Why Price Point Is So Critical In Your Online Business Profits
Price point is something that most of us did not even think of when looking at a home business oportunity. I know I didn't. The reason I didn't look at this was because I was so new to a business venture, especially something online that I did not even know what to ask when looking at the opportunity.
The other reason is the opportunity I looked at never really mentioned this key aspect to me. I will offer you my views on this based on a years experience running my home based online business.
Price Point, can be referred to in many ways but basically it is the start up costs you will incur when starting your business. Knowing what the real start up costs are and being able to meet those demands can be the "make or break" for you in whether you succeed or fail in your business start up.
Any way you look at it, this "price point" must be priced just right for you to see success and profits. Too high or too low- either way you will most likely fail or struggle at best.
High End Price Point Opportunities:
There are many opportunities that are priced quite high and in the range of $2000 to $10,000 and more. The people that join these programs tend to have more financial backing but they too can run into unforseen costs that if not planned for, may result in a lot of struggles to make a profit.
Advertising is your number one cost that will be a continual expense in running your business.The ongoing costs of your business or the cost to acquire one customer with this High End price point business opportunity can be as much as $1000- $4000. If your product sells for say $3000,your initial sales may not even cover your costs!
The other issue with High End price point programs is your prospect base is drastically lowered to where you really need to know where to look for the people that can afford such business investment and start up costs.
If you take the initial cost, add in your cost for your first sale, then add in on going admin type costs or fees, you can quickly see that this high end price point can run into some serious costs.I'd say anywhere from $5000 - $12000 or more!
The bottom line with High End price point home business opportunities can be great if you are prepared for the initial start up costs. As I mentioned earlier most people don't even know what questions to ask let alone ask the correct questions before getting involved with any online opportunity.
Too Low Price Point Opportunities:
These business opportunities have a different problem than the preceding. Most of the typical low end programs cost as little as $10 and up to say $100. These products are very difficult to result in any serious income potential. You can get into "back end" products but we will leave that for another article topic!
Ebooks are a good example of such low end products. What most people don't realize is it takes the same effort to make a $10 - $100 sale as it does to sell something for 10 times more. Often you will spend as much as the low end item's cost in advertising, which then creates a problem with needing a back end product, or at least some trick to lessen your advertising costs.
The average pay per click cost for the Business Opportunity category of product is in the range of $0.75 to maybe $1.50. There are free advertising methods as well but paid tends to be much more targeted and results in a more definite sale per "hit" ratio.
I personally started selling an ebook for $19.95. I thought for sure I would sell dozens a day initially, and I'd easily cover my advertising cost. WRONG! I found that maybe every 100 visitors bought,but that barely covered the advertising cost. Profit margin was very minimal w/o a back end sale, and those did not come often enought for me.
I then tested a new product line that had what I feel is a perfect price point. What is this price point range? $300 - $1000 seems to be the perfect price for the masses to find affordable. The effort to make a $300 - $1000 sale is the same as that $19.95 ebook, and the advertising cost is easily "covered" in the selling price.
Using the $0.75 cost per click for advertising, and say every 100 visitors results in a sale, your advertising cost is $75 and your profit is $1000 - $75 or $925. Not bad! Even the $300 level product with these figures is a net profit of $225.
One thing to note is selling a product over the $1000 price will often require you to spend some telephone time with a prospect. Most people will want to talk to someone before they shell out more than $1000. I get many sales below $1000 without ever talking to my customer!
My opinion is to look for products in this $300 to $1000 range.
Next time I will offer ways to cut advertising cost using PPC to pennies on the dollar and discuss the pros and cons of a back end product vs. ensuring your profit in your "front end" sale.
Stan Tomaszewski began his online business in March of 2006. He offers his experience and honest views on the truth about online success. www.businessreviews4you.com
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