Whenever you start a business, whether you are building a physical product or a subscription service, you have to set a price.
But strangely, most people barely think about this part. They just pick a number and move on, thinking something reasonable will do. Honestly, that mindset is far more dangerous than it sounds.
Even so-called business experts rarely talk about pricing. They cover how to run a business, how to come up with product ideas, but pricing? Almost never. So most first-time business owners set their price based on gut feeling. And that randomly chosen number often becomes the source of massive, silent revenue loss.
I am actually talking about myself here. In the beginning, I had no idea how critical pricing really was. Then one specific event changed everything. I changed my price once, and my revenue literally doubled.
Today I want to share the two pricing strategies I learned from that experience.
Two Types of Customers in the Market
Before we talk about pricing, there is one fundamental truth you need to understand. There are exactly two types of customers in the world.
The first is the customer who is desperately eager to solve a problem. The second is the customer who thinks, "Maybe I will give this a try."
You need to decide clearly which group you are targeting, or whether you want to reach both.
For the vast majority of digital products, you have to target everyone, including the curious ones just testing the waters. Why? Because with most digital products, you are not solving the customer's problem directly for them. They have to use your product to solve it themselves. That means the customer carries all the risk. Because of that, I believe it is nearly impossible for a digital product to justify an exorbitantly high price.
Some people do target highly desperate customers with expensive digital products and make money in the short term. But if you are thinking five to ten years out, that is not a sustainable strategy. The most important asset in any business is trust, and that approach will destroy it.
The Dynamic Pricing Sweet Spot
So assuming you are targeting a broad audience, including people who just want to try it out, how do you set your price to maximize profit?
Danny Postma, a well-known solopreneur, explains his approach this way.
"I love using dynamic pricing when I launch a product. Every time I sell 200 units, I raise the price. While doing this, you have to closely watch the conversion rate and see at which price point things start to fluctuate. Eventually, you will see a point where sales drop off a cliff. The most optimal price for your product is the exact point right before that sudden drop."
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| Keep raising your price until your conversion rate falls off a cliff. That point is your answer |
This is much easier to picture as a graph. Imagine the X-axis is price and the Y-axis is willingness to buy. Here is the key: willingness to buy does not decrease gradually as price goes up. Once it crosses a certain threshold, it falls off a cliff. Your goal is to find the exact point right before that drop happens.
The best way to find it is to keep raising your price until your conversion rate suddenly nosedives. The moment right before that crash is your sweet spot, where you capture strong sales volume and maximum profit margin at the same time.
Here is a real example from my own business. When I first launched my service, I priced it at $130. My conversion rate was exactly 1%. I assumed the landing page was the problem and rewrote the copy entirely. The conversion rate barely moved.
Then I decided to test one simple change. I dropped the price to $120.
The result shocked me. The conversion rate jumped to 4% overnight. I changed nothing except the price, and my revenue doubled.
At $130, I had crossed that cliff. Customers could not justify the purchase. At $120, they could. I later tested $110 and $100 too, but $120 turned out to be the highest and most efficient price point I could sell at.
That was the moment I understood that pricing itself can be a massive bottleneck. And that pricing is not just a number. It is a core strategy.
If you are selling a digital product, try dynamic pricing. Keep raising your price until your conversion rate falls off a cliff. The moment right before the drop is your best price point.
Filtering for the Desperate Few
What about non-digital products? If you are doing consulting or running an agency where you do the work directly for the client, the strategy flips completely.
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| Keep raising your price until only the truly desperate remain. Those are the clients worth having |
In this case, you keep raising your price until only a tiny, select group of people remains. As you can see in the graph above, you are targeting only the far right, where the price is high and almost nobody buys. Sales will be rare, and only the truly desperate will buy. But that is exactly the point.
Unlike digital products, consulting and agency work does not scale. Every new client you add costs you more time and energy. It is infinitely more efficient to charge a premium to a small number of people than to serve many clients at a low rate.
Charging a high price also filters out everyone except the genuinely desperate. And when clients are truly desperate, they tend to get far better results. Those results become your marketing.
Of course, at the very beginning when demand is low, you may need to offer your work for free or at a very low price. But if you can actually solve the problem, clients will get results. Market based on those results, and demand will grow naturally. As demand grows, the number of people willing to pay goes up too.
When that happens, do not take on more clients. Raise your price instead. If you build this cycle, you can keep growing revenue without adding more customers or spending more of your own time.
So here is the bottom line.
If you are targeting a broad audience that includes people just wanting to try something, start cheap and keep raising the price until the conversion rate drops off a cliff.
If you are targeting only the desperate, keep raising the price until only a tiny minority remains. Then use the outstanding results you generate to keep pushing that price even higher.
Look at your own business, pick one of these two methods, and put it into practice.
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