If there’s one lesson, we have all learnt from Coronavirus and the ensuing lockdown it is the ever-increasing importance of having an online presence and having a digital product of some sort.
You only need to go on any social media platform, from Facebook to Instagram, from Pinterest to YouTube, to see how those brands with a digital product or service are able to sell this flexibly. For many, this digital delivery has not only supplemented their income but has caused a skyrocketing of their profits.
When you’re offering digital products, how you price them is typically different from how you’d price physical products. You need to consider various factors when setting your pricing to ensure you’re attracting the right customers.
So, how exactly will 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 (incorrectly) deemed to be risky for customers. Therefore, when you’re setting your pricing strategy, it’s a good idea to offer proof of the value. You can also add a good return policy to reassure customers that they won’t be left out of pocket if the product isn’t what they thought they were buying. A good and fair return policy is also an excellent way to reduce return and negative reviews.
Showing proof of value can often mean that you give customers 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.
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 other incentives thrown in.
These can include free ebooks, worksheets, and toolkits, for example. Using these types of digital products can greatly increase 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 more affordable 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. Selling digital products too cheaply can put customers off 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. Think about the value your product will be providing and don’t be afraid to price higher than your competitors.