Fixed Price or Recurring?

By Posted on 4 min read 371 views

There’s no question that pricing your product is important. You want to get it exactly right to maximise your conversions.

The big players out there will tell you that the only way to do this is to test.

And they’re right.

But that probably doesn’t help you. Because it means that you need:

  • Split-testing software
  • Large volumes of traffic

Okay split-testing software can be bought, if you can afford it. If you’re relatively new to the game you probably can’t, so that doesn’t help.

The bigger issue though is traffic. You need to be able to send enough traffic to the sales page to be able to test different variations and maximise the conversion rate for your launch.

And not just any traffic… you need good traffic.

So the question becomes is it worth getting the split-tester to test price-points if you haven’t got enough good traffic to get a reliable answer?

Probably not.

So what do you do?

Well, I would suggest that initially you step back.

Before you decide on the price you want to decide on whether your product should be fixed price or recurring.

And this isn’t as simple as it sounds.

Okay, if you’re selling an ebook or something that is only accessed once and doesn’t give anything new then it’s almost certainly going to have to be fixed price.

But…

If you’re selling anything that is used regularly or contains fresh information you could choose to go for recurring. This could include software, wordpress plugins, forums, content driven members areas, tools etc…

If your product could be recurring then in order to determine whether it should be or not you need to consider your customer.

Some questions you should consider are:

  1. Will they use it regularly or is it just a one off?
  2. How likely are people to continue to use it?
  3. How large is the learning curve, once they get through it will they stick with it?
  4. What is pain of disconnect likely to be, i.e. if they spend three months learning will they stick with it
  5. because using something else means starting again?

Let’s look at some examples.

If you’re releasing a software product that follows the more one-button approach, i.e. requires little input from users but fulfills their wildest dreams, then you’re appealing to a crowd who don’t like to invest time.

These types of buyers are likely to jump from product to product always looking for the next best thing.

In this case recurring payments are likely to be unsuitable because your buyers aren’t likely to stay with the product more than a month or so.

If you were charging $47 per month then most people will probably only pay you $47 as they’ll leave after one month. However you can change this to a lifetime license for $197 and they’ll still buy, because your’s is the new and the best, but you’ll be making $150 more per sale.

On the other hand, if you are selling a product that is designed for users which are going to be investing time into learning how it works and making it work for them, the opposite is likely to be true.

This means there’s a learning curve, but if someone has spent three months learning how to use your product and make it work for them they’re unlikely to leave. Charge them $47 per month and they’ll be paying you $564 per year instead of the $197 one-off fee.

Your job now becomes having awesome customer support to get everyone past the first three months so they stick with your product long-term.

Consider this carefully because getting this right for your market can easily triple your revenue without any extra work.

Okay, so you’ve decided if you’re going for a fixed price or recurring, but then what happens with the actual price point?

If you haven’t got the budget for optimising software yet, or you don’t have enough good traffic or a good source to send to it then there’s only one way to determine your price.

Start by looking at your competitors and write down what they’re charging. Next to each of them write down any features they have that you don’t and any features they don’t have that you do.

When you’ve finished you’ll be able to see at a glance what the prices are and what they offer.

Only go at the top if you’ve really got something special, extra to add that is going to provide huge benefits to your customers.

If not don’t price yourself at the top, you just won’t sell enough.

Generally speaking I would recommend going just a little bit more expensive than average. More expensive means you will be perceived as having the better product without putting yourself into a bracket that demands quick and obvious benefits over competitors.

I have never found there to be any benefit going just below average, generally pricing here tends to sell less.

However, if you want to build a customer list quickly then pricing low compared to competitors can make a massive difference in conversion rates. But make sure you know your numbers, this can make big money but if you need to cover any kind of development costs make sure that you will still be able to do that and pay your partners.

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