- You have a product.
You have a service.
What should you be charging for your product or service?
Hey, everyone, I'm Neil Patel
and today I'm gonna share with you
how to determine the optimal price
for your product or service.
(calm music)
The first thing you need to do is look at your competition.
Is your product comparable to theirs?
Is it better?
Is it worse?
Do you have the same feature sets?
Do you have less features?
If your product is more easier to use,
it has all the same features, it's higher quality,
you can price your product
at the same price as your competition or higher.
Now, if your product has less features than the competition
or your service has less features, it's not as good,
you don't wanna be in the same price point.
Ideally, you wanna be lower.
It's just common sense, right?
If people come to your website and be like,
oh, wow, this product's way better than the competition's,
of course they're gonna be willing to pay the same amount
as the competitor's product because yours is better.
Heck, they may even pay more money
but if your product sucks, they're not gonna wanna pay more
or the same price as your competition.
They're gonna be like,
why should I pay $20 for Neil's product
when I can get the competitor's one for 15
and it's five times better?
That's a thought process that goes through people's head.
Typically, what I like doing
is I like making sure I match the same amount of features
or the same type of product or the usability and the quality
and I'll price my product roughly the same price
as my competition or a bit less
because if you have a better solution
or as good of a solution and it's a bit less,
it's much easier to win over the business.
Now, the second tip I have for you
and this is if you wanna maximize
how much income you're making and profit
versus capturing the majority of the market
because the first tip I gave you,
if you wanna put your price lower than the competition
when your product's better,
it's a great way to gobble up their market share
but on the flip side,
if you're trying to optimize for profitability,
what you wanna do is split test your pricing.
You can use Crazy Egg, you can use Optimizely, VWO.
Pick a A/B testing tool.
Create two pages of your product or service
with different price points and keep playing with the price.
You can increase it, you can decrease it.
Usually, you wanna start off increasing it
and you wanna see, alright,
can I generate the same amount of sales
with the higher price point?
If you can then you wanna go with the higher price point
then you don't wanna just stop there
just because you got more sales on the front end.
Double check to make sure you're not getting
a ton more refunds or chargebacks
'cause if you're getting a ton more chargebacks and refunds,
your total net number isn't the same.
Now, typically, what you'll notice
when you increase the pricing,
you'll get a bit less sales but in total,
you'll generate more revenue and more profit.
So don't just look
for how many total conversions you're getting.
Look for the total dollar amount each variation presented
because let's say you have two products or one product
and you're doing the split test.
If you had one variation that's selling for a dollar
and you had 100 conversions, that's $100 total in revenue.
If you had another variation,
that would cost $100 for the same product.
I know that's a drastic increase but you had 10 sales.
Yes, it's gonna show that that new page
converted 10 times lower but you just ended up making $1000.
1000 versus 100.
Huge difference.
In that case, you probably wanna go with the version
that just made you $1000 over 100
even though you got 10 times less sales.
So when you're using the A/B testing software
like Crazy Egg, it'll help you optimize for revenue
and not just the true conversion number
because all that matters at the end of the day
when you're doing price testing
is what makes you the most revenue and profitability.
Assume you're not trying to crush your competition
because if you wanna crush 'em,
build a better product or service, under price 'em
and gobble up their market share.
So that's it.
If you're unsure of how to price your product or service,
leave a comment below with your product or service,
tell me what you're thinking
and I'll give you some feedback.
If you like this video, tell people about it,
share it, subscribe.
Thank you for watching and I can hope to help you
come up with the ideal price for your product or service.