sells a website for $2,500. Surely the latter will deliver more value in the long run, but the client needs to know that up front. Be detailed about everything your offer includes. If it's a product — say, a piece of jewelry — highlight the handcrafted nature of the design and the unique components built into the piece. Make it clear that your buyer won't find anything else like what you provide anywhere else in the world.
2. The Yes-Yes System.
Once you've established the uniqueness of your core product, it's time to introduce a bonus. Think of deleted scenes in the special edition Blu-ray for your favorite movie or the super-sized fries and drink that go with your burger. For a website owner, the bonus might be an ebook or access to exclusive, members-only content. Whatever the distinction, D'Souza says to make sure the core product (i.e., the Blu-ray, the fries and drink, the website) and the bonus (i.e., the deleted scenes, the super-sized extras, the ebook or members-only content) look similar. Having more is what allows for premium pricing, especially since customers don't want a half-baked offer. "Once you take away the bonus, all your customer wants is the bonus," D'Souza says, which should allow you to charge more.
3. Sequential Escalation.
Think of your customers as patrons visiting a restaurant. You wouldn't pitch the entire menu upon seating. Instead, you'd offer a starter, followed by a soup or salad course, followed by the main meal, followed by dessert. "Build up to the main meal in your pricing," D'Souza says. At your store, you can do this by selling your product as a series of components. Say you're a trainer. You could start by selling a cheap ebook (the starter). Then, sell a consultation (the salad or soup). Then, sell a training course (the meal). And finally, top it off with a membership that includes an annual assessment of progress and 24-7 access to exclusive content (dessert).
Is time to Try New Prices?
For D'Souza, raising prices on new customers while slowly boosting rates on old clients has fueled years of profits. And yet there are limits. D'Souza cautions to charge no more than 15% more for a core product that includes a bonus.
Also, he says to make sure your bonus is worth it. "A cup of coffee is one thing, but it all changes when you add a muffin. Make your premium offer irresistible and your customers will pay up to get it."