5 Things to Consider when Setting Prices

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One of the most important decisions that you will make as an Internet marketer is deciding what price to charge for your product or service. There is actually an entire field of science devoted to figuring out what the best price points are for a product and it’s not a simple matter. Most of us however, tend to just pick a number out of the air and hope for the best. Here’s how to do pricing the right way:

Don’t Get Into a Race to the Bottom

When was the last time you went out shopping for a pop up toaster? If you haven’t been in a while, drop by some stores and just take a moment to price them. You can even do it online. Be sure to compare apples to apples by looking only at standard two slice toasters. Don’t start looking at the four slice kind or the kind with special features.

Okay, done? What did you notice? If you’re like me, you might have noticed that name brands are priced a bit higher than off brands. However, you’ll also have noticed that the basic toasters pretty much all compete based on price. That’s because toasters are a commodity item. There’s really very little difference from one to the next and unless they have special features, there’s very little to distinguish one from the other.

In a quick comparison I did on PriceGrabber, all the basic two slice toasters (there are some other styles that got mixed into my search results but I’ve circled the ones that are relevant) are priced within around $20 of each other. Commodity items like a basic two slice toaster mostly compete based on price though you may seem some modest differences. For example, one of the toasters in my comparison is red which some people may like for their kitchen.

toasters

The thing is, if you can avoid it, you don’t want your product to be a commodity. You want your product to be something unique which will grab people’s attention and will get them to want your product, even if it costs more than the competition. Otherwise, you inevitably end up in a race to the bottom where you are always going to be outpriced by someone offering basically the same thing for a cheaper price.

Positioning Your Product

I recently started taking some graduate classes in a local university. Many of my new colleagues in my classes come to class with a laptop. In fact, on the first day of classes, we actually ended up with people jockeying for position to grab one of the wall outlets to charge their computers. That’s not what I want to bring up though.

It happens that the majority of my new colleagues are using Windows based PCs. One of them however, a retired MD (medical doctor) who is doing this program just because he’s interested in it, brought along a sleek MacBook Air. It gets the requisite oohs and ahs from anyone who knows anything about computers. It’s super thin and just looks great. It also happens to carry a really hefty price tag (I guess as a retired physician, he can afford the best).

My new colleague likely spent in the neighborhood of around $1,500-$2,000 for his computer. I recently bought myself a cheap laptop which cost me under $400. Now I’ll grant that the Air probably has a few more bells and whistles than my budget laptop. However, the thing that makes the Air so appealing is at least in part, the Apple brand name. It has cache.

Ideally, when pricing your product, you should think about who your potential market is going to be. Remember that going after the bargain seekers is often a bad idea. My own experience as a freelance writer has shown me that the people looking for super cheap writers are often the ones who are the worst customers.

As an example, one guy, who ostensibly is a very well off professor at another university, tried to hire me to ghostwrite a scholarly book for him and wanted to pay me $6 per page. I told him I’d never agree to such a low price but because I found his project interesting, I gave him a discount to the price I usually reserve for my best customers. Big mistake. The guy repeatedly complained and then refused to pay what he owes. The case is now pending in court.

Bottom line, think about what your product or service is really worth and don’t sell yourself short. If you believe that your product or service deserves to command premium prices then by all means – price it accordingly and don’t be shy about promoting it to people willing to pay a premium for the best.

Remember that it’s often easier to make $10,000 by selling a $1,000 product to ten people than it is to make $10,000 by selling a $10 product to 1,000 people. Of course again, it depends on who the potential market is for your product. If what you sell should be priced low because it’s a commodity then by all means, do so. On the other hand, if you can aim for a loftier clientele, it’s often best to position yourself to appeal to them.

The Power of 9

For some bizarre reason that nobody has been able to explain to me, there seems to be a trend in the IM world where products are priced with a 7 at the end. I see it constantly. People price stuff at $27, $37, etc. This may well work specifically in the Internet Marketing world simply because of the fact that people have come to expect it.

However, for virtually all other kinds of products, which are marketed to the general public, you simply cannot beat the power of 9. The Massachusetts Institute of Technology along with researches from the University of Chicago did a fascinating study. They tried different price points for products and found that the number 9 at the end of a product holds a certain resonance for people.

The power of 9

In fact, and this is the weird part – people were actually willing to pay more if a product had a price ending in 9. Products priced at $34 didn’t sell nearly as well as the same product priced at $39. I know it’s weird but I think that we’ve all become so accustomed to seeing that 9 at the end of a price that we automatically flock to it.

By the way, to maximize your pricing potential with this, put up a “regular” price and a “sale price” with the number 9 at the end. The researchers found that this was by far the most effective method of grabbing customers.

Sell the Experience

This is somewhat similar to what I wrote above about selling at a premium and targeting the clientele willing to pay extra for “the best.” However, this is a slightly different take on things.

Most people like bargains, even millionaires. Millionaires who go out shopping for a yacht will still try to haggle on the price and if they save a few thousand dollars off of the price of a multi-million dollar yacht, they feel they’ve scored a deal. It’s just human nature. On the other hand, we also love to feel as if we’ve bought the “best” there is so we can show off to our friends.

It is possible to take advantage of these innate desires for a deal and to get the “best” though by offering different, similar products at varying price points. A good example is pricing an apartment in a luxury building.

If you’re trying to sell two very similarly sized apartments, one of the best ways to sell both is to make one of them much more expensive than the other with some relatively minor differences which make the more expensive one better.

The reasoning behind this is that you can then size up a customer and if they seem like the kind looking for a bargain, you can show them both and tell them that the “penthouse” is really overpriced since it’s virtually the same as the apartment directly below it but for three times the price.

On the other hand, the person who is looking to show off will insist that they must have the penthouse at three times the price even though it’s virtually identical to the “ordinary” apartment on floor below.

In both cases, you are selling your customers an experience. For the former, you sell them the experience of feeling as if they’ve gotten a really shrewd deal. For the other customer, you sell them the experience of feeling as if they paid top dollar for the very best.

One of the most interesting experiments on this that I’ve ever heard of is where a jewelry store managed to completely sell out its inventory of turquoise jewelry because it accidentally priced it at double the price instead of half price as had been  intended. Apparently, the doubled price point made the turquoise seem particularly desirable (it was the best) and so people snapped it up.

You can do something similar by positioning different products with “value” pricing and “premium” pricing. This will allow you to grab both kinds of customers and ensure that they’ll all want to buy what you have for sale.

Pricing Perceptions Matter

I really love reading magazines. Lately, I’ve gone a little crazy though and ordered a bunch of them through Amazon Kindle. If you go and take a look at the pricing of magazines on the site, you’ll notice that almost inevitably, they charge per month as opposed to per year. Ever wonder why that is? After all, wouldn’t they prefer to lock in a customer for a full year?

Try this: open a printed magazine and grab the subscription card. Notice what it says about the “price per issue?” Usually it’s $1 per issue or some other similar very low sounding price point. The reason for this is simple and it’s the same reason that Amazon prices many of their Kindle magazines on a per month basis rather than a yearly basis.

It’s called price perception. I had subscribed to a whole bunch of different magazines on Kindle and thought to myself, this is not a big deal. It’s $2.49 for Forbes Magazine (by the way, notice that power of 9). Cheap, right? And I’m fascinated with history so the Smithsonian Magazine for $1.99 a month sounded like a bargain too.

kindle magazines

I had ended up subscribing to nearly a dozen magazines before I stopped and realized what was happening. I had perceived that the prices were “cheap” because it was being sold to me as a minor expense (who can’t afford $2.49 a month after all?).

By the time all was said and done, I calculated how much I was spending per year on magazines and found that my total came to well over $200 per year. Now that’s still not a terribly large sum of money but when I saw that, I started asking myself, do I really need all these magazines? Will I ever read them all? I ended up cutting back until my total yearly cost dropped below $100 and even now, I’ve got too many coming in.

What I was fooled by though was price perception – Amazon mastered this and found that if they simply offered me a price that sounded really, really cheap that I’d think of it as a throwaway item and not think twice about ordering.

You can do the same by showing your customers an amortization of how much your product costs them. For example, you will often see people offering packages of 1,000 backlinks for $99. They’ll point out that this is less than 10 cents per link (by the way, be careful – many such packages aren’t worth anything).

By pointing out that it’s just 10 cents per backlink, they are taking advantage of price perception to shift people away from thinking about the $99 price point and push them to think about the 10 cent price point instead. Amazon of course took it one step further and never lets the customer even see how much a magazine costs per year, preferring to hook you and keep you hooked with a cheap “throwaway” price.

Does the Length of Your Content Matter to Google?

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This is one of the most pervasive questions in the world of SEO – does it matter how long your content is when you publish it? Does Google or Bing or any other search engine care how long it is? The answer is both yes and no.

Most People Believe This Absolutely

As a freelance writer, I’m regularly asked to write 1,000 words or more because there is a perception that the longer length matters to Google and will help an article to get indexed and even rank higher. There is a grain of truth there but it’s not the entirety of the truth and that’s where the problem comes in.

In fact, I have actually seen people claim that if a document doesn’t have at least 250 words, it will not be indexed by Google at all. There are also people who believe that a document which has fewer than 100 words won’t be indexed and people who insist on at least 500 words. So what’s the truth of the matter? Read on.

Semantic Indexing in Google

I’ve written in the past about how Google does their rankings today. They have a very sophisticate system capable of detecting semantics in language. This means that the search engine is capable of parsing real language and getting you an actual answer. For those interested in testing this, try putting into Google: What is the answer to the ultimate question of life, the universe, and everything? The answer appears below.

Hitchhiker's guide to the Galaxy

Okay, so that’s just a silly thing that Google’s programmers put into their system as a kind of an Easter egg. I just wanted to share it because it’s funny. But seriously, if you ask Google real world questions, it will often respond with an actual answer. For example, if you ask Google “Who is the President of France?” you’ll get this answer:

President of France

What this means is that Google’s algorithm is sophisticated enough to actually read what you wrote in your blog post or articles or whatever and to actually figure out whether or not what you wrote should be considered “quality” content.

Quality, Not Quantity

Google is a business. It’s not a public utility and it doesn’t exist for the good of webmasters the world over. If Google could make the same money without ever having to provide links to our websites as they make by doing so, I guarantee 100% that they would stop indexing websites altogether. The reason they index sites is that they are trying to make money, just like anyone else.

The way they do this is by providing a service to the people who come to visit their website. The service that is provided is a search engine which allows people to find the answers to questions that they may have or the place to shop for something. In essence, they’re a giant referral business who make their money from selling ads alongside the search results.

Now for those who haven’t been involved with the Internet for a while, it may come as a surprise that Google was not always the dominant player in search. Back when I was first starting to learn about the Internet, in the late 1990s, the pre-eminent search engine was called Alta Vista. It was then supplanted by the Yahoo search engine, which was dominant for the end of the 20th century and the beginning of the 21st. Google’s domination of search has only existed for about 10 years or so.

The reason that Google was able to supplant Yahoo was simple: they provided a better experience for users than Yahoo did. Google was the first search engine to employ a multitude of different indicators (called Page Rank – we talked about this in the past) to decide which pages were more relevant to their customers.

Google maintains its status as the top search engine by continuing to refine its algorithms, most recently, by trying to eliminate spam and increase the number of high quality articles in a search result. They do this by using the aforementioned semantic indexing which lets the system filter out obvious spam results. Don’t ask me how they program for this because I frankly haven’t a clue how it’s done. I just know they do it.

This means that the single most important thing as far as Google is concerned is quality, not quantity. If you were to put up a 2,000 word article which was very poorly written, Google’s system is sophisticated enough to detect that and to trash your rankings. Similarly, if you put up a 100 word article which is really well written and answers a question, Google will detect that and rank it accordingly.

So Word Count Doesn’t Matter at All?

Not exactly. Here’s why I said above that the answer to the question of length was a yes and no answer. There are times when you don’t need more than a paragraph to precisely and completely answer a simple question. For example, if anyone is confused about the number 42 above, the answer is:

In the film (there’s a series of books too, which the film is based on), Hitchhiker’s Guide to the Galaxy, space faring mice created a super computer to answer the question, what is the answer to the ultimate question of life, the universe, and everything? The computer came back with an answer: 42. The rest of the book describes how the protagonists of the book deal with this and other challenges.

Now, the above provides a concise answer to the question but of course, it could be expanded to explain all the minutia of the book series and exactly why the number 42 is computed, but that’s not the question. On the other hand, if you really wanted a fuller answer, it’s reasonable to assume that you would need a much longer answer than I can give in a single paragraph.

Google’s engineers are aware of this and so they consider word count as one of a great many different factors to look at in order to decide just how relevant any given piece of writing should be to a query.

Bottom Line

Worry first and foremost about answering a question fully by writing whatever needs to be said to answer whatever it is that your title claims it’s answering. Word count should be an afterthought for you though it does have some relevance.

Using Your Personal Facebook Account for Business

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First, let me make clear that Facebook takes a very dim view of using your personal account to directly promote your business. That having been said, there are a number of things that you can do with your personal Facebook profile which will not get you into trouble and which will allow you to promote your business.

For example, on my own person Facebook timeline, I often put links to my blog posts and I also set my Twitter feed to redisplay everything there. I figure that my friends might be interested in what I have to say and so it doesn’t hurt to make them aware of it. That said, there are a number of dos and don’ts for using your personal Facebook page for business. Here’s what you need to know:

Allow Followers

One of the cool things that Facebook allows you to do (I think it’s intended primarily for those who are mega popular and who have approached that 5,000 friend limit that Facebook imposes) is to allow for followers to subscribe to your feed. In essence, this is a pseudo friending situation where your timeline updates will appear on the timeline of anyone who subscribes but you won’t be “friends.”

The way it works is that you set up under your account settings exactly how your followers should be treated (and indeed, whether or not there should be subscribers to begin with). To do this, go to Account Settings (click the little sprocket icon in the upper right hand corner) and then select the box next to allow followers.

Facebook followers

Of course, that’s only half the battle. Now that you are allowing followers, anything you post to your Faceook profile can be seen by those followers. So, you now need to start going to your status updates and making sure that they are set appropriately. Every time you post something to Facebook, you are presented with a number of options for who gets to see it.

Facebook update

Public means that anyone who looks up your Facebook profile can see what you wrote.

Friends means that anyone who is a friend can see what you wrote.

Friends Except Acquaintances You need to set this one up when you accept a friend request. You can set people to be acquaintances as opposed to friends so that they are considered to be less than your closest friends. This setting is actually quite good for business partners and the like.

Only Me If there’s something you found that you really like and you want to make sure you can find it again but you don’t want anyone else to see it, use this setting.

Close Friends Again, this is set up on a per friend basis. You can designate specific people as “close friends” and only they will see what you post while everyone else will not.

Limited Profile This basically hides certain information about the people who comment on your post.

Custom Even though I didn’t go in order, I left custom for last because this allows you to choose only specific friends to see something and not everyone. It’s useful if there are a small handful of friends that you want to show an update to.

facebook update options

Now the good news is that whenever you post a status update, it’s usually set to Friends so you needn’t be concerned about it showing up for everyone.

However, if you have previous posts that you would like everyone to see, including your followers, you can simply change the settings of a status update. Right next to the date is a little button which when you hover over it shows you what the update is currently set to. Just click it and choose a different setting.

facebook change update

The same settings also work with things like photo albums and videos that you have shared on your timeline. This means that effectively, you can allow people to “follow” you while showing them only the things that you want them to see and without needing to friend them.

Fix Up Your Personal Timeline

I’ll never forget years ago when I worked as a teacher, I recommended a kid for a summer job at a camp. My friend from the camp called me and told me he wasn’t willing to hire the kid. Why? Because he checked the kid’s personal Facebook page and saw that he had a rather uhm, let’s say inappropriate picture as his profile photo.

While you can certainly control who sees what from your profile (as I pointed out above), everyone will at least see your timeline cover photo as well as your profile photo. So the photo of you dancing the night away with your best friends might be great and something you want to share with them but your profile and timeline photo should look professional.

You should also be sure to put down in your “employer” section the name of your website or company. This information will be displayed to anyone checking out your Facebook page regardless of whether they are a friend or just a follower.

Check Your “Other” Inbox

This is one of the most important things that you can do and it’s actually virtually unknown to the majority of Facebook users. You actually have two different message boxes on Facebook. The one that most of us look at is the one that your friends send messages to. However, there is another box that’s labeled “other.”

I had been on Facebook for years before I ever heard of this. You know how Facebook shows you that you have a message waiting when one of your friends sends one to you? They show you nothing at all if someone who is not a friend sends a message to you.

I found out about this because someone commented on a post I’d published and said they’d sent me a private message and that I should check my “other inbox.” My first thought was, which “other” inbox? I have five e-mail addresses and anyway, how is it that you know about any of them other than the one I make publicly available on Facebook? A little Googling around and I finally found it.

I then learned that I’d missed out on a number of business opportunities because people had sent me messages which I never saw since I got no notice from Facebook that they were there. I now make a point to check my “other” inbox every now and again because otherwise, I’d never know if someone else was trying to contact me.

To check it, just click the messages icon and then click “other” right next to where it says “inbox.”

Facebook other inbox

Share Useful Stuff

Just like when you’re trying to impress your friends, if you use your personal Facebook page for business, it’s important to share things that are useful. Just keep it centered on things that won’t have your friends scratching their heads and wondering why they should care.

I mean, if you run a plumbing business, it’s probably useful to share tips on how to deal with leaky faucets. On the other hand, if you run a consultancy which deals with mergers and acquisitions, your friends may not be particularly interested in reading about the intricacies of how a Letter of Intent needs to be structured.

Do the Birthday Thing

One thing I’ve taken to doing is to always check when people’s birthday’s are to make sure to wish them a happy birthday. Facebook makes it easy to do because they’ll put up a notice for you about any birthdays that are happening that day. If you really want to make a connection with your best clients, consider friending them on Facebook and then making a point to wish them a happy birthday. It makes a huge difference.

By the way, you should also pay attention to anything else your clients say on their timelines. Often, you can make a real impact on them by trying to help them with whatever problems they’re having. Of course, this means that you need to “friend” them as opposed to just letting them be followers but for most of us, that’s not an issue. Most people don’t bump up against the 5,000 friend limit on Facebook.

Oh by the way, by wishing people a happy birthday and doing other things to interact with your best customers on Facebook, you’ll also find that people will “like” your comments on their timelines. This has two effects. First, it can help your Klout score and second, it makes it that much more likely that your updates will appear in their timelines (remember that Facebook discriminates and puts stuff in the news feed only from “friends” you often interact with).

Try Creating Lists for Clients

Another really great feature on Facebook is the ability to create lists of friends and to segment them accordingly. Thus you can create a list of your “friends” who are actually clients and then make sure that your comments which pertain to their interests will only be sent to them. You can do this by (as above) choosing a custom list when posting an update.

Use Groups and other Pages to Your Advantage

There are a large number of Facebook groups available on pretty much every conceivable issue you can think of. Just go to the main Facebook search bar and do a search for your keywords. You’ll get lots of groups and pages listed that you can join. Why are these so important? For the same reason that you should be participating in forums which are popular in your industry.

Facebook groups and pages

Think about it – if you are looking for new clients, the best places to find them is likely to be in various groups and pages where they congregate. These places are naturals for finding new clients. Now of course, you need to be careful not to just spam these pages.

Put up useful ideas and answer questions that people have when you visit them. People will then often offer to friend you and will also consider following your Facebook updates and or liking your page. This is probably the best way to use Facebook to get new clients.

However, as I have said on numerous occasions in the past when discussing social media, it is vital that you do not come across as being just another salesperson trying to get them to buy something. Be a genuine person who is genuinely helpful and they’re that much more likely to purchase whatever product or service you have to offer when they need it.

Consider Following Industry Leaders

Here’s a neat trick that I recently learned about. Just as you can allow followers on your own profile, you can also follow other people whom you may not be able to friend. This means that you can then post comments on their public updates and just possibly grab their attention.

It doesn’t always work but if you’ve tried to friend someone in your industry but have been ignored, this may be a great way to engage with them. Of course, the catch is that the very top people in any industry are likely to have set their timelines to disallow commenting on their public profiles. The reason is simple – they don’t want to have to wade through the endless spam that will result.

Remember to Follow the Rules

Of course, all of this is all well and good but it’s still important to study the rules that Facebook has for what can and cannot be done on your personal account. If you’re not careful, they could shut down your account without warning, causing you all kinds of headaches in recreating it. From what I hear, they tend to be pretty humorless when people ask them to reconsider so don’t go overboard.

Check Facebook’s Community Standards page to ensure that you’re not violating the rules if you are ever unsure of something you plan to do with your personal account.