How to price a digital product: what to charge for your digital products

Not sure what to charge for your digital products?

Pricing a digital product is a key moment in building an online business. And if choosing a price is hard for physical products and services, it tends to be even harder for digital products.

After all, how do you know what an e-book is worth?

How do you show the value of an online course?

How do you put a price on knowledge built up over so many years?

Beyond that question, there are the market's paradoxes. If the product is too cheap, it may not convey authority. On the other hand, if it's too expensive, it may drive customers away… but don't worry, that doesn't mean it's impossible to figure out what to charge for your product.

In this article, the team of experts at Cademí, Brazil's first Member Hub, will help you understand:

• How to calculate the value of a digital product
• Study the market
• Understand the monetization models
• How to increase perceived value
• Run pricing tests

How to price a digital product

As with pricing any other product, pricing a digital product means weighing a number of factors to make sure it's profitable and that your business stays competitive in the market.

In short, these are the essentials when deciding what to charge for your digital products:

1. Your production costs: how much does it cost to develop your digital product? From your own working hours to the people you hired, additional services (software, transportation, stock image libraries…) and the marketing budget.

2. Operating costs: What fee does your payment gatewaycharge? Also think about how much you spend on hosting, member area platform, data storage and all the other costs of running your operation.

With that data in hand, you can start pricing your product.

The most traditional approach is to set a profit margin and calculate the price from that number and the costs you've already worked out. In this case, if your cost is R$ 100 per seat in an online course and you want a 50% margin, you should charge R$ 150.

In the digital product market, margins usually fall between 50% and 80%. This varies with complexity and perceived value (more on that shortly).

Remember to divide the total operating and production costs by the number of units you expect to sell. So if the cost is R$ 10,000 and you have 100 seats, the cost per seat is R$ 100.

Study the market

Done the math? Hold on, that may not be the final price of your digital product yet.

Because this is a dynamic, highly competitive market, it's also important to study it so you know where you want to position yourself, and factor that into your pricing.

At this stage, it's important to look at the prices being charged in the market.

After all, if every expert sells a course for R$ 997 and yours costs R$ 100, it may not come across as very credible, right?

The first step is always to understand the real price and then adjust your offer to the audience and the market. So decide whether you want to position yourself as a premium, affordable or mid-range option.

Understand the monetization models

Another very important point when pricing your product is understanding the different ways to monetize it. The most common options in the market include:

• Lifetime access: the student pays once and can access the content as often as they like, forever;
• Time-limited access: the student pays once and gets a period you set to access the content (usually one year);
• Subscription: the student pays a monthly fee to access your platform (here there are usually updates with new content at set intervals);

The price you charge for the digital product will change depending on the model you choose. After all, you can't charge someone who gets one year of access the same as someone who gets lifetime access, for example.

Also consider what perceived value is

It's also important to remember the difference between price and value. You've probably heard something along those lines before.

But the concept goes a little deeper than you may have been told.

The difference between price and value is directly tied to perceived value. In short, it's a theory that explains the subjective assessment every customer makes when buying a product or service: an unconscious comparison between what is charged and what is delivered in terms of:

• Level of experience;
• Solving pain points/needs;
• Benefits;
• Usefulness;
• Brand reputation;
• Perceived quality.

This assessment is usually driven by the customer's emotions and expectations. That's why it's important to keep all of these points in mind not just when pricing a digital product, but throughout production, communication and the offer.

After all, the higher the perceived value, the more willing your potential customer is to pay a higher price for your digital product.

How to increase perceived value

So one way to charge more for your digital product is to increase its perceived value. This strategy will depend on your persona and what makes them notice the points above. But in general, these are ways to build perceived value:

• Social proof;
• The expert's authority;
• Bonuses and discounts in the offer.

It's also important to showcase success stories from people who have already used your digital product.

The sooner you put these strategies in place, the better your results will be.

Run pricing tests

Once you've landed on a price for your digital product, always remember that you can change it.

So test it.

To do that, create different offers with different bonuses and price ranges, and watch how customers respond. A/B testing is another option. In this case, the same product gets two sales pages with different prices, and the goal is to see which one sells better.

Whatever method you choose, remember to collect customer feedback in addition to analyzing the data, especially from abandoned carts.

Why do your leads abandon their purchase at checkout?

Brands like Sallve, for example, reach out on WhatsApp to remind customers about the purchase and offer support if needed.