Saturday, July 22, 2017

Pricing Strategies: How To Price Your Video

“How should I price my video?” is one question we get asked all the time. It’s important to be thinking about your pricing strategies, along with getting to know your market and coming up with a budget, from the very beginning. Among other things, your profitability will depend on how you set your price.

While I would like to say there’s a simple rule of thumb or set pricing structure you should use in this business, more often than not there is no one right answer to that question because there are many variables, both internal and external to your particular business that will come into play when setting your price.

First of all, you will want to look at your pricing objectives and your budget. Then you’ll have to assess your market’s ability and willingness to pay, become aware of what your competition is charging, and decide where you want to position your product between least and most expensive. Then ultimately, the only way to know for sure what pricing strategy will bring you the most profit is to test.

Your Pricing Objectives

Before you begin, and along the way, you should be deciding on your pricing objectives. Those objectives could be to: maximize your short range or long range profits; increase your sales volume; increase gross profit per sale; desensitize customers to price or match competitors prices; or a combination of these.

You also have to set a budget and then estimate what your video will cost to produce. Reflected in this production budget will be the total cost of producing your video, from inception to packaging. Look at your hard costs such as cast and crew, equipment, travel and your own investment of time.

You have to recoup these costs before you make a profit. After looking at the total investment you’ll make in your video, you then have to determine what your market will pay for your video in order to know if you’ll actually be able to make any money.

What Your Market Will Pay

Your market and your competition will play a large role in determining what price you will be able to ask and what you will most likely receive. Pricing is often driven by the size and income of the market.

Remember when I told you to ask this question, “Can you identify and reach your target market economically?” A similar question to ask regarding price is, “What will my target market be able and willing to pay for my video?”

And again, you’ll be answering that question by doing research. You want to know if your particular market may be price sensitive or may be the kind that will buy a video on your topic at any price.

Another important thing to point out is the size of your market. If your potential market is small and you know you will only sell a limited number of copies ever, you have to raise the price to the point it needs to be to make the profit you need within a reasonable time. Then ask yourself, will my market pay this higher price?

What is Your Competition Charging?

This is where having some competition already is a good thing. Use the information you find by researching as a guide. You want to know the ceiling and floor of the price for this type of product in your market so you can decide where you want your video to be in that range. You’ll also want to learn the prices and quality of your competitor’s products because you’ll be using this information to set your prices too. It’s also important to be aware of economic forecasts and conditions in your market.

Test Your Prices

To really get an idea of what price will work best for you is to test. One of the best ways to do this is through split testing (also called A/B testing or bucket testing) one price with a different price among segments of your prospects.

Split testing has been used in direct mail marketing for decades. When selling on the internet, the same testing tactics can be employed very successfully and many times less expensively than with direct mail. You can use ad tracking software, which comes in many other shopping cart programs like the one we use, to test pricing variables.

How To Start Setting Prices

Here’s an example of how you can start setting your prices.

You’ve determined that your actual cost to produce and sell a physical DVD will be about $2. That includes all costs associated with printing, packaging, duplicating, getting it shipped to you in bulk (or paying the video hosting fee if it’s a VOD video) and processing a credit card sale.

You have also calculated that it will cost you $5,000 to produce your video, including your time. If you sell your video for $20 and your profit after duplication is $18, it will take you 278 sales to break even.

If you sell that same video for $50 it will only take 105 sales to get there. If it was a $75 price it would take only 69 sales to break even. Sell it for $120 like my friend, Joe Clokey of San Luis Video Publishing does to schools and you only have to sell 43 and you’re in the clear. Quite a difference, eh?

The bottom line is you’d have to sell seven $20 videos to make the same profit as one sale at $120. If you think your market will bear it, obviously go for the higher price.

If your competition is selling for $120, you sell yours for $120. Don’t underprice it. You can always have a sale or cut the price later but it is very difficult to raise the price once people have seen the product at a lower price point. A better approach would be to price it higher so that you can afford to offer incentives for people to purchase, like bonus items or discounts.

You may be thinking to yourself, “my product is going to be so much better than anything else in the market, I’m going to break through that price ceiling.” Optimism is good, but look at the reality of the economic climate. Are premium priced products selling well in your market or are people in an economizing mindset. I’m not saying don’t do it, just listen to what your market is saying at the time you’re pricing your video.

Listen To Your Market

When all is said and done, your market will tell you what the correct price is. If your videos are flying off the shelf faster than you can keep up with, your price may be too low. You won’t truly know that unless you test your price points. That is one of the beauties of having your own website where you can raise and lower your prices to see what is working for you.

If you’re getting lots of interest and great feedback but nobody’s buying, ask some questions. You may be charging more than your customers can afford, no matter how much they’d like to have your video. Or maybe they would rather have the video in a different format (online or physical product) so it may not be a pricing issue at all. Talk to your customers and listen to what they tell you.

Recommended Posts:

Test, Measure, Tweak, Then Test Again

Feedback – How You Get Vital Information For Growing Your Product Line

Where Can You Find Your Competitors And Why Do You Want To?

8 Ways To Make Money Producing Your Own Videos

First Step To Pricing Your Special Interest Videos For Maximum Profit

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