The
Right Price
by Brandon Palmer
The question 'how much is too much?' has been on the minds of American
entrepreneurs since the snake oil salesman of over a century ago...
Those guys knew something fundamental about human nature - that making
money isn't about giving someone a good deal, it's about making them
think they got a good deal. Today we call it 'perceived value,' and
it's still more important than actual value. This doesn't mean you
are tricking customers into buying an inferior product or service,
on the contrary - you can still give them their money's worth and
then some. The concept is simply an acknowledgement of the important
role psychology plays in sales. Hence the word 'perceived.'
"With all the mass marketing in the world today," says Ryan Elizalde,
Sales and Marketing specialist at ChiChiClicks.com, "to get the consumer
to feel they are saving money, you have to give them the perception
that they are getting the best deal. When you are looking at a price
point of $30.00 as opposed to $28.95, the consumer feels they are
getting a much better deal with the cheaper one; even though it's
only a dollar difference to us, it feels like two dollars to them."
Something For Nothing
Consumers have been aware of that kind of basic pricing psychology
for some time, but the perceived value approach applies to more complex
strategies as well. "Our company started off in October 2002 with
a monthly recurring membership fee of $10," says Lloyd Brown, a.k.a.
baddog, CEO of Sex Pictures Pass AVS, "which meant that the pay-out
to affiliates was only $5 recurring. This pricing structure was somewhat
effective in enticing the surfer to join," he explains, "but the low
pay-out to affiliates resulted in very few webmasters signing up,
and even fewer actually participating by submitting sites to the system."
"When I was asked to take over," Brown continues, "the first thing
I did was change the pricing to $4.95 for a lifetime membership, and
increased the pay-outs to $20 each. This resulted in an immediate
increase of ten times the number of affiliates, and a dramatic increase
in the number of sites submitted to the system. It also resulted in
significantly higher profits to the company in the last three months
than were experienced in the prior 6 months." Which begs the question:
is there a magic price?
The Price is Right
The answer is no, there is no magic price, and the reason is simple.
It all depends on what you're offering, how you present it, and your
target audience or demographic. As is so often the case with adult
sites, trial and error is the key. "I would say test your site," says
Elizalde, "and see which pricing plans stick, and just scrap the plans
that don't bring money. Ultimately, you have to remember when your
site is completed, driving traffic to the site is most important.
Don't depend solely on search engine submission," he advises. "In
addition, cut deals for traffic trades, exit traffic consoles, and
articles on your unique site."
Being willing to experiment to see what works and what doesn't is
crucial. "I think it goes without saying that this is the case," says
Brown. "In our case, I think the addition of a second join option
was a good idea, and it appears that webmasters agree, since this
option has seemed to help increase the number of affiliates joining,
and a higher percentage of them are submitting sites and promoting
them. Getting webmasters to join is easy," he explains, "getting them
to submit is a little tougher, getting them to actively promote their
sites is the toughest."
Available Options
It's a good idea to look at what everyone else is doing periodically,
because things change quickly, and there's a reason why some pricing
strategies are more popular than others. "The most popular pricing
plan I've seen out there is billing on a monthly basis," says Elizalde.
"Usually, a free trial is offered, somewhere between 3-7 days. Personally,
I think 5 days is more than fair. If your product provides a good
value, the member will stay and enjoy all that your site has to offer.
If not, then you can try and bank on the idea that they forget about
the trial, and you get at least one billing from them." Bear in mind
however, that if they pay by credit card, the new 1% rule may take
its bite out of you.
Although that strategy has been demonstrated to work for many sites,
there are some techniques that are more experimental, and their worth
has yet to be proven. "There are many new strategies coming out,"
says Brown, "like the 30 minute trial. I have yet to try this option,
and am not sure that I will in today's climate, especially with VISA
seeming to clamp down on the aggressive marketing practices. I think
the one and three day trials are pretty effective, which is probably
why you see these options available with the more successful programs
out there."
You Can't Give it Away
Remember, when trying to convey a great value to the potential customer,
you can't just give away the store. In fact, if your site seems like
too much of a bargain, the opposite effect will occur. "I went to
the $4.95 lifetime join primarily because I know there are surfers
that do not trust a free membership," says Brown, "because they figure
there must be a catch somewhere. Also, since we are an AVS and a good
portion of the revenue available to our affiliates comes from upsells
within their sites, I figured the fact that the surfer was actually
willing to pony up five bucks proved that not only did he own a credit
card, but he was willing to use it to purchase online adult entertainment."
"This resulted in a conversion ratio of 1:1112 at our index page,
just using TGP traffic," Brown explains, "with a 1:80 ratio at the
join page. In July, we added a second free join option, and the joins
did increase significantly. I have looked at some of our affiliate's
stats, and while I think most of them are utilizing hubs and search
engine traffic, I have seen ratios ranging anywhere from 1:35 to 1:60
at the join page."
But Wait... There's More!
When you do finally make the sale, the age-old technique of upselling
comes into play. These days, with consumers more sophisticated than
ever, the hard sell is old news. Force feeding upsells to your customers
will hurt you in the long run, since their loyalties can easily go
elsewhere. Try something that truly is a value, and don't bite the
hand that feeds you.
"If you offer a surfer $9.95 for a basic membership, which will give
them access to galleries," says Elizalde, "then mention for only $10.00
more, they get the VIP membership which offers a lot more, maybe a
personals section, live or video feeds. That would bring your monthly
re-bill to $19.95. Make a good offer at the beginning but then make
the upsell something they can't refuse."
Another upsell possibility is to offer significant price breaks to
those who increase the length of their membership at the time of sign-up.
"If you do this, I think you need to be fairly well established,"
says Brown, "so that the surfer knows you will be around in six months
to a year. Of course, they are going to want to know that there are
frequent updates to the site as well."
Whatever pricing strategies you choose, keep in mind the two most
important things you can offer today's consumer: value and options.
If you stick to that formula, you'll never be accused of selling snake
oil.
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