Creating your own information product can be one of the most lucrative and profitable ways to make money online.  Pricing your digital products (i.e. ebooks, videos, information products) is an important factor that can ultimately determine how successful your product will be.  In addition to the value of your product itself, there are perceived values that people place on products when deciding whether or not to buy your digital product – and the pricing model that you choose is one of the most important aspects.

What are digital products?

Some of the things most often associated when mentioning digital products are ebooks, guides, videos, and tutorials which would all fall under the “information products” category.  While these make up a large chunk of the digital items that are being sold online, things like WordPress themes, programming scripts, and website templates also fall into the digital product category.

Price points for digital products

Before we delve into what you should actually charge, you will need to choose a pricing model that will accomplish the goals you are trying to reach.  There are several different models you can use when selling your products:

• Free

  Giving away your product can have tremendous upside potential.  While you are not monetizing your product on the front-end, you can use free products to drive certain goals on your site.  A free product can be used to build RSS readers, gain newsletter subscribers, build links to your site, position yourself as an authority, and gain visibility & exposure.  The downside to free is that you are not directly making money from your product.

• Inexpensive Pricing

  A pricing model that is built around providing an inexpensive product you can gain mass appeal and cater to the highest number of potential buyers.  With a lower price, more people can afford your product.  The downside to inexpensive products is their perceived value and you will need to reach a large number of people to make money.

• Premium Pricing

  If you choose a premium pricing model you can sell much less of a product and still make good money.  You will charge a higher price and the perceived quality of your product will be much higher.  The downside to premium prices is that you limit your potential audience because fewer people will be able to afford your product.
  

Price models for digital products

While we just explored how you are going to compete with your price, the next step is to determine your price model.  Your price model is how you are going to approach selling your product.

• Giving your product away (the free model)

  In addition to being a price point, free is also a price model.  If you are trying to build an audience and gain exposure, the free model can be the most effective for doing so.

• One-time purchase

  In many instances, a one-time purchase will be the best model for your product.  If you are selling a script, ebook, or something along those lines – building your pricing around a one-time purchase will allow you to sell more of your product.

• Recurring payments (subscriptions & memberships)

  One of the most lucrative ways to build your pricing is around a recurring revenue model.  This allows you to generate income that can be more consistent and stable than offering your product for a one-time price.  However, there is typically much more work that goes into creating a recurring revenue stream because you must deliver value each month, year, etc. in order to retain the people paying for your product on a recurring basis and make them feel that you are continually benefiting them.

Exactly how much do I charge?

Now that you have determined a price point and decided on a pricing model, you need to figure out exactly how much you are going to charge.  There are several different factors to consider when choosing the exact price:

• Competition - What are others in your field charging for similar products?
• Quality - How does the quality compare to other products that are similar?

The psychology of numbers

When choosing a price you will probably want to stick with the standard practice of making the cost end in a 5,7 or 9 (i.e. $17, $49.95, $79.99) as studies have shown people interpret these as more inexpensive than rounding up to the nearest dollar.

Testing & Input

Often, you will want to ask some potential buyers what they would be willing to pay.  In addition, passing out a couple review copies will often help you in determining your price.  It is also worth noting that testing your product at various price points (if it’s a long-term product) will help you find the price that is the most profitable.  When testing, you will probably want to try starting cheap and going more expensive to find the perfect price.

Inspiring real-world examples

Sometimes it helps to see how others have succeeded in pricing their products and the results the achieved.  Included here are several examples of digital products and how successful they have been.  Be  sure to note that the results are not solely due to price, however, they will give you a good idea of what people are willing to buy and how much they are willing to pay for different digital products:

Successful Digital Products:

• Getting Real: The Book by 37signals – 30,000+ sold at $19
• 31 Days to Build a Better Blog by ProBlogger - 16,000 sold at $19.95
• Affiliate Theme for WordPress – $90,000 its first month at $97 – $297
• Unleashing the Ideavirus by Seth Godin – 1,000,000 copies distributed for free