The digital space has opened up many opportunities for entrepreneurs and start-ups.
Launching a digital product or service isn’t like launching a product in the ‘real’ world. In the offline world, you have a defined market based on location, tangible competitor products to use as a price guide, and more overheads pushing the price up.
But we’re not talking about offline.
The online world moves rapidly so your product and business need to be adaptable and the price needs to be globally competitive. The most important aspect of pricing a digital product or service is to remember that it needs to be based on value.
When I first started finder.com.au I had to take into account the value of our service, the costs, and the possibilities in terms of market scope. I had to determine the value of the service on three fronts: the value that our customers would get, the value our clients could potentially get, and the value that we as a company could get.
To determine the right price for your digital product or service you need to take all of those aspects into account. Think about the functionality of what you’re selling and the possible value the customer will get from purchasing it. Are your customers only able to use it for personal use or can they use it for business purposes to make a profit? How long does the product last, and will they need to buy it again?
You should also think about the possibility of having different prices set depending on how the customer will use the product, for example one price for business customers and one for regular consumers.
If there are similar products/services on the market do your research and use that price as a basis, but don’t end the price conversation there. Don’t offer a service cheaper than your competitors just to try and draw customers in. If you think your product is worth more, then it probably is. A common mistake by new businesses is that they think digital products need to be cheaper, but this isn’t the case – don’t be afraid to charge a premium price.
In fact, higher prices can sometimes help digital products. The internet has limited regulations in terms of quality, and sometimes cheaper products can signal a lower quality product to the consumer. If I’m looking for a product online and find three similar products being advertised for a price between $50 and $60, and then I find one being advertised for $10, I’m going to be wary of that fourth product. Charge for the quality you think you’re offering.
You should still incorporate basic pricing factors that are used for real-world products to help you set a price. Think about the business value that your product offers, whether the idea can be developed and how much growth potential it has. When deciding on a price, you need to think about its ability to be maintained as your customer base grows.
Remember, there’s no one rule to determining a price for any type of service. The best thing about launching online is that you’ll get plenty of feedback to work with, and you can adjust your price to meet consumer demand. The digital possibilities are endless, so remember to be open to suggestions.
Fred Schebesta is the chief executive and co-founder of finder.com.au, one of Australia’s largest financial comparison websites.
