SendOwl Anytime Webinar: Pricing your digital products
Digital product creators often underprice because marginal costs are low. Three approaches work: cost-based pricing (development hours times hourly rate), market-based pricing (what competitors charge), and value-based pricing (what problem it solves). SendOwl lets you test with discount codes and track results.
Chapters
Hello everyone and welcome to our webinar today on how to price your digital products. A quick word on who SendOwl is. We make it very easy for you to sell all kinds of digital products online. We host them and we make sure they get safely to your buyer. We talk to digital product merchants all the time and there's a lot of confusion and a lot of fear around the idea of pricing digital products. So in this webinar, we're going to look at some important questions you should be asking and some ways to experiment with the prices you're charging. The first model we want to look at is kind of a time-honored one in the world of pricing, and that's pricing based on your costs. If you're going to make a physical product like a shirt, you're going to spend money on materials to make it, you're going to have a cost of labor to make it, and every single shirt you make is going to have those same costs, right? With a digital product, you're going to have equipment and labor to make the first copy, but then you can make an unlimited number of digital copies that don't cost you a thing to make. A lot of new merchants tend to think, because these copies are essentially free and there's nothing tangible I'm delivering the customer here, I should price them very low. But we'd like to encourage you away from that notion. Everything you're putting into your digital products has value. Your expertise has value. The time you put into making it great has value. And all of that should wrap into your pricing. This is such a cool time. The creator economy is booming, and all of us have access to really bring our skills to the world. So don't undersell that. Now here's a very useful little equation that we're big fans of. Let's look at the total cost to make your digital product. We're going to use a simple model here. First, you want to estimate the total hours it took you to make it from start to finish. The next thing you want to think about is what would you like to get paid per hour for that time? You get to set this number. Don't pay yourself minimum wage. Find a nice sustainable number. And then finally, if you multiply those two numbers together, what you get is the approximate total cost of making your digital product. Now once you have that total cost, what you're going to do is take that and you're going to divide that by a price that you're thinking of charging for the product. So this is like the experimental half of the equation. You can plug any number in here that you're considering, and then when you divide those two together, what you're going to end up with is the number of copies of this product that you would need to sell to make back that total cost. If you price too low, you could really be faced with selling so many copies. And think about the sales and marketing work it would take you to sell that many copies. Maybe try plugging a higher price into the equation and seeing what happens. The next model to think about is what I like to call pricing based on your surroundings, which is really your market. But with digital products, sometimes your market is a little different, especially if you're a creator that has started out sharing content for free online. You might have built a community around you of people who love what you make and want to support you. Selling to this audience is a little different than selling to a customer market because these people are also your community and they're tending to buy your products as much because they like you as because they like the products. To compare, a more traditional market might be somebody deciding, hey, I need to find this thing, and they Google up somebody who sells it and they make the purchase. It's a much much more impersonal transaction. Your product might fall into either one of these camps, and depending on what kind of customer base you're reaching, that will determine the way that you market the product, and it might determine a little bit about your pricing. Everyone has at least one competitor. There's always going to be someone selling a similar product to what you're selling. So as you're considering what you're going to charge for your product, be sure and order products from your competitors and take a minute to analyze What did they charge, and how much value do you feel you got for that price? Why do you think they were able to charge what they did? Have they done a great job building community around themselves, or have they done a great job with communicating the value of the product? What are the things that you could do better than them? Now, a third concept to think about is pricing based on your value proposition. What problem does your product solve, and how does it go about solving it? Now we often talk to new merchants who will immediately say to us, "My product doesn't solve any problems at all." But every product solves a problem for somebody. Let's take these two examples. One product is a pattern for a crochet bear. The other product is a guide for entrepreneurs to pitch to investors. They both solve unique problems. If you're a potential buyer for the crochet bear pattern, the problem is you want that bear and you don't know how to make it, and the pattern solves that problem. If you're a potential buyer for the Guide to Pitching Investors, your problem is that you have a business idea and you need funding and you're not sure where to start, and the guide for pitching solves that problem. Your product is going to solve a problem for somebody, and arriving at what that problem is will help you determine your best pricing. Pricing is a conversation. It's an ongoing process between you and your customers. Some audiences are very price conscious and some audiences are much more focused on the problems they have that they need solved. Don't hold off selling your products until you get that perfect price because you won't get it right the first time. The most important sale you make is the first sale, and then you'll be able to iterate and perfect that pricing. Keep in mind, if your product's not selling, we could swap out the product image. We could change its title. We could adjust its price up or down. We could change its description, all of which help communicate that value proposition better and will encourage a buyer to pay. If you start with your price too low, you won't have any room to do things like discounts or sales or special offers. And these are important ways to help you understand where the right pricing is. In SendOwl, we have a discount code tool that you can use in so many different ways. Let me jump over to my SendOwl account now and I'll show you how to set one up. So here in SendOwl, I have a bunch of products. Let's say I want to have a sale on this gluten-free baking product. I'm going to head over here to the marketing section and we're going to fire up a new discount code. And let's say it's 15% off. But if I wanted to, I could just make it a dollar amount discount instead. Now here you have a lot of different ways to play with your discount. So you could have your discount only work when the buyer has a minimum amount of purchase. If you don't want to use that, you may want to limit it to a specific product, which is what I'm going to do here. I want to make sure this discount code only applies to my gluten-free baking product. I can set this code up to be available just for a limited time or or permanently. And then I can let SendOwl generate a random string of numbers and letters as my code, or I can do something more interesting. And then once I create the discount, I'm ready to start selling. So I would share this code with my buyers alongside the link to the product. So let's grab the selling link for that gluten-free baking collection, and I'll go ahead and copy this into a social media post or a blog post or however I'm communicating with my buyers that day. That link is going to take them here to this page, and they'll be able to click and then put in my discount code, and that is going to take that 15% off. And then they'll be able to add their information to complete the purchase. Because they are so customizable, discount codes can really be the basis of flash sales. They can be loyalty discounts for longtime customers. After someone buys from you for the first time, you could always email them the code for a discount on their next purchase. The cool thing is once you have set up a discount code, you can always see the orders that are associated with it. Another place that you can check the progress of your pricing experiments is over here on the analytics page. So let's say that you share that discount code on September 4th. You can then come back on September 18th or 22nd and you can see how many sales you've had during that period. And that helps you see how the pricing experiment performed. So to recap, we talked about pricing based on your costs, based on your surroundings/market, based on your value proposition, and we talked about some ways to experiment and test your results. To help you out, we've made a free worksheet that you can grab from the description of this video. And incidentally, you'll get a chance to experience a SendOwl download in the process. And thank you so much for being part of this today. You can head to our Help Center, help.sendowl.com, to get all of your questions answered, and we'll see you in the next webinar.
