How To Structure Your Price For Maximum Profit (And Happiness)

by Jeremy Reeves 6 Minutes

PricingIn today’s article, I’d like to discuss sales funnel price structuring. This is something that very few people talk about, or even think about. They haphazardly create sales funnels without thinking of their buyers frame of mine, the goals of their business or how price can affect profit.

(Hint: It is one of THE most crucial keys to profit growth!)

Let me start with a story…

The Invitation

A few months ago, I was invited to a private marketer’s dinner in Philadelphia. I was invited there by a customer of mine (Bill Harrison, from who fell in love with a course I sell.

When I got there, I have to say I was impressed. Some of the most highly respected industry leaders were there. You had to be making over $200,000 per year just to be invited.

Just before dinner, he asked me to do an impromptu speech.

Keep in mind, I’m not much of a public speaker. I’m a copywriter and like to sit alone in my “dungeon”, so speaking in front of some of the most highly respected industry leaders in their markets was a bit of a jump for me.

Needless to say, I sped up my wine drinking to get loosened up.

The Question That Shook The Room

One of the things that I talked about during that presentation, during the event, was price structuring in your sales funnel. This was in response to a question asked by an attendee, who asked me if he should start his sales funnel with a low priced product at the front-end to generate as many buyers as possible… or start with a higher end product.

My initial answer?

It’s really not a black and white thing. It’s a little bit of a grey area.

  • It depends on your business.
  • It depends on your goals.
  • It depends on the type of business that you’re trying to create, whether it’s lifestyle business, whether it’s if you’re going for maximum revenue, which is a very different thing.

Not everybody is just trying to maximize their revenue. There are a lot of people who just want to get to a certain level and then enjoy the lifestyle it gets them.

There are certain people out there claiming that ALL online sales funnels need to be started with a low-end product. While it’s true for a lot of Internet Marketers, it is NOT true for a lot of people outside that realm. It’s also not true for a lot of typical Internet Marketers, either.

That’s why I’d like to take a detailed look at what you need to consider before figuring out the structure of your sales funnel.

Broad vs. Targeted Market

The first thing you need to look at is the overall size of your market. If you’re involved in a very broad market, you have access to a lot of buyers. In this case, I usually recommend doing something like a really low-end offer first, because when you do a low-end offer like that, it helps you generate buyers.In other words, it’s an easy way to separate the wheat from the chaff. The serious from the lookie-loos. It shows you who’s willing to spend money with you. It gets them in the buying mode and you can get them to by higher price products. It allows you to essentially create a buyer’s list that you can sell to over and over with your higher price products without really wasting a lot of your marketing budget.

Sometimes you can break even on a $7 or a $17 product (or other low-priced product). Other times you’ll need to sell them something else immediately after ordering the first product.

Either way, you’ve just acquired a BUYER… for free.

As I’m sure you know, buyers are the lifeblood of your business.

But before you get too excited, keep reading to see if that’s really the right strategy for you.

Your Back-End Process

If you have a solid back-end with several higher priced products and serviced, it’s typically better to bring people in at a lower price because your lifetime customer value is likely going to be higher. You know what people are going to be worth to you as a business.

Let’s say your lifetime customer value over a 12 month period is $2,000.

$1,500 of that comes from AFTER their original front-end purchase.

In this case, you know you can afford to acquire new customers at breakeven, or even at a loss. Doing this can drive your competitors crazy because they won’t be able to figure out how you’re still in business.

(It’s a great way to grow extremely quickly, but you have to be careful doing it or risk running into severe cash flow issues)

On the other hand…

If you don’t have a solid back-end, having a low-priced offer upfront isn’t going to do you much good. You’re going to get those customers at a loss, and then have no way of recouping the cost of acquiring them.

This can be an extremely dangerous road.

If this is the case for you, I have one of two suggestions.

  1. Begin building your back-end to contain more high-end products and/or services
  2. Work on building your relationship and authority to go straight to a higher, front-end offer

And that brings me to…

Your Overall Positioning In The Marketplace

If you’re trying to be a maven in your industry and establish rock-solid authority, I would recommend going with a higher priced funnel. There is a certain percentage of every market that doesn’t want to waste their time on cheap, low-end offers. They want to work with you personally… attend your seminars or workshops… get personalized coaching… have things done for them, and so on.

If you’re trying to increase your positioning, you cannot ignore these people as they are going to be your bread & butter.

In fact, if you have thick-skin, you may even consider purposely repelling those people in your market who are looking for cheap stuff. By repelling those types of individuals and talking directly to your most high-end, loyal buyers, you’ll find yourself attracting them effortlessly.

In the end though, it all comes down to one thing…

The End Goal Of Your Business

People run businesses for very different reasons.

  1. One person might want to build a business out of passion. They love what they do and will own that business until they take their last dying breath.
  2. Others will build a business as rapidly as possible, in hopes of selling it at a high multiple and then beginning their next business.
  3. Still others might want to build a lifestyle business. One that provides them an income well above their means, yet is extremely easy to manage and gives them incredible time freedom.

So which one are you?

The fact is, it doesn’t matter.Whatever type of entrepreneur you are, is the perfect type for you. Stop living up to the expectations of other people and build your business the way YOU want it to run.If you’re going for maximum revenue, then you go with whatever one gives you maximum revenue. If you’re going for a lifestyle business, I would say probably the higher-end is a better choice because the less customers/clients you have, the easier your business will be to run.

Not Sure Which One Is For You? TEST!

When this particular individual asked more probing questions about what he should do, I recommended something that I recommend to everyone.

Do a one year long test or six month long test, however long your buying cycle is.

If most people max out a six months, then do six months. If most people max at what they’re going to spend through the lifetime customer value, then do twelve months. You have to know your key metrics for this.

Then run a test with two separate funnels.

Funnel A is a high-end funnel where you’ll be attracting the most loyal and dedicated buyers in the market.

Funnel B is a low-end funnel where you’ll be attracting many more customers, but at a lower price point.

Then, you track the OVERALL PROFIT over a specific time frame.

Yes, it’s going to take awhile to figure out what funnel works best for you if you don’t know at this moment. But hopefully you’re in business for the long-haul, not just a few months or years.

Taking a 6 or 12 month period to test this is WELL worth the time, if you can’t figure out which route you want to take.

I hope this article has helped you. Let me know your thoughts in the comments below!

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by Jeremy Reeves
Jeremy Reeves is a sales funnel specialist who builds advanced marketing funnels, adding over over $10 million in revenue to his clients bottom lines in the past few years alone. Go here to get his free report, "How To Construct A Million Dollar Sales Funnel".