The Summit Evergreen Ultimate Guide to Tiered Pricing
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1 Summit Evergreen High-Value Courses in Minutes, with no Technical Headaches The Summit Evergreen Ultimate Guide to Tiered Pricing SummitEvergreen.com
2 Table of Contents The Ultimate Guide to Building Your Tiered Pricing ) What Makes Up Your Tier?... 5 Define Your Offer ) How To Price Your Tiers... 7 Rule of Thumb for Pricing... 7 Pricing Mini-Case Study... 8 Setting Your Pricing (Round 2) ) The Name is the Thing ) Implementing Your Tiers Create The Bonus Content Add The New Products To Your Payment Processor Update Your Sales Page Launch ) Your Tiered Pricing Worksheet
3 The Ultimate Guide to Building Your Tiered Pricing So, you re looking to build your own tiered-pricing structure for your course or product. Good for you! Because as you well know, Tiered Pricing Is the ONLY Way to Price Your Product. In fact, tiered pricing is so common, that you might not even notice all the places it s used (liter vs 6-packs of cola, meal sizes at McDonald s, regular vs premium gas, the list goes on). The problem is, tiered pricing is one of those things that s obvious in retrospect, and hard to figure out when you still only have a single product. This guide is going to help you solve that. We ll walk you through the 4 steps you need to follow to create your own, professional, effective tiered pricing strategy something that you can implement TODAY. But First! A Digression: Why Tiered Pricing? If you aren t convinced about the value of tiered pricing models, here s what tiered pricing has done for product creators, just like you: Server Density DOUBLED their revenue by moving from a pay as you go model to tiered plan pricing. Case Study: Doubling SaaS Revenue BidSketch had the highest revenue growth ever when they decided to increase their pricing tiers, and change their plan names. Case Study: Bidsketch Tiered Pricing If you re in doubt about the value of tiered pricing or afraid that investing your time in adding tiered pricing to your product is a waste of time, let me assure you: tiered pricing is one of the most valuable investments you can make for your business. There are two reasons tiered pricing is so effective: 3
4 You give your customers a choice of yeses Instead of presenting customers with a buy / don t buy decision, customers are able to select the plan that makes the most sense for them, not just the single option you have available. You increase your revenue Instead of just offering one product or plan at a single pricing, you can let your customers choose the plan that best aligns with what they value the most. While a majority of your customers may purchase your basic plan, a small portion will purchase your higher priced plans, increasing your overall revenue, without requiring an increase in customers. So let s dive in and create a tiered pricing strategy for your business! 4
5 1) What Makes Up Your Tier? Before you start defining your tiers, you first have to decide what you re offering to your customers. If you have a core offering already a course, a book, or something else the question you need to answer is what else you can add to create additional packages. Below are a few options for easy-to-make add-ons. These are additional assets that provide a lot of value for your customers, but don t usually require a ton of work on your end. I ve categorized and rated these on a scale from 1 to 3 to help give context on how much perceived value they carry for the customer, which means that you can place those items in a more expensive tier. Educational Content Interviews Additional Content Events 1 - Worksheets 2 - Interviews 1 - Behind the scenes content 3 - In-person events 1 - Extra videos 3 - Q&A Sessions 2 - Bonus Content 3 - Group Coaching 2 - PSDs / Code Samples 2 - Design Assets 3 - Q&A 3 - One on One time 2 - Other Products 3 - Live webinars Pro Tip: Short on Time? Repackage Existing Content! One great way to easily add bonus content to your course or product is to take part of your existing content a chapter, a video, an interview, etc and then package it as a bonus within the context of the product. With just a change of phrase or a slight repackaging, you can dramatically influence your sales. 5
6 Define Your Offer Okay, now let s create your tiers. For simplicity s sake, let s start with a standard 3-tier product. You ll want to take your core product and one or two items from the list above and put them into each of the tiers below. Base Product Middle Tier Top Tier Core Product Core Product Everything in Basic Tier and... Everything in Middle Tier and... Tier Bonus Offer #1 Tier Bonus Offer #2 6
7 2) How To Price Your Tiers Now that you ve defined your offers, it s time to put a price on them. So go ahead, and write down your prices for the 3 tiers here: Base Product Middle Tier Top Tier Tier Price $ $ $ Got them written down? Ok. That s probably way too low. How do I know? Because 9 times out of 10, people underprice themselves. In fact, when one of the biggest proponents of charging more, Patrick McKenzie, launched his first information product, he priced it at well, let me tell you about the product first. 1. Content 9 hours of video, detailing exactly how a buyer could implement a high-value business strategy. 2. Value The content was based on the work that Patrick had done to make his client millions of dollars over the last 5 years. High-value, right? Patrick initially wanted to price this product at $47. And again, I remind you, that Patrick McKenzie is the personification of the philosophy Charge More. So, you probably priced your product tiers too low. :-) Rule of Thumb for Pricing 7
8 Here s a basic rule of thumb you can follow for pricing your product tiers: Base Product 1x (Your base price) Middle Tier 2x your base price Top Tier 10x your base price Don t believe me about the 10x number? It seems extreme, huh? Keep this in mind: a majority of your customers won t be purchasing your top tier product. A very small percentage of your customers will see the option available, recognize the value of the product tier as exceeding the price, and make the purchase. But these customers will represent a majority of your revenue. Here s a rough estimate of what your purchasing distribution could look like: 60% of your customers will continue to purchase the basic plan 35% of your customers will purchase your Middle Tier 5% of your customers will purchase your Top Tier But that 5% will represent an outsized portion of your revenue. Pricing Mini-Case Study Here are a few examples of this pricing strategy in action: Ramit Sethi s Dream Job course launched at $1,000, $2000 and $12,000 Nathan Barry launched the App Design Handbook at $39, $99 and $249 Brennan Dunn s latest Double Your Freelancing Rate course is $129, $299 and $699 And in each case, while a majority of customers in each case most likely purchased the Basic Product or Middle Tier, a majority of revenue came from the customers who purchased the Top Tier. Setting Your Pricing (Round 2) So based on this additional information, let s set some pricing for your tiers (remember: 1x, 2x, 10x): 8
9 Base Product Middle Tier Top Tier Tier Price $ $ $ Looks better, right? Having the courage to price the tiers of your product higher based on the value that you re providing takes courage. I m proud of you for having the courage to price your product where it deserves to be. 9
10 3) The Name is the Thing You want your customers to evaluate your product offerings before making an educated decision. What do I mean? The emotional decision that a potential customer makes about your product will often benefit you more than letting their rational, logical lizard brain analyze your product offerings and make a cold, calculated decision. The truth is customers will more often pick the NAME that feels most appropriate to them, regardless of whether that PRODUCT TIER makes the most sense for me. Curious about this? Here s an interesting anecdote: A friend was evaluating a piece of software for his boss (let s say it was a piece of scheduling software). The piece of software had four different tiers available: Hobbyist $9/mo Small Business $19/mo Medium Business $49/mo Enterprise $199/mo My friend, after looking at the features and the specifications for each plan, determined that his company only needed the Hobbyist plan. So he brought a report to his boss, laying out the different options, and including his recommendation that they sign up for the $9/mo plan. His boss reviewed the report, looked at the plan names, crossed out the word Hobbyist, and then wrote in Enterprise. Boss, my friend said, I don t get it. We don t need to pay $199/mo all we need is the hobbyist plan! My friend s boss said back to him I ll be damned if I m going to submit an expense report to the CEO showing that we re paying for Hobbyist anything. We re a large company. We re paying for the Enterprise plan. 10
11 When my friend was making the decision, he looked at it through cold, rational, logical eyes and made a decision to purchase the plan that made the most sense: the hobbyist plan. When his boss was making the decision, he made an emotional decision based off of the plan s name. Names mean things. You want your name to appeal to the ideal buyer for that plan. Think about it this way: if you had an enterprise-level offering, but named it Small Business Plan, what Fortune 500 company would buy it? Here are a list of example Low, Medium and High-Value names for different demographics. Choose a combination that you think works well with your product and audience. Low-Value Names Medium-Value Names High-Value Names Free Bona Fide Carpe Diem Gratis Core Pro Ad-Hoc Professional Premium Starter Hobbyist Business Bronze Silver Gold 11
12 4) Implementing Your Tiers Let s review so far: We ve defined the differentiators between your tiers. Each tier is made up of a combination of your core offering and additional bonuses. We ve priced your tiers, following the basic rule of thumb of 1x (for the Base Product), 2x (for the Middle Tier product), and 10x (for the Top Tier product) We ve named your product, using the appropriate low-, medium-, and high-value names, to communicate the emotional value to the customer. What comes next is implementing these tiers for your product. Let s walk through the steps you ll need to take to implement your tiered pricing strategy for your product. Create the bonus content for your different product tiers Add the new product tiers to your payment processor Update your sales page, listing the new product tiers Launch your new product tiers Let s step through each of these steps Create The Bonus Content You ll want to get started by creating the additional content for each of your product tiers. What you don t want to do is overthink this. No matter what type of bonus content you re creating and packaging with your core product interviews, Q&As, bonus articles, sample PSDs, etc it s better to focus on getting something 80% of the way to what you re setting the bar at instead of slaving away to get something perfect. Remember: You are not your customer. 12
13 You might feel like your content (and bonus content) needs to hit a very high bar to satisfy your customers. But your customers don t have the same level of domain knowledge that you do about your area of expertise. Something that s 80% of the content you re envisioning is as valuable to your customers as something that s 100% of the content you re envisioning. Don t get caught in the weeds. Focus on creating the bonus content in the simplest way possible. Add The New Products To Your Payment Processor Once you ve finished creating the additional products, you ll want to add them to your payment processor. If you re using Gumroad, ejunkie, Stripe, or another platform, you ll want to add your new products as options for your customer to purchase. Update Your Sales Page Finally, you ll want to update your sales page. Add the new tiers as options to the sales page, writing copy that describes the options that you re adding and outlining the benefits that your customer will receive from purchasing the new options. Launch Then You re ready to launch. Tell your customers about your new tiers, integrate them into your marketing and promotion, and sit back and wait. Chances are, you ll see something like the following: 60% of your customers will continue to purchase the basic plan 35% of your customers will purchase your Middle Tier 5% of your customers will purchase your Top Tier Let s look at what this means for your bottom line. Let s imagine we have 100 customers for our product. In the first scenario we have 100 sales at our base price, $50, leading to $5,000 in revenue. Not too shabby! 13
14 In the second scenario, this is what our revenue looks like: Base Product Middle Tier Top Tier Tier Price $50 $100 $500 Number of Sales Revenue $3,000 $3,500 $2,500 Total Revenue $9,000 Hypothetical numbers for illustration only, sure, but in practice, time and time again, we see this play out: offering multiple tiers at different price points for a single product dramatically increases revenue. Because we re offering a choice of yeses instead of a single yes/no buying decision, customers buy more and more often. Because you re offering your customers multiple tiers that add value in different ways, customers will purchase the tier that makes the most sense to them, and your revenue will increase. Just by making these multiple tiers available, you can do amazing things: like nearly double your revenue. 5) Your Tiered Pricing Worksheet Now that you ve started to think through Tiered Pricing and adding it to your own products, there s a short assignment for you to put these ideas together. Click here to access the Tiered Pricing Worksheet: How do you charge what you charge? Once you fill out the worksheet, I'll send you a copy of your answers and I'll also get a copy. Don't be surprised if you hear from me personally :-) Here s to your success! Keith Perhac Co-Founder, Summit Evergreen 14
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