Low Pricing and Value
Since the value of an item is largely determined by supply and demand,
if a product is priced below this market-determined value, it typically
communicates lower quality. This is the reason why low pricing may be
Would you buy a brand new computer for
$50 that is normally priced at $2,000? Without any additional
information, we would all assume that this computer was significantly
lower quality, broken, or that there was some other way in which we would end
up paying. "What's the catch?"
Likewise, if you consider ebooks,
consumers generally assume that ebooks priced at $0.99 are lower
quality than ones that are priced $9.99. However, consumers are also
more willing to spend $0.99 on an ebook if they know nothing about
the author or the quality. Nevertheless, many consumers would rather
spend more money on something that has more perceived value.
How to Win at Pricing to Maximize
The goal when setting a price should be
to maximize revenue. You can sell your product for $20, but if you
only make 100 sales (20 x 100 = $2,000), you would be better off
selling for $15 and making 500 sales (15 x 500 = $7,500).
Since the market largely determines the price
through the effects of supply and demand, finding the right price
to start with is as simple as finding out which products resemble
yours. Ask yourself: What needs or wants is my product satisfying
that other products also satisfy?
Then, from that point you have
to decide which direction to go: up or down.