How did you decide on your current pricing? Did you conduct market research to understand what prospects would pay? Or did you compare yourself to your competitors and base your price on that? Or was it a crapshoot, and random shot in the dark?
These are the ways most people do it, and they are all wrong. Because the price you set for your products and services is more important than you think.
The following few paragraphs are a bit number heavy, but stay with me because this will be really valuable for you to understand.
Let's say you sell a high margin product - information products and software are two good examples. Your price is $60, and your costs are $10 - that means your gross margin (selling price - your costs) is $50 each time you sell one unit. Let's say further that your overhead is $5,000 per month. If you sell 100 units you'll break even, right?
Now you want to sell more, and decide you can take some business from a competitor by lowering your price - temporarily. You lower it to $40 - a 33% price cut, and not uncommon.
Your costs remain $10 and your overhead is still $5,000, only now your gross margin is $30 - 60% of what it was before. And how many units do you need to break even now? 166! That's 66% more unit sales required to make up for the 33% price cut!
But what if you're feeling very aggressive and you cut your price in half (also not unheard of) to $30. Now you have to sell 250 units - just to break even! That's 2-1/2 times as many as before. How easy do you think that's going to be?
Let's use a different example - something that has real manufacturing costs. This time, your product sells for $100, and your cost of goods are $50 per unit, for a gross profit of $50. Same $5000 overhead, same number of units to break even. Now imagine you cut your price 20%, to $80, leaving you with $30 of gross margin. You need to sell 66% more units. Ouch!
What if you cut the price to $70. This 30% price cut means you have to sell 2-1/2 times more units - just to stay even.
Let's go further...
Competition is really heating up and you think that matching them cut for cut is the way to go. The price for this amazing widget of yours is now a bargain basement $60.
(Shucks, that's only 40% off your original price. Salespeople and business owners do this every day.)
How many units do you need to break even? 500.
Five hundred? That's five times your original number.
Do you really think you can sell five times what you did before - at least without significantly raising your overhead and your variable cost of sale?
How many times have you done just this in response to competitive pressures?
How many times have you cut prices because you thought it would help you sell more?
:(:(:(
What we've just done is a simplified version of what's called margin analysis, and I hope it gives you a glimmer of what can happen when you mis-price.
For the most part, your price cuts don't automatically enable you to sell 66% more than you did before, and generally - at least not in this universe - you don't sell 250% more, and never, ever do you sell 500% more with this kind of price cutting.
But there is some good news - and it's very good.
Let's look at what happens when you raise your prices.
Remember your high-margin product. It sells for $60 and costs $10 to make.
Through good product positioning and excellent marketing you raise the price to $70. That's only a 15% increase. Now you only have to sell 83 units to break even, and if you sell the same 100 units, your profits go from $0 to $1000. Nice increase...
And that "hard" product - the one with $50 of costs? Raise the price tag 20% to $120, your margins increase to $70, and now your breakeven drops 71, and you make $2000 if you sell the same number of them.
See how this works?
:):):)
You can do this same analysis in a bit more sophisticated way, considering your marketing costs, sales or affiliate commissions, travel expenses if you have them, and so on. You can see the actual pricing effect varies quite a bit depending on these details.
If you have a high-leverage, pay-only-for-results affiliate model, a very high gross margin and almost no fixed overhead, you have a lot of price flexibility. You can cut the price 25% and only need to sell 15% more! That's not too bad at all.
But only in that type of model. If you have a office, some staff, and a physical product - in other words, fixed overhead - lower prices can kill you - and you won't even see it coming.
And higher prices?
They can make you rich.
By now you are starting to see the tragic effects of mis-pricing on the downside, and the marvelously enriching possibilities of raising your prices.
This only works, of course, when you can also increase your value proposition...
Stay tuned for part 2.
Follow this link at the bottom of the page to get a copy of an excel spreadsheet to play with. Get the spreadsheet, plug in your own numbers. It will really blow your mind. Also, feel free to pass this article or the spreadsheet on to your friends and associates. They will definitely appreciate it.
(c) Copyright Paul Lemberg. All rights reserved
1 2 Right Angle Drill
Actually, let me rephrase that... Search engine optimization tricks have changed a lot over the years. But in truth, good solid SEO practices have remained stable and work better today than in years past. Why better? Because so many others keep trying to win with tricks that Google hates. This leaves you to reap the rewards of methods that Google loves!
The most important thing to realize is that Google, and other popular search engines place 90% and MORE of their ranking preferences on content and links. Keywords are still important, but only in the content of your pages; not in META tags like the old days.
It's that simple. And just as simple is how to accomplish that top ranking...
1.) First you need to find the best keywords and place them just right in your page's content.
2.) Next you need to find, get and manage great inbound links.
3.) Last, you need to closely monitor your progress (and your competition!)
Goal 1: Find the Best Keywords
Let's use Google's own keyword database to see what search terms are best to target. Go to https://adwords.google.com/select/KeywordToolExternal and enter any keyword or keyword phrase you think your future customers are looking for. Now get ready for a LOT of great results!
INSIDER TIP; Use specific and "long tail" keyword phrases whenever possible. One of my client's is in national floral delivery. Here's a real example of how my business partner and I put that business at number on Google with the perfect keywords...
The client had been paying per click for the term "flowers" and barely breaking even after spending tens of thousands of dollars per month in PPC costs. We not only gave him much better targetd keywords for his pay per click campaign, at one tenth the cost, but also made jim number one for his new primary keyword using the methods described later in this article. Before we go too deep however, let's look at the new keywords and the logic used to get there...
Instead of just the word "flowers", which has 233,000,000 competing pages on Google, we looked at what he really wanted to attract visits for. Although there are lots of possibilities, we will stick with just one example that saves him about $35,000 per month in PPC expenses and gives him another $100,000 per month in profit. We first evaluated "send flowers", which has 1/10th the number of competing pages. Then we asked him to try "think like people speak" (I.E./ I'm "sending flowers" to my mom.) As it turns out, a lot more people are searching for "sending flowers" than are searching "send flowers" and "sending flowers" has less than 1% of the competing web pages as the search term he started with, "flowers". Now that's impressive!
Use this method of keyword determination (get exact and use longer keyord phrases when appropriate) and you have will have an instant advantage over about 99% of your competitors.
Once you have your keywords selected, take the top three or four and list them in order for best to second best and so on.
Goal 2: Develop the Best Possible Content
Content is King! The ability to create search engine friendly web content, optimized for real people, is the key to your success. Modern search engines (especially Google) can read a page just like any person would thanks to natural text algorithms. Now Google can tell in nanoseconds if your web pages were pages for real people or just to get better ranking. With the following tip, you can easily do both!
Step A.) Call a good friend and tell him or her what you want to tell your web visitors. Then immediately write it down as close as you can remember it. If you can record the conversation it's even better.
Step B.) Now simply review your text and place your top keyword as close to the beginning of the opening sentence or two as possible. Then place your next most important keyword someplace else toward the beginning of that same first paragraph. Try to get your third keyword into the last sentence or two your first paragraph or at the beginning of your next paragraph if it fits better.
Step C.) Now place just one instance of each keyword in the next few paragraphs, anywhere they fit well. So if you have six more paragraphs before the final, each keyword should be three times total (once in paragraph 1, twice in the remaining 6 paragraphs with one mention of a single keyword in each paragraph.)
Step D.) For the last paragraph, do the opposite of what you did for the first paragraph and place your least important keyword toward the beginning of the paragraph and your most important toward the end. This shows the search engine consistency of topic.
Step E.) Last but not least, don't repeat any keyword more than four times per page and always let the text flow naturally.
Part 3: Get Great Links and Monitor Your Site
Getting and maintaining high quality inbound links typically accounts for more than 75% of today's search engine optimization success on Google. Getting these links is the crucial step that will get you over the top and keep you there! But you also need to monitor your progress and your site's status (not just ranking but how search engines REALLY see it). This will tell you more than just where you are but also where you are likely to be. Back in the day we did all link work and monitoring by hand. And I can telly you that it took a long time (My business partner and I spent about sixteen hours each week, per site!) My advice to you is to do what we did and find a good SEO tool that does the heavy lifting and time consuming work for you. Buying the right product is easily the best money you'll ever spend on your site's marketing and publicity.
As for products, there are some good ones out there. I used one called WebPosition Pro for a couple years. I ended up switching to another called SEO Elite because it has automated linking, which is the most time-consuming aspect of my SEO efforts. However, both are fantastic products for tracking and reporting.
Number 1 Pick: SEO Elite
http://www.SeoEliteWeb.com
Cost = $167 (lifetime free upgrades and no annual fees)
Personal Results: 121 top 5 rankings on Google in 3 weeks; Mostly 1's and 2's
Favorite Features: Finds the best link partners, including special "Authority" link partners that count for more with Google; Automates link process; Provides great Site Monitoring
Comments: I bought SEO Elite in 2005 and have used every upgrade (all are free.) I got rid of my other products since this one did a better job for me and does not have any ongoing fees.
Number 2 Pick: WebPosition
http://www.webposition.com
Cost = $389 WebPosition Pro or $149 Standard (plus $99 per year subscription fees for either)
Personal Results: 44 top 5 rankings in Google in eight weeks; Mostly 3's and 4's.
Favorite Features: Site Monitoring; Great reporting; Site Critic
Comments: I stopped using WebPosition because there were no automated linking capabilities and did not want to continue paying the $99 per year in ongoing fees. I did however really like the reporting.
Both Paul Lemberg & Scott Jason are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Paul Lemberg has sinced written about articles on various topics from Real Estate, Internet Marketing and How to Sell on Ebay. Business Coach & Strategist, Paul Lemberg is the President of Quantum Growth Coaching, the world's only fully systemized. Paul Lemberg's top article generates over 14800 views. Bookmark Paul Lemberg to your Favourites.
Scott Jason has sinced written about articles on various topics from Internet Marketing, Education Toys and SEO Search Engine Optimization. Scott Jason has been an SEO professional since 1999 and is the founder of BestSEOcopywriting.com. Over the past nine years he has worked with hundreds of clients h. Scott Jason's top article generates over 27100 views. Bookmark Scott Jason to your Favourites.
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