The Ultimate Guide To Product Monetization & Pricing for Creators: Using pricing as your competitive advantage
Your goal is to make your pricing profitable.
Do you feel that your competitors are beating you on price, and you find yourself constantly charging lower prices to remain competitive?
The whole point of transitioning from passion to business tends to one goal - "make money". Passion got us here but a good margin and business growth will take you further. If you're just starting out, read this.
When it comes to monetization and pricing, the first step is knowing where your value lies. What makes your product or service unique in a world full of sameness? What makes it worth paying for?
Facts. When we think about cost, we often consider how much we have to pay in total and how much it will cost us to use.
Do you have a "Monetization & Pricing" strategy?
To stay alive as a business, you should have a monetization strategy. When you have a monetization strategy, only then should you go ahead to set a price.
Knowing your monetization strategy means knowing your customer, market and competitors.
To increase your market share, pay attention to your margin and growth. Your margin should tend to profitability with sustainable growth.
Your Pricing Strategy.
Many creators spend a lot of time creating content, marketing and distribution with little effort on pricing. They quickly settle on a price the same as their competitors or what a customer is willing to pay.
Some creators charge lower than their competitors to get more marketshare. No differentiation to give them a competitive advantage. Competitive advantage gives your customers a valuable reason to choose you over competitors. Not knowing the right price to charge could be hindering your growth.
Tips: Don't set out to outperform your competitor based on pricing, do it by 'value-delivered'.
To ensure the profitability of your business, pay attention to your pricing strategy. Your pricing strategy can make an impact on your business. After all the hard work, it will differentiate you from the competitor.
The idea of differentiation is to strategically find a way so you do not have to compete. 'Competition is for loosers' - Peter Thiel in the book - Zero to One.
Start by Setting Revenue and Profit Goals.
Don't be shy to set revenue and profit goals. Start with the SMART formula: Be Specific, Measurable, Achievable, Realistic and Timely.
For instance, how much do you want to make this month? Write it down.
Don't say I want to make a lot of money. A lot of money is relative. Does it mean $100k, $1m etc.?
Say; we want to make $10k this month.
How can we make $10k this month? 👉 "With 5 paying clients that pays $2k*5 = 10k".
How do we achieve this? Generate 30 leads, convert 10% i.e. 3 and add to the existing 3 clients = 6 clients".
Is this realistic? Yes, we are good. If not, go and look at your numbers.
Then, is it timely? In our case, yes! We want to make $10k in one month. With the available resources, can you make it in one month?
It's not rocket science.
After you're done setting your revenue goal, do it for your profit. How much profit do you want to make from the $10k? 35%? To come to a number, you should know how much it costs to run your business.
The benefits of deciding on a revenue and profit goal are that it will help you keep your operations more efficient and motivated when things do not pan out as you envisaged.
Also, knowing what your profit looks like ensures you cross off any price points that won't bring in the profit.
5 Pricing Strategies to consider
To arrive at pricing, take some time to understand these 5-pricing-strategies. You can experiment with a mix of two pricing to find what works. You can call it "Pricing-Product-FIt". 😂
Cost-Plus Pricing: The focus is on the cost of producing your content. To apply the cost-plus method, add a fixed percentage to your product production cost. For example, if it cost $50 to make content, and you want to make a $25 profit. Set a price of $75, which is a markup of 50%.
Value-Based Pricing: Two things are at play here: what does value mean to your customer? What does it mean to you? When you find a balance, fix your price based on the value you are delivering. Understand that your customers would like to pay for the value they're getting. Find out what they're willing to pay.
Competitive Pricing: What's the market rate? The idea is to know what your competitors are charging, and benchmark with it. But be creative about it. Don't charge more than 10% lower except it's to onboard the customer and increase your price later. Don't charge 20% higher if you're considering this strategy. Unless you're bundling the price.
Demand Pricing: Consider a flexible pricing strategy where prices move based on market and customer demand. It relies on the economics of demand and supply. As an efficient strategy, pay attention to your competitors and your customer. Your advantage is the ability to shift prices to match when and what the customer is willing to pay at the exact moment they’re ready to make a purchase.
Tiered Pricing: If you are giving users access to your different types of content and value, consider tiered pricing. This is a good strategy if your value-delivered can be such that each user that decided to interact with a part of your content gets the value they expected. The good thing is that you can upsell users to a higher one.
The good people at HubSpot have a deep-dive article on a pricing strategy - read it!
The big part! So, How do you choose the right strategy?
To gain marketshare, pay attention to your customers, market and pricing.
For the right pricing strategy, don't be afraid to experiment. For instance, if you monetize your users (fans) and clients, consider tiered pricing for your users (fans) while you give your clients value-based pricing.
Pricing is science and art. It's dynamic. You should continue testing to know what's working and what's not.
PS: Read “What is web3? The Creators Way”.
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