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How To Price Your Online Products And Services

Okay, so you’ve got an ebook, or a piece of software, or a service to sell.

What do you charge for it?

The answer has nothing to do with how much time or money it took you to create the product. It doesn’t matter if you spent thousands developing it, or if you knocked it out in an hour. Pricing online has nothing to do with product cost, and everything to do with maximizing profit.

Here are some of the factors that play into a pricing decision.

Similar Products

How much do similar products cost?

Your natural tendency might be to figure out how much similar products cost, and then lower your price a bit so you can undersell them. That works well for hard goods, but not so well for intangible online products. Sure, if someone is looking to buy a specific product, such as Microsoft Word, they’ll shop around to find the best price.

But if someone is looking to find the best word processor, the cost of the products plays subconsciously into their impression of the quality of the product. Under price your product and you’ve created the impression of a cheap product.

Pricing your product at or a bit above other similar products is the best idea. Go above their price point especially if you can point out how your product overcomes the shortcomings of other products.

How Much Does A Sale Cost?

You need to get traffic to your product page, and some percentage of that traffic will purchase.

For every person who buys, how much did it cost you to get that sale? Figure in not only your actual advertising costs, such as the cost per click for PPC campaigns, or the cost of sending out solo ads, or however you plan on advertising to your target market, but also your cost in time for doing the marketing.

All of these are estimates, of course, since you’re pricing before you know the numbers. You can read the blogs of people who have launched similar products, they often disclose numbers that will help you predict your own.

So you come up with your cost per sale…figure in how much profit you want to make on top of that, and you’ve got a possible price.

Have You Just Launched?

When you’ve just launched a product, it makes a lot of sense to give early purchasers a discount. By getting those early sales, you get some buzz in your target market. People will write on blogs about the product, if you have an affiliate program some percentage of those people will sign up for it, etc. You’re basically giving early purchasers a discount in order to get them to advertise for you.

The proper way to do this is to designate some time period as your “introductory pricing” period, and make that public on the sales page. When that period ends, raise your price to the normal level.

Don’t play the game where you artificially create a deadline one day into the future, or in the next 30 minutes, or whatever. Those sorts of techniques give you a poor reputation, and can affect your later launches.

So What’s The Final Price?

You might come up with different answers for a price as you look at similar products and how much it’ll cost you to make a sale.

The bottom line is the cost per sale. If you sell for less than that, you must have some way of making money off your customers after the sale. Maybe a one time offer, or whatever. If you make the decision to sell a product for less than your cost per sale, make very sure you have a good back end system in place to make up your losses.

For those of you who have products, how did you come up with your pricing?

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January’s Neglected Niche Site Update

There are still a couple of days left to go as I write this, but I figured I’d go ahead with this update.

In November, the niche site I’d put up over the summer and then completely neglected made a bit over $11, up from $1.63 in October and $.12 in September. In December, the site made a bit over $21, proving me wrong in saying that November’s earnings were the cap.

In January, the site proved me wrong once again, earning over $35. There was a flurry of traffic in the mid to late part of the month, probably from the site peeking into the first page of Google for the primary keyword, and starting to rank well for associated long-tail keywords (e.g. product names).

I still think that the site is limited in earnings by a couple of important factors I neglected back in the summer when I created the site.

First, the main keyword traffic is minimal. The flurry of mid-month traffic in January was close to the limit of what I can expect out of the main keyword.

Second, the amount earned per click on Adwords ads is fairly low. If I were doing a site these days, I’d discard this niche and look for one that paid $1 or more per click, which would have nearly tripled my earnings.

So, while the site has paid for itself, and has earned enough in the last month to offset some membership fees I have as part of other Internet Marketing efforts, I wouldn’t call it an unqualified success.

I know more now about proper keyword research than I did then. I also, unfortunately, don’t have time to put together another one (I’m concentrating on adding content to a couple of quality niche sites) to see what happens with better research.

Anyone have any niche site success stories?

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Last Chance To Win A Free Website

The clock is ticking down on my January contest.

For anyone who started reading the blog late, and didn’t catch the announcement, you can read the original contest post here. The short version, though, is that by posting a comment on the original contest post and by being one of the top commentators at the stroke of midnight (EST) on January 31st, 2008, you’ll be eligible to win a free SBI! website.

SBI! is hands down the best way to create a niche website to make money online, especially if you’ve never done so before. The SBI! process leads you through keyword research, picking a domain name, designing the site and writing the pages, generating traffic and building relationships with your visitors. The package includes every tool you might need, including ad tracking and autoresponders.

Paying for all the tools alone separately would amount to more in a year than SBI! charges. And you can get it all for free for the first year.

Any of the top commentators at midnight, January 31st, who have also commented on the original contest post, will be given a number of entries into the contest equal to the number of comments of theirs showing in the top commentators list. I’ll then randomly draw one of the entries from a hat, and that person gets the free SBI! site.

Along with my mentoring on the entire process, of course. By the end of the year, your site should be earning more than enough to cover the SBI! fee for the next year.

Note that it’s perfectly legal to toss a lot of comments into the ring in the last day or so to boost your entry count. Just make sure that each comment adds to the post, and isn’t just a “great post” sort of comment. I will ruthlessly delete any fluff comments that were made just to boost someone’s comment count for contest purposes. Comments on old posts count just as well as comments on the newer posts, too.

Good luck to everyone who has entered!

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Perry Marshall’s Bobsled Run

Whenever I hear that Perry Marshall (of the Definitive Guide To Adwords fame) is running a coaching workshop, I always start to dream just a bit.

Perry’s workshops have a reputation for helping people to take their PPC efforts to the next level, greatly increasing their profits. Both by reducing their cost per click, and by ensuring a greater conversion rate on their existing traffic. The work is done not only at the Adwords level, but also at the sales page level.

The catch is that the workshops are only for people who already have a substantial online business. You can’t just be starting out, or you won’t be accepted. Your business doesn’t have to be doing well, but you have to have one. If you qualify, the workshop comes with a great guarantee. You’ll recoup the costs of the workshop in either additional sales or in cost savings, by the time the workshop is over. And in a year, you’ll make at least $25,000 more than you would have otherwise.

So, yeah, I tend to salivate a bit when I hear about another one starting out. The problem is, I don’t have an online business, I work the affiliate angle. I also don’t use PPC as part of it, because (as I’ve mentioned before) I’m a PPC moron. When I get to the point of having my own products I sell, you can bet I’ll sign up for the first of Perry’s workshops that I can afford.

If you do have an online business, and are doing PPC as part of that business, take a look at Perry’s latest workshop, the bobsled run.

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Big Dog Heavy Hitters’ Co-op Program

I promised a review of the co-op advertising program that was mentioned in the Big Dog Heavy Hitters free report, so here are some initial results.

The basic idea behind the co-op is that you contribute to the advertising costs, along with any other members who want to participate in a particular advertising effort, and Rick Katz, the author of the free report mentioned above, personally places advertising, both paid and free, to recruit leads.

Every co-op member gets a share of the leads. It’s part of your job to welcome them and encourage them to consider joining the co-op (Rick has a nice email you can customize for this). You also get to soft-sell them an opportunity of your own, and of course follow up with them later.

Every member also gets a share of the membership fees generated by all this advertising. So you’re getting leads, and also earning back the cost of the advertising from new memberships in the co-op.

Normally, when I see programs like this, I’m skeptical. After all, I’ve reviewed a lot of programs that promise easy money, but they’re generally thinly disguised systems to make money for the founder.

The early results of Rick’s co-op are promising, though. I paid for a one-year membership, and that included a single share in the co-op. In a bit under two weeks, I’ve earned around 75% of that back. If I’d known earlier that the program would actually produce results, I’d have sprung for the lifetime membership, which includes two shares in the co-op.

Rick seems to know his marketing, and is doing great at getting people to his free report, which then feeds into the co-op. So if you’re looking for leads who are interesting in making money online, and want to recoup the cost of getting those leads, definitely look into Rick’s co-op.

To get started with it, download his free report here.

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IM-Speak Translator

These days, it seems like there are a lot of Internet Marketing related phrases that are being misunderstood by the general public. So in the interest of public education, I thought I’d publish translations for some of the more popular of these phrases.

I’m Giving Away A Free Ebook

For some reason, this one doesn’t hold up so well in translation, but here’s what that phrase means in English. “If you read enough of my copy, I can convince you to buy something from me, so here’s an entire ebook worth of copy”.

Sign Up For Free Internet Marketing Tips

This basically means the same thing as the first phrase, but has slightly different connotations. In the free ebook phrase, the expectation is that the ebook will be on a single topic, and any offers in it will be on topic. Free tips tend to vary widely in the topics and the ways they try to make money from you.

My Coupon Code Server Crashed, So Everyone Gets The Discount

This one basically means, “I’m having trouble getting people to buy, so I’ll raise the price and give you a discount at the same time, making it seem like you’re getting a good deal”.

Only 5 Spots Left!

This one means, “I’m having trouble getting people to buy, so I’ll make it seem like everyone else is getting in and you’ll be left out if you don’t, too”.

Don’t Buy IM Super Product Until You Read This

This loosely translates as, “IM Super Product is selling like hot cakes, please oh please buy through my link!”

Buy IM Super Product And I’ll Give You Last Year’s IM Super Product For Free

Similar to the last one, “IM Super Product is selling like hot cakes, so I’ll give you an outdated product if you’ll buy through my link”.

Anyone have any favorites I’ve missed?

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The Role Of Free Money Sites In Making Money Online

Regular readers will know that I’ve tested various free money sites.

Most people who want to quit a day job tend to look down on these sorts of sites. It’s understandable, after all you don’t make much at them. Generally 1 to 2 cents per ad you view, and the really good sites have at most 20 to 30 ads a day. Say $15 to $20 a month for a really good site.

Add in a few more really good sites, and get some referrals to them, and you’re probably looking at $100 a month. Definitely not enough to quit the day job on.

What’s missing in this equation is perspective.

Learning enough skills to be able to quit your day job and live from your online income is going to take time. See my post on How To Succeed In Internet Marketing for more details on the process. In the meantime, what do you do?

Let’s assume that you’ve got the right mindset, you understand that learning to make money online is going to take time, and you’re willing to put that time into investing skills. You’ll still have some online bills to pay during the process. Web hosting, ad tracking services, keyword research, etc.

All that can add up, starting anywhere from $25 a month for an all-inclusive site like SBI!, to as much as $50 a month or more if you get separate web hosting, ad tracking, autoresponders, etc.

Did the light bulb go off yet?

The proper use of various free money sites is not to replace your day job, but to allow you to bootstrap your other Internet Marketing efforts. While you’re learning how to get referrals to free money programs, you’re not only building skills, but you’re building an income stream that can pay for your entry into more serious Internet Marketing, such as building a quality niche site, or paying to have a product developed that you can sell.

You could pay for that effort with your own money, but how long will it take? Will your savings hold out? Building an online income stream using free money sites lets you have as much time as you need to learn Internet Marketing.

Some keys to doing this:

Pick only quality free money sites

Too many sites out there are scams, and won’t pay. Stick with sites that are known to pay out, and have a decent number of ads each day. I use Marketing Pond as a filter for free money sites. Marketing Pond only features quality sites that pay out, and you’ll have the added bonus that by promoting Marketing Pond you gain referrals in multiple free money sites at once.

Upgrade only when you can earn back the cost quickly

Free money sites make upgrades sound attractive, because they make money from them. You have to look, though, at the amount you’ll make extra per ad view, combined with the number of ads they generally have per day, to see how long it’ll take you to earn back the cost of the upgrade. If you have referrals, you can also figure in the amount extra you’ll make for each referral.

Some sites’ upgrade programs would take longer to earn back than the year that you’ll get as a premium member. Other sites offer lifetime upgrades that would take two years or more to earn back. Never assume a free money site will be around in two years…that’s an eternity for such sites.

The only site I recommend an instant upgrade at is ClixSense.

The ClixSense upgrade is $10 for 1 year, but you’ll earn it back within a month or two. You’ll immediately get access to about $5 worth of premium only ads, and then another 10 or so a day after that.

Most other sites’ upgrades don’t make sense until you already have a decent amount of referrals, and by that point you’ll probably be putting more effort into other Internet Marketing activities.

Never purchase referrals!

The free money sites often sell members who have signed up directly at the site, and don’t already have a sponsor. These members almost never earn back the cost of purchasing them. The same goes for guaranteed signups.

Remember that your goal is to make enough money to pay for other Internet Marketing costs, not to spend money you won’t get back.

So, if you’re just starting out in Internet Marketing but are in it for the long haul, start by marketing something like Marketing Pond. You’ll learn basic skills you’ll need later on, and won’t be leaking money out of your savings.

Eventually you’ll be able to pay for the more sophisticated tools you’ll need for other Internet Marketing efforts.

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Wealth Toolbox Review

Okay, so this isn’t much of a review, because there isn’t much to review.

WealthToolbox.com is a site that claims you can “Join, Earn, and Learn”.

You join for free, and as a bonus they deposit $100 into your account. They invest that money (that they gave you) and you earn from the results. They also pay you $20 per referral, down 5 levels. So they’re paying out a total of $200 per member.

The learning portion comes from this line, “In time, we’ll create and give our members access to audio, video and web tutorials”.

Those tutorials do not currently exist. In fact, as far as I can tell, there are exactly five pages on their website (the main page, the terms and conditions, the privacy policy, the member account balance page, and the member referral page).

Reading their terms and conditions shows that after 24 months, you’ll be paid the balance of your account via PayPal.

This yells “SCAM!” so loudly that it’s deafening. A lot can happen in 24 months Internet time, let alone the fact that, officially, no money is going into the system.

Checking the whois report shows that the domain name was initially registered on February 27, 2001. The Wayback Machine doesn’t bring up anything, as the website specifically blocks their spider via robots.txt.

I’m sure that many sites have valid reasons for blocking the Waback Machine’s archiving of their content. But at 3 public pages, this site doesn’t seem to have cause. Makes me wonder what they’re hiding about the history of the site.

When I run across something like this, I try to imagine myself as the founder. How could I possibly get money out of this site, given that they provide the money into your account and (supposedly) invest it.

There’s this phrase in their terms and conditions:

Account payout is dependent upon you maintaining an active account and abiding by the Terms of Service and membership requirements.

The Terms of Service are on the site, but nowhere is there to be found membership requirements.

So here’s how I would work it. Provide some basic page that allows a member to track how much money is in their account. Send out regular emails telling members how much money they’ve gained or lost based on investments I’d made. I wouldn’t bother with the investments, the point is to gradually increase the amount in their account until they have a vested interest in getting the payout.

Then the “membership requirements” would kick in. They’d need to buy something through an affiliate link, or join a site, or do some other action that would financially benefit me. And I’d keep it up, making them do these things on a regular basis, for the entire 24 months until even the most strong-willed among them would give up in disgust (thus forfeiting their payout).

And if someone somehow managed to get to payout? The chances are good they’d have spent enough money along the way to let me honor it. Or I’d find some fine print in the unwritten membership requirements and weasel out of paying them.

At least, that’s how I would do it if I were unprincipled and unethical. Is that what this site plans?

I don’t know, but I’ll keep you posted.

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Evaluating A Site’s Product Potential

This tutorial is part of an email course I’m developing on creating niche websites. So if it seems like it’s a tutorial out of the blue, that’s why. It makes more sense in the context of the email course, but I thought that my readers might get some use out of it even without the course itself.

While advertising is one part of monetizing a niche site, product sales are another. You can sell your own products, or you can sell other people’s products.

Right now, we’re not so interested in picking products to sell, as in simply evaluating whether it looks like the niche is one that has the potential to profit from product sales. Remember, we’re trying to pick the best niche to pursue out of our top three. We’ve already evaluated the potential for selling advertising on the site. Product potential is just one more aspect of evaluating the total potential of a niche topic.

So how do we decide if a particular niche topic has good product potential?

One simple way is to see if there are a good number of products already existing for the niche. The thinking goes, that existing products show a market demand for those products, especially if there are a large number of products.

We’re going to focus on other people’s products right now. You may actually sell your own product on your site, but making sure other people have products in the same niche tells us that there’s some existing market demand for products in that niche. The easiest place to check a niche is on the ClickBank Marketplace. ClickBank is a place for people to sell digital products (e.g. ebooks and software).

One of the reasons we use ClickBank as a first place to check for products is that it’s easy to search and, later, it’s easy to get a ClickBank account. Commission Junction is another marketplace for products and services, but you need an established website to get an account there, so we’ll wait on that until later in the process.

I’ll start with the keyword “golf swing”, to see what products are available. In the list that comes up, I see 7 or 8 good possibilities in the first page of results. Not every product that comes back will be a good match, but there are quite a few.

When I try “board games”, I see no good products on any of the results pages. This is not surprising, since the nature of the niche is that suitable products are not digital. We’ll search for non-digital possibilities later.

Trying “sewing patterns” at ClickBank, I get a couple of good possibilities in the first page.

So in terms of digital products, “golf swing” is the easiest niche to monetize with products. To find non-digital products, we’re going to search for affiliate programs offered by individual companies. We’ll use a site called Affiliate Scout to search for these programs.

At Affiliate Scout, “golf swing” returns 3 programs, “board games” returns 3 programs, and “sewing patterns” returns 0 programs. So a bit better for board games on direct affiliate programs.

Big sites like Amazon.com and Ebay.com also have their own affiliate programs, so you could search them for the topic keywords to see what sorts of products are available. Typically, every topic has a good number of results at both.

So in terms of basic product potential, I’d pick “golf swing” as the best of the niche topics, with “board games” coming in second.

We’ll see a bit later how to come to a final conclusion about which niche topic to go with, by combining the results of our various researches.

See you in the course!

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Hub Pages, Giving Squidoo A Run For Their Money?

I just ran across Hub Pages the other day.

Hub Pages is a Squidoo like site, where you can create web pages about pretty much any topic, and earn a share of the advertising and affiliate revenue generated by the page.

The tools seem comparable, and make creating your page and embedding photos and videos quite easy. What distinguishes Hub Pages from Squidoo is the transparency of the accounting.

At Squidoo, all revenue goes to Squidoo and at the end of the month you learn how much each of your lenses earned. What goes into the calculation is a bit mysterious, but it’s definitely related to your lens’ traffic and page rank, and lots of other things.

At Hub Pages, you enter your Adsense id, your Amazon ID, your Ebay ID, and your Google Analytics tracking ID into your profile area. 60% of the page impressions generated by your page use your IDs. So you get tracking of those impressions through the various affiliate programs, and any income is paid to you directly by those programs. Hub Pages never sees your money.

I’m a big fan of Squidoo, but the transparency in Hub Pages is incredibly attractive. Being able to log into my Adsense account and see how many impressions and clicks I’ve gotten through my pages is very nice. Earnings should also tend to be higher, on average, with the 60/40 split.

Another great feature of Hub Pages is that you can create a link to one of the pages created by someone else, and when you drive traffic to that link you also earn a percentage of the ad impressions generated by that page for a while. So you can get impressions just by driving traffic to other people’s pages! This alone fosters a sense of community assistance. When other people can get paid to drive traffic to your pages, you won’t be the only one promoting them.

I haven’t yet created a hub over at Hub Pages, but will do so soon. I’ll add Hub Pages to my monthly income reports, along with Squidoo and Yuwie.

Click here for the Hub Pages tour.