When you’re offering digital products, the way in which you price them is typically different to how you’d price physical products. You need to consider different factors when setting your pricing to ensure you’re attracting the right customers.

So, how do you know how to price your digital products? Here are some of the key pricing strategy differences between digital and physical products to keep in mind.

Value over Cost

One of the key differences between digital and physical product pricing is that with physical you’re charging by cost, and with digital you’re charging with value.

What does this mean? Well, when you sell a physical product, you need to take into account the cost of investing in the product. With digital products, however, there is no real cost of production so you focus on the value the product will provide.

Think about how much value you are bringing to your customers with the product. Are you offering a money-saving product, or will it teach customers a new skill? If it is an investment, the earning potential is huge, and you should price your product in accordance to how much value it will deliver.

Proof of Value

When you’re selling a physical product, you’ll typically offer a refund and returns policy. However, digital products can often be viewed as risky for customers. Therefore, when you’re setting your pricing strategy, it’s a good idea to offer proof of value.

This can often mean free trials and money back guarantees. If a customer can see there is some level of protection there, it’s going to encourage them to buy. When you add a money back guarantee, it also shows you have high confidence in your product, which again encourages customers to buy it.

Additional Incentives

Another key difference between pricing physical and digital products is the additional incentives. With physical products, the customer simply gets that product in the cost of purchase. With digital products, however, there are often additional incentives thrown in.

These can include free eBooks, worksheets, and toolkits for example. This really increases the selling power of the product. Alternatively, you could charge more for additional incentives. Offering a tiered pricing structure helps to attract a wider variety of customers. They can choose how much of an investment they make, and you’ll benefit from both low- and high-paying customers.

Cheaper Isn’t Always Better

A good thing to remember about pricing digital products is that cheaper isn’t always better. With physical goods, if they are sold at a cheaper rate than your competitors, it’s going to have a positive effect on your business. However, it doesn’t always work the same way around for digital products. In fact, selling digital products too cheaply can actually put customers off. This is because it can cause them to question the quality of the content they’ll be receiving.

These are just a few differences in the way you price physical and digital products. There is a lot to consider when you’re putting together a pricing strategy for your digital goods. Really think about the value your product will be providing and don’t be afraid to price higher than your competitors.

competitor analysis

What You Can Learn from Your Competition

When you’re trying to decide how much to price your products, there’s a lot you can learn from your competitors. While ultimately several factors will impact how much you should price your products, your competition can certainly help point you in the right direction.

Here, you’ll discover some key information that you can learn from your competition and how it can help you to determine the right pricing strategy.

How Much Are They Charging?

The first thing you can learn from your competitors is how much they are charging for similar products. Now, it’s important to compare at least three different competitors here. This will give you the best idea of the average price your product type sells for.

It’s important to not just look at the overall price. You’ll also need to look at what customers get for their money. Are their products different to yours? Do they offer the same things? If not, this needs to be taken into account when you’re comparing their prices to the ones you are considering.

So, while you shouldn’t use your competitors’ pricing as the only reference for how much you should charge, it can definitely help narrow down a figure. Pay attention to any discounts they offer, alongside any tiered pricing models they might include.

You could also see whether they are offering any new pricing models. There may be a way of pricing your products you hadn’t considered.

What Aren’t They Offering?

You can also learn a lot by looking at what your competitors are not offering. This gives you the opportunity to capitalize on the gap in their services. If you can offer what they don’t, you can charge a more premium price for your products and services.

If you’re struggling to determine gaps in their products, take a look at reviews for the company. You’ll often find that customers recommend improvements within their reviews of a business. So, take a look and see what customers aren’t getting from your competitors and use this to your advantage. 

Look at Their Financials

OK, so you aren’t going to be able to see full financial records. However, you can get an idea of your competitors’ finances. Many provide reports on their spending, especially how much they’re spending on marketing. You’ll also be able to see how much profit they are earning.

As well as that, you can look at any paid advertisements they’re running and see how effective they are. Understanding how much they are spending on marketing will give you an idea of how much you should be spending if you want to see the same level of results.

There is a lot you can learn from your competitors. While you shouldn’t focus on simply offering a lower price than them, you can use their pricing structure to influence your own.

The above are some of the main things to compare and look into when researching your competitors. When done correctly, competitive pricing can really drive sales and push your business ahead of the competition.


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