How to Turn Pricing a Product Into a Simple Arithmetic Problem

6 min read

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An orange cat in front of a laptop, on a couch.
New creators always fret about pricing their digital products—online courses, ebooks, subscriptions, etc. They make it into this huge problem when it’s really quite simple.

You see, pricing a digital product is a lot about number crunching—a bit of arithmetic.

It goes something like this:

  • What is your income goal?
  • How many people (buyers) can you sell it to?
  • At what price point should you sell this product, to the number of buyers available to you, to meet your income goal?

Let me break it down for you.

In this post:

The audience, a.k.a., how many people can you sell to?

To sell anything, you need an audience.

It can be social media followers, but I remain skeptical about that.

A better audience is comprised of newsletter subscribers. So, yeah, build that email list.

You can start selling to as little as, say, 100 subscribers. Fewer could work if you have a laser-focused audience, a product that’s at once novel and in high demand… but those are rare feats and hard to accomplish.

So, let’s go with 100 for now. Starting at 100 will make the numbers easier to understand.

The 1% rule

When you search for email marketing conversion rate, you get crazy numbers… some suggesting as low as 0.1% to others saying over 5%.

These are all based on many different parameters, but my own benchmark is around 1–2% based on my six years of experience as a blogger and online creator selling courses, memberships, templates, etc.

Given this number, the realist in me likes to choose the smaller number when in the planning stage.

So… 1%.

If I make more sales than that, great! But if not, my results will still be within expectations.

Now, let’s say you have 100 email list subscribers. At a 1% conversion rate, you can sell something to one (1) person.

This is a rather straightforward assumption, but the reality is a bit more complicated, right?

So, let’s look at a few factors that will affect your typical conversion rate.

Take note of audience demographics

Think about who your subscribers are.

To give you an example, I spend a lot of time talking about creating a business on the side. My ideal audience comprises moms, pops, students, freelancers… folks who have limited time due to various obligations but still need to add an extra income stream.

Basically, they’re not the most affluent in our society. A lot like myself, really.

They can spend some money, but not the BIG money.

I understood this with a simple experiment.

I used to teach a blog writing workshop. When I priced the workshop at around $200-ish, I had a full house. Then I decided to up the price by almost 100%. So, at around $400, I sold it to just a handful of folks.

It’s not that there was less demand, only that my audience didn’t belong in the demographic that could easily dish out 400 bucks to learn online writing.

Basically, it is important that you sell your product at the right price to the right people.

What can you sell to your 1% subscribers?

Depending on who your audience is, you can either sell a $1,000 product to your 1% subscribers, a $99 product, or a $9 product. It all depends on what you’re selling and who you’re selling to, as demonstrated above with my workshop example.

So, if your target audience is comprised of rich people, you’ll have better luck selling a $1k product. If not, then you’ll only be able to sell a cheaper product.

You can kind of guess this by how you’ve been building your audience.

Let us assume, for example, that two different online writers are in the money/finance niche.

Writer #1 writes about ways to make $1k per month. Naturally, people reading this writer are folks who are in dire need of money. They’re trying to make an extra thousand dollars per month! They’re not rich! They can’t afford to pay $1k for a product when they’re in need of that extra $1k.

On the other hand, let’s say writer #2 teaches folks about investment. Now, you cannot invest if you do not already have money. So, in this scenario, writer #2 may be able to sell a $1,000 online course on investment to their email list, and about 1% of them will likely bite.

Go big… if you want to make a lot of money from a small audience

Imagine selling to 5 people vs 500.

If 5 people give you $1k, that’s 5,000 bucks.

And if 500 people give you $10, that’s also $5,000.

What I’m trying to say is that if you have a small audience, you’ll make more money by selling a premium-priced product.

Not as easy as it seems, though. Because when people pay a grand, they want their money’s worth. So go big only if you’re confident that you have something worth a grand AND if you’re in a niche that attracts people with the kind of money you’re asking for.

Do not just package a mediocre product at a premium price because then people will know you’re a scammer.

And, of course, the demographic matters a lot.

Learn to manage expectations

Whatever business model you choose (serving the rich or serving the not-so-rich), you have to learn to manage expectations accordingly.

I see way too many people trying to sell a $499 product to an email list of less than a thousand subscribers and expect to make 10 grand.

Let’s say they have 1,000 subscribers. At a 1% rate, only 10 will convert to buying customers, provided the audience can pay $499 out of pocket for whatever they’re selling. If they can sell to 2% (which is not impossible if they have the right product and the right subscribers), then they’ll be able to meet their goal.

But it’s too much of a close call.

Either raise your price (provided you have the right audience) or manage expectations and make your goal smaller.

Or… a third option is that you focus on growing your audience (email list) first and sell only when you have the right numbers.

An online course on how to build and grow an email list with your blog, using freebies, content upgrades, and more. You’ll learn tips, tricks, and everything I’ve learned about email lists from growing my own!

Product pricing scenarios

Assume you can sell to 1% of your email list subscribers.

If you want to make $1,000 from selling your product, then these are some scenarios:

  • You can sell a $1,000 product to one subscriber. Given the 1% rule, you need at least 100 subscribers to sell this product to one person.
  • You can sell a $100 product to 10 people. According to the 1% rule, you will need at least 1,000 subscribers.
  • You can sell a $10 product to 100 people, so you’ll need at least 10k subscribers.

Now, whether to make your product $1,000 or only $10 depends on your audience, their financial circumstances, and, of course, the quality and breadth of the product you’re selling.

Quick summary: How do you price your product?

Follow these steps:

  1. How much can your email list subscribers pay you? (Cue: audience demographic)
  2. How many subscribers do you have?
  3. Calculate the 1% number. As in, how many subscribers will likely buy from you? (Calculate 1% of total subscribers: total subs/100)
  4. How much money do you want to make (a.k.a. your income goal)?
  5. Divide your income goal with your 1% number. That’s how much your product needs to cost.
  6. Does #5 meet #1? If not, you’ll need to adjust your expectations. You can do one of three things: I) You can wait until you have more subscribers so you can sell a cheaper product to more people, II) You can lower your income goal, or III) You can re-strategize and start attracting a different audience demographic. In which case, of course, put off selling until you have the right audience.

Product pricing calculator

Here’s a quick calculator to figure out your product price based on the number of subscribers you have and your income goal.

If the result is more than what your ideal subscriber can pay, then either wait til you have more subscribers so you can sell a cheaper product to more people, or you can sell a cheaper product now and make less money than your income goal, or restrategize.

Don’t be afraid to experiment

It takes trial and error for a new creator to figure out a price that’ll work with their audience.

You may think your audience can pay $500 for an online course, but they can only pay half of that… or vice versa.

So, if you’re unsure about your audience’s ability to pay, take your best shot and then adjust accordingly based on your experience. Most creators don’t get things right the first time. I didn’t 😉

But there’s also the value aspect. You do not want to undercharge a product. Your time is important, and you must be paid accordingly. So, if a product isn’t doing as well as you thought it would at the price you’ve set, and if you think the price is justified, then consider the following:

→ Is it that your subscribers cannot pay you or that they do not trust you yet? (Did you try to sell too quickly?)

If it’s a trust factor, then continue to create, and eventually, buyers will come.

Another factor may be this:

→ You may have misjudged what your audience truly wants from you.

You can do a few things when sales do not meet expectations:

  • If it’s truly about your subscribers’ buying potential, then consider breaking up the product into smaller products and selling those smaller products at a lower price instead of making the whole product cheap.
  • Or wait until a better and more fitting product idea emerges.

In other words, don’t lose hope.

The first three courses I made way back in 2019 didn’t really sell. But then I made the fourth online course (Side Income With Canva Templates) in 2020 and it was an instant success, even though I priced it higher than my previous courses.

So yeah, experiment with products and pricing and accept that it may take a few rounds of failed attempts before you get things right.

And that’s it. Hope this helps!

Questions? Leave them below in the comments. Also, subscribe to my email list! It’s free, and I send weekly blogging and online business tips right to your inbox! 🙂

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