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Price and Value: A Marketing Lesson for Life

Price, Value, Shopping
Image by Armel
I have survived as an entrepreneur for 10 years not because I am inherently good at most aspects of running a business. I am a terrible salesperson, I get bored easily, I don't like busy-work or higher math, and I have the classic ADD personality.

None of this is tremendously helpful in business, and in a lot of ways, it's made things more difficult than they are for other, more balanced people.

Instead, I trace my success at survival to two key skills: first, I am a decent copywriter. Writing well really does help you do a lot of things. Second, I have a fairly good understanding of the twin concepts of price and value.

There are some other "life skills" that are also important -- notably, persistence -- but in terms of specific business skills, that's pretty much all I've got. And for the most part, it works just fine, if a bit haphazard at times.

Today I thought I'd tell you about the second skill of understanding price and value, and I'll do so with a real-life case study from the launch of my first AONC product. I'll tell you what I did wrong, what worked well, and why I chose to market the product the way I did.

Ready?

First, all understanding about the whole subject of pricing comes from one critical principle:

Whenever we spend any amount of money, we undertake a complex, emotional analysis of price and value.

This process is hard to overstate, and few of us are immune. In fact, it is pretty difficult to buy much of anything without going through the process. It's often subtle or even subconscious, but it's definitely real. We often have expectations for how much something should cost, and when our expectations are unmet, we respond with emotion.

  • BAD Feeling (skepticism, uncertainty) - "Wow, that's so expensive. Is it really worth it?"

  • GOOD Feeling (happiness, fulfillment) - "Wow, it's on sale! I'm getting a great deal!"

These feelings are not always rational -- have you ever known someone who will drive 30 miles to save a couple dollars? Or someone who uses coupons to buy products they don't like?

Like I said, our expectations of value are not entirely rational, but they are very real nonetheless. From a $4 latte to an $8 movie to a $15,000 car, we evaluate purchases based on the expected emotional benefit in exchange for the money we give up to receive it.

When we go to Starbucks, we complain about the $4 latte... but then we go back the next day or next week. Apparently, the latte is worth the price even though we feel a little guilty about the $4.

There is a lot to this - the great book Influence covers the topic in far more detail.

The important thing to understand is that buying something is not simple. There's a lot going on, and that's why it's critically important for businesses to get the pricing right.

If you price something too high, you alienate buyers. People will kick the tires, but most of them won't take the car off the lot without more persuasive selling. That may seem fairly obvious, but the opposite is true as well.

If it's priced too low, this is also a big mistake, because perceived value is directly related to price. People are skeptical of advice on the cheap. Free is good, and reasonable-to-expensive is good, but cheap is bad.

What if you heard about a consultant who works for $9 an hour, would you think, "Wow, what a deal?" I suspect that most people would think, "Wow, they must not be very good."

Again, this may not reflect reality -- perhaps there's an awesome consultant out there who just likes pricing at the low-end -- but true or not, it reflects how we perceive value. When you hear about a $300 an hour consultant, you might not be able to hire her, but you usually respect her. The perception is that a $300 an hour consultant is much better than a $9 an hour consultant.

For another example, say you walked into Best Buy and saw a $99 iPod killer on the shelf. Would you buy it right away?

I suspect not. You'd automatically think it couldn't possibly be as good as a real iPod. You'd be very suspicious, because you expect iPods and even iPod knockoffs to be more expensive because they're worth more.

Those are somewhat hypothetical examples, but you get the idea. Let's take a look at a real-life, recent, highly-personal example.

Discount Airfare GuideThe UGDA Case Study

As many of you know, last week I released my first commercial product, the Unconventional Guide to Discount Airfare. This was definitely a labor of love and an emotional investment for me, because I've spent a lot of time working on the AONC site and building an audience over the past five months.

For anyone who believes that bloggers shouldn't sell things, let me assure you that there are a lot easier ways to make money. But on the other hand, I passionately believe that artists should be allowed to make money. (I wrote that post in part to preempt complaints about creating an online shop in addition to my free essays and other content.)

Since I've been an online entrepreneur for ten years, I'm not normally indecisive with pricing. I can usually look at something and know fairly quickly how much it should cost. But since this was a new market and my first "branded" product, I was a little nervous.

Before the launch, I sent off some emails to people I know and trust to get their advice on pricing. Unfortunately, there was no consensus.

My internet marketing friends, who sell ebooks every day for $67, $79, or $97, took a look at the guide and said I should price at $49. "Look at what you are giving people," said one.

"You're telling them how to get access to airline lounges, the truth and lies about upgrades, how to get elite status without flying, and on and on. This is worth hundreds of dollars."

Yes, that's all true. But I felt uncomfortable pricing at the $49 point -- I really wanted it to be more accessible. On the other hand, a few other respected experts said I should price lower than I expected.

$14.95, said one. $18 max, said another.

Yikes - I was equally uncomfortable with that idea. There is real value in the information I provide, and if I was selling it on the cheap, I'd rather just give it away. I'm not a mass-marketer; this is a niche product, and the average airfare costs $413 in North America. If someone can't afford $25, I don't mean to be insensitive, but they probably don't do much flying.

Thus, I had to make my own decision, and as much as I dislike the middle ground, that's what I went for - $24.97. I might sell more copies at a rock-bottom price point, and I might make more money selling at a higher price, but such is life with pricing decisions. You just have to make a decision and see how people respond.

So, how was the response?

Well, I won't be retiring to Monaco anytime soon, nor can I rely on this as anything close to a full-time income... but I think I have the potential to build a nice little business over the next year.

There were a couple people who complained about the price, and a couple people who said after reading the guide that they gladly would have paid more. I can live with that kind of healthy tension.

Oh, by the way - social proof is another important part of the price and value correlation. We'll have to cover this later, but in short, social proof is the public display of what other people think about your work.

Here are the early reviews, from real-life people:

I feel like I’ve stolen the book for that price. Well worth the investment. -Elliot Webb

And here's another, from Naomi who writes from Ontario over at Ittybiz:

"While I admit it takes a shotgun to my head or a hefty handful of Xanax to get me on an airplane -- I seriously considered taking a boat to Bali for my honeymoon -- sometimes it has to be done. This book actually makes flying seem kind of fun. Very informative, value packed, no fluff. The guide to airport lounges alone was worth the cover price. If you don't save money after reading this book you are quite frankly too stupid to be allowed on a plane without a chaperone."

(You may have noticed that Naomi is quite a direct person. Don't be offended. She's a friend.)

I have a lot more feedback like that, and I'll publish some of it on the product page over the next week or two. Elliot wrote his note to me at the same time someone else (who did not purchase) sent me a long rant telling me how expensive the guide was and how I was doing a disservice to the world, all marketing an evil, etc. I appreciated reading Elliot's note right after hearing from the unhappy person.

Despite the fact that the launch went well, there's always a few things you can learn from any success.

Here's my list of what-to-do-better in the future:

  • I should have included a 2-page sample. Someone said that they would like to know more about what they are getting. You guys are correct, and I've fixed that. Here's the sample. The sample is representative of the practical information included on each page of the guide.

  • The length could have been extended. This is the ultimate pricing paradox, and I've thought a lot about it. I've bought a few dozen ebooks over the years, and about half of them have cost me $49 or more. Almost all have provided good value, but almost all have been a bit too long for my taste.

There is inevitably a lot of good content but also a lot of fluff in the average ebook, and I wanted to avoid that with mine. I focused entirely on practical strategies and tactics, and left the fluff out. (There's no blank pages for notes, for example, or long checklists that take up extra pages.)

However... I now realize that some people decide on value based on a price-per-page basis.

If you think about it, this is highly irrational. If someone drew you a treasure map, would you worry that it was only on one page? But as noted previously, most purchase decisions involve more emotion than rationality. Thus, even though I offer free lifetime updates and will be adding more to the guide in the future, I probably should have had a few extra pages in there. Point noted.

  • Lastly, I couldn't do it this time, but in the future we'll do a better job with segmentation. I got emails from the U.K. and Australia asking for localized versions. I got emails asking for a higher-priced, higher-end version for business travelers most interested in flying First Class. I got emails from India and elsewhere asking for a bare-bones (but cheaper) version.

We're working on these ideas. I have to find the right balance there (i.e., I don't want 10 different guides for the same subject), but it's on my mind. For now, I have a makeshift solution for those international readers who are interested. If you're one of them, write me and I'll give you the details.

For the next guide, I'll take each of these lessons to heart and see how to make it even better. I'm working on it already, but it won't be coming out for a while. Like the first one, it's better to do it right than to do it quickly.

***

Getting Back to Basics

There's no way to eliminate the emotional process of buying something, but I recommend taking the process into the open. Asking serious value questions - not "What color is it?" or "How many pages is it?" but "How will this improve my life?" helps reduce the tension and ensure better choices. Another good question is, "Do I value this item (or service) more than I value the x dollars it will cost me?"

When I started thinking more about this, I started making different life choices. I made my decision to visit 100 countries by thinking about price and value. I entered and completed a Master's Degree program by thinking about price and value... but then I turned down a Ph.D. program by thinking about the same thing. It wasn't the right time for me.

Your mileage, as they say, will vary. You might not do the same things or make the same choices - in fact, I hope you'll do whatever it is you want to - but when you think carefully about price and value when buying (or selling), you'll usually make wiser decisions.

Good luck out there.

###

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Art and Money

Art and Money
Image by Jblndl
Lately I’ve had a lot of reasons to think a lot about the relationship between Art and Money. There's a lot to say about that subject, and we'll cover it from different angles over the next few months. To kick off the series, here's a quick story from the archives of unhappy people on the internet.

Andrea Scher writes over at Superhero Designs, where she also sells homemade jewelry and does commercial photography. For five years and counting, she’s provided regular inspiration for a hyperactive community of women, fellow artists, and self-proclaimed superheroes.

So anyway, last week Andrea announced that she would be doing a site redesign, and the new site will include a few spaces for sponsors in the right column. This is the normal protocol for full-time bloggers – build a community, write for free, and have some advertisers on the right-side that help pay the bills. That’s not my plan here, but I have no problem with people who do it that way.

No big deal, right? Well... in the comments section of an otherwise tame blog, a few people felt like the world had ended. Here’s what some of them had to say:

  • “it is not right to put an ad on your beauty. it is not healthy for everything to be for sale. this is a cultural sickness.” -kelly

  • “I really never thought I would see ads on your Superhero Journal. I won't read it anymore because I am tired and sickened by the selling of America. You can paint it and dress it in pearls but that's what this is. ADS. Ads. ads. I feel so sad.” –penelope

  • “i am opposed to advertising impacting every aspect of our existence and I wish more of us would keep boundaries around our creative space and say ‘this is not for sale!’" -katie

Someone even compared Andrea to a cocaine dealer and email spammer – yes, seriously. It reminded me of this article in my favorite non-newspaper, The Onion.

Really, putting an ad on a blog is as bad as selling cocaine? It seems that the hyperbole of the internet takes over in full force with some blog commentors, who strangely enough don’t usually provide links to their own blogs.

Of course, most people aren’t that silly. There were dozens of positive comments posted on Andrea’s blog supporting her decision, with 95% of the people expressing their appreciation for all of the free inspiration she continually brings to her community. In the end I have no doubt that she will benefit more from the exchange than if no one had complained at all.

But most of us tend to focus on – and worry about – the complainers who want to hold everyone down to the level of average.

I talked to someone from San Diego the other day and mentioned the singer-songwriter Jason Mraz, who lives there. “I really like his music,” I said.

“Yeah,” he said. “Although now that he is all famous and everything, he no longer plays coffee shops, so I don’t like him as much.”

You hear this kind of attitude a lot about musicians. Now that he can afford to have a house and buy health insurance for his family, Dave Matthews sucks. Coldplay was cool before they started selling out arenas, but now they are the band everyone loves to hate.

(The funny thing is that Coldplay’s new album has been #1 for weeks in most countries that track record sales… so if everyone hates them, who is buying the album? Hmmm.)

When you are a starving artist that lives by donations, that’s cool too. But when you become successful enough that more people want to appreciate your art, all of a sudden you become the target of jealousy and resentment from less successful people.

Unfortunately, it’s not only the critics who feel this way—some artists have a similar complex of their own that holds them back.

I usually end up meeting artists whenever I travel, and I've noticed that some (certainly not all, but a significant minority) seem to have a fear of letting money come anywhere near their art. They think that selling something, anything, is the same as “selling out.” They worry that people will criticize them if they decide to go commercial – and as we can see from Andrea’s recent experience, they’re probably right.

Paradoxically, by not taking the next step in their art, they are severely limiting themselves. Bill Cosby said once, “I don't know the key to success, but the key to failure is trying to please everybody.”

Being 100% non-commercial is safe and easy – no one can complain, because you work for free. To take it up a level, you have to enter the marketplace.

My Upcoming Cocaine Dealership

Talking about Art and Money is not a hypothetical discussion for me. I won't be putting ads on the site because that’s not really my style, but as I have said from the beginning, I have no objection to people earning money from their art form.

With that in mind, I’m creating a series of Unconventional Guides that will be offered for sale here on the site. The guides will feature 100% practical information focused on specific topics related to Life, Work, and Travel. In the guides I’ll explain exactly how I travel around the world, pay relatively little for airfare, earn money without a job, and so on.

More importantly, I’ll explain how you can do the same, or even better—how you can use the strategies to do whatever it is that you are interested in.

The first report is called the Unconventional Guide to Discount Airfare and will launch on Wednesday morning. I’m pretty excited about it. In 31 pages of specific strategies and tactics, I’ll tell you exactly how you can become your own travel guru and pay a lot less for plane tickets than virtually everyone else out there.

Of course, the guide will be professionally designed, include free updates for life, a complete satisfaction guarantee, coffee refills at Starbucks, etc.*

(*The coffee refills may not happen. But everything else will.)

I already know that some people will love this. I get emails every day asking for this kind of information, and I spent a lot of hours writing the Discount Airfare guide. I'll be surveying the readers who purchase it to determine which guide I should write next, and to keep it as accessible as possible, I'll price the guide a lot lower than market value.

Other people won’t love it or just won’t need the information, and that’s fine too – that’s why it’s a paid product, so that those who can benefit from it will buy it, and those for whom it is not relevant for can sit it out. No problem. Assuming this guide is well-received, I’ll be making more of them, and maybe something else will be a better fit for you. Or maybe not, and that’s also OK, because my writing on the site will always be free.

But if someone thinks I’m as bad as a cocaine dealer for selling products that improve people’s lives, well, they’ll just have to think that, because I could probably not convince them otherwise.

For everyone else, I hope you like it. I’ll see you on Wednesday with more details about the guide, and an order link for those who are interested.

###

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Building a Command Center for Your World Takeover Plans


Image by fensterbme - Click to enlarge
Before I went to Africa in 2002, I had been working as an entrepreneur for about two years. During the first year, I worked at a $50 plywood desk in a corner of my bedroom that was too small and threatened to fall apart whenever I set anything on it. It did the job for a while, but as I spent more and more time sitting there, it quickly got old. I finally broke down and decided to upgrade. I went to Office Depot and spent nearly $500, a huge sum of money for me at the time, on what I decided to call The Ark. The Ark, recreated above thanks to a public domain image, was my Command Center. My actual Ark was dismantled when I went overseas, but that's pretty much what it looked like. When you go from a $50 desk that threatens to fall apart at any moment to a desk like that, you feel pretty powerful. You also get a lot more done. If you’re going to take over the world, or do pretty much anything worthwhile, you’ll need a Command Center of your own. This Command Center—you can call it a workspace, if you want to be traditional—must enable you to do all the work you need to do to accomplish your goals. Ideally, a Command Center that suits your own unique abilities will foster your productivity and facilitate a good working environment. You can save money in lots of ways, but don’t skimp too much on a workspace that helps you work well. Looking through the Office Max and Staples websites, where you can find a decent selection of Command Centers, here are a few that I like:
I chose a selection of different sizes to accommodate varying work spaces. Ideally, you won't shop for a desk like that online -- it's a lot better to do this kind of shopping in person whenever possible. Other Weapons of Mass Construction Many good workspaces are not technology centric. I do my best writing with a pen on a legal pad, so be sure to have plenty of pens and paper around even if you usually prefer the computer. Another important element of your Command Center can be a series of project boards that you can hang up. These project boards – bulletin, dry erase, calendar system, choose your favorite or use them all– exist to keep you focused on what you’re trying to accomplish. If you’re like me, you have a lot of things going at once, so use several different boards. Put the projects up and start working on them task-by-task. Here are a few other things you may want for your Command Center:
  • A nice chair
  • Inbox for your GTD system
  • Nearby coffee maker that is as simple or as fancy as you like
  • Nice lamp
  • Cell phone charger
  • Dual monitor system
  • Laser printer
  • Wireless router
What if your goals call for constant work on the road? Simply put, if you’re working on the road, you need a Mobile Command Center. To be honest, I find this challenging. As much as I travel, I wouldn’t rely on a mobile model exclusively. I do travel with a laptop, a SmartPhone, and my Moleskin journal… but beyond that, I haven’t worried too much about setting up my show on the road. I once heard of a guy who carried two laptops and a printer with him wherever he went, but that just sounds stressful to me. Lots of other people do this well, though, so maybe you should check with them. What about artists and other non-business types? You still need a Command Center. You need a space to create or do whatever it is you do. It doesn’t need to be a whole office—a corner is fine. A coffee shop may work for some people, although as I mentioned above, a stationary space is usually better in the long run. Writers and artists of all kinds are just in need of their own space as anyone else. *** Your Command Center is your ultimate workspace. It’s where you will plan and accomplish great things. Are you completely satisfied with your working environment? If so, great! You’re ahead of most of the rest of us. If you’re not satisfied, think about what you need to upgrade. Make a plan to get your own Ark, or whatever you need to make a space of your own. Make it a priority, and as you work on taking over the world—or at least changing it for the better—your Command Center will reward you. ### RSS Feed | Email Updates | A Brief Guide To World Domination Did you enjoy this article? Please pass it on to others at your favorite social networking site, or share your own thoughts in the comments below.

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