While considering monetising some of my online activities, the questions arose: what kind of product would it be and what would be the price point? Ramit Sethi, a very successful entrepreneur, has provided some insights (see his pdf): The Ultimate Guide to Starting an Online Business. Here is the way he visualises online businesses.
Because you are charging a high price, you are likely to have relatively few customers. Think Rolls Royce and Prada. Ramit Sethi’s business model is to produce high quality content, give 98% of it away, but charge premium prices for the remaining 2% — like thousands of dollars. Ramit runs how-to-get-rich courses for the millennials (see audio clip below).
Products in this section are great businesses; they have the potential for plenty of customers and command a high price. Think Apple iPhones. You get there by making a quality product and you can charge a relatively high price because the price becomes secondary to the product.
Ebooks are an example of mass market products — the Amazon prices of $1.99, $2.99 or $4.99. There are so many products there that the probability of someone finding you are very, very small. You are swimming in the shallow end of a very large pool and are unlikely to go anywhere. People have a natural tendency to undercharge when they are first starting out in business. The goal is to find the right price that reflects the true market value of whatever you are selling. You can always lower the price as a special offer at a later date.
Labour of Love
These are products that have few potential customers and can only be charged a low price. These are like weekend hobbies that nobody would pay you for. You may still want to do them to fulfill some inner need, but don’t expect it to make money or be disappointed if you fail to succeed.
Pat Flynn interviews Ramit Sethi on these questions in Podcast SPI222 Here is a short excerpt that focuses on the price point questions that people who are starting out might ask.