So we're going to think about pricing and when we ‘rethink' about pricing we need to start with the right question. And a good way, a smart way, to think about pricing is to think about what does it take to earn say, $10,000. So that's what we're going to think about. It's like how many do I have to sell, how many copies, how many products do I have to sell to make $10,000, and how many people do I have to reach.

I'm choosing $10,000 because they can represent many milestones. It can be making your first $10,000, it can be making ten thousand a month, ten thousand week, ten thousand a day, but in any case the right question to ask will emerge from here and let's start with a low price.

Let's say I'm selling an information product at a low price let’s go with five dollars.

So five dollars that’s what one copy of my eBook for example costs, and right away we can tell at a price point of five dollars we need to sell 2 copies. Sell 2 copies in order to make $10.

Now here comes the first point. Number one is what I call the big draw. We have to think about, well, what’s the conversion rate going to be for a $5 product, and the first thing we have to realize is that ANY price that is more than $ZERO will make the conversion rate plummet. Even if it's $1.00 of its just cents.

In fact the conversion rate between $1 and $5 is probably going to be more or less the same.

The biggest difference - the big drop happens, as soon as you charge ANY amount of money and that's because charging money - having to pay money, represents a really big obstacle you have to overcome by the customer.

You have to fill out forms, you have to trust someone with your payment data, you have to maybe dig out a credit card, copying the numbers, and so on.

And also for some people, oh! this payment system that you're using, isn't supported in my country, or I don't have credit card, or whatever. So as soon as you charge any kind of money you'll see a big drop in conversion rates.

So for giving something away for free and maybe asking for an email address as an opt-in thing, you can get double-digit conversion rates - depending on how warm the traffic is you can get high conversion rates. But as soon as you charge any amount of money you’ll see the big drop so what is a possible conversion rate here? And again, this is you know rough ballpark math.

Right, let's say you get a 5% conversion rate that is assuming you don't have like super hyper targeted traffic, but also it's not just cold traffic, and your sales page is doing a good job.

Five percent, that's a decent performance here now had a five percent conversion rate this is the problem this is why we're talking about REACH.

At a five percent conversion rate you have to **reach** people. Okay, people need to come to this sales page for you to make 2 sales for you to then make $10 off of those 2 sales.

That's important because we often think 'oh I can lower the price if I sell a cheap product that's going to be easier right'?

But trying to reach 2,000 people that is a big ask, and on any platform in any way right trying to post something on social media that gets 2,000 views, or trying to post a You Tube video trying to build a mailing list of 2,000 people and then trying to get people to a sales page - that’s that big ask!

How are you going to do that? how can you find people to bring to your sales page, and you think about how much work that is to reach an audience of this size, then the payoff of $10,000

Is that worth the amount of work I have to put in here to make $10,000?

This brings us to point number two which is let's think about **reach** and let's reduce the reach required to make this money. So let's experiment with a different price. Let's bump up the price to $70.

At this price point we need 143 sales to make $10,000 sales. Now of course that’s way less which is good, but we have to think about this **reach** again. Now what happens to our conversion rate if we go from $5 to $70?

Let me tell you the ballpark figure first and then where it comes from - so here a conversion rate that is in the realm of possibility will be 2.5%

Now the reason I'm using $70 in this example, is that I'm currently selling a product that sells on an average of $70, and the real conversion rate on that is 2.4 percent so this is a realistic conversion rate at this price point.

I'm not just making stuff up now at this conversion rate we have to reach 5,720 to make ten thousand dollars so you see what happened here we more than tenfold increased our price, but our conversion rates only about half, and as a result the required audience reach goes down dramatically.

So right away it's much easier to imagine doing the work needed to get roughly 6,000 people to see my sales page to make $10,000

Right away when I see this, I would much rather organize 6,000 people to see my sales page to buy a $70 product for me to make ten thousand dollars.

The reason this is happening is the conversion slope - so the relationship between our price and our conversion rate is not linear.

There’s certain psychological price point, certain psychological barriers that would be less than ten dollars or more than ten dollars less than a hundred more than a hundred and so on this is why we always see price tags like $9.99, even though the price difference is almost on-existent it will be like a steeper drop right there.

The most important thing is to realize that you know doubling our price generally doesn’t halve our conversion rate and vice versa.

But this slope means is that as we increase the price in terms of how many people we need to reach it tends to develop in our favour.

Higher price means need to reach fewer people to make $10,000

What if I charge $2,000 for my product?

We can see something pretty interesting happens, I only need to reach five people now or rather Indeed, to sell a five copies. I need to sell five times this two thousand dollar product to make ten thousand dollars.

I can probably maybe think of five people I can try to convince to give me $2,000 each so it makes it a lot easier but what happens with the** reach**, because obviously convincing someone to hand over $2,000 is going to take more work.

So what happens to the** reach?**

Well even if our conversion rate drops by a lot, let's say we can only convert one in a thousand people our conversion rate goes down to 0.01 percent

We can only convert one in a thousand people that means we need to reach 5,000 people, and well once again that’s lower than what we had here and you know that this is a big drop.

You can probably put together a good sales page you probably get a bit more than that right, so it still holds true, as Increase my price, I need to reach fewer people to make $10,000

But this is where the next point comes in point number four is what I call the logistics problem.

If I'm selling a product for $5.00, then there is not that much production needed to go into that.

Let’s think about if you buy a book for $5.00 and the e-book is not very well formatted you know it's not the most beautiful thing you've ever seen, but it contains like one or two good tips then that’s fine right? you're probably a happy customer spending $5.

If you learn one or two good things from it - all is okay.

But now if you buy something for $70, your expectations rise and you want to see better production quality you want to see more something more unique, something more valuable, and if it's just a book with one or two good tips, you're not going to be a happy customer!

In other words on the product creation side, as the price goes up, the amount of effort it takes to put together an offer that will work, that will make people happy, and that will people will buy.

So, putting together an offer that justifies its price point requires more and more work so if we sell a cheap product we have to do some work.

I sell a slightly more expensive product I have to do a bit more work but at some point in order to sell a $2,000 product your design has to be on point, your sales copy has to be on point, you have to have a lot of trust signals, your product itself has to be super valuable, and super unique.

People require or expect, really high quality service and one of the things here is remember, you cannot just do by yourself overnight before they will hand you $2,000. You have to establish trust with them they have to be able to see a history of your work they have to be able to see that this is a trustworthy person, there is a trustworthy business behind this, and this is not something you can just create by yourself.

So the logistics problem is basically that if you want to sell something for $2,000 you probably need a team but you probably need a team - people to help you with design, copy, marketing, production, customer service, and so on.

So while it's possible and it can be very beneficial and very profitable it's not very solopreneur friendly, and it's certainly not suitable as your first business, or to start getting something off the ground.

Now the other thing that we've seen here is going to be how much work does it take to reach the audience that we need to make our $10,000 If we have we look at the price and product work and price and audience work, it leads us to the **sweet spot.**

So, there's a sweet spot where we can reduce our needs to reach a huge audience without having too much work too for the production.

I think that sweet spot is $200 - and that is especially true **if what you're selling is an online course,**

Selling an online course for $200 puts you right in that sweet spot

So let’s quickly do the math here on our napkin for a $200 product.

What that means is we need sales of a $200 product to make $10,000

Now like I said I'm selling a $70 product right now with a real conversion rate of 2.4 percent

I'm also selling a $200 product right now, and the real conversion rate is 2.4 percent. Let's just do two percent right rounded down a bit the conversion rates here are pretty darned close together - even though the price is almost triple.

That means that our required** reach** here becomes 3.5 percent, let's say 2,500 people.

To reach 2,500 people to make $10,000 - and this is why the sweet spot is a **$200 product for an online course**,because reaching 2,500 people it's not something that’s going to just happen by accident or overnight, but it's the kind of thing that you can do by yourself!

Put in a bit of elbow grease, do a bit of hard work upfront and you can reach 2,500 people.

And the same is true for the production quality needed to make a $200 product.

**So, to make a product that justifies a $200 price point where you'll have happy customers that buy this from you, and low refund rates - that is something that if you have good system you turn your expertise into a course you can do by yourself and all the marketing and so on.**

You can do it by yourself without needing massive production quality.

Our mission here at Expat Profit is to help entrepreneurs and small teams build better more successful online training businesses, and in many cases its not just about how you build your website, it's not just about what you do to drive up conversion rates on your site, it's much more about** what you do, what you sell and how you sell it**

Many entrepreneurs try to start businesses that are too complicated and too complex to start out with or put themselves in apposition where as we saw in the low-price example where in order for this business to succeed they have to reach absolutely gigantic audiences.

So hold on before you do all that take this knowledge you have packaged as a course, and sell that, because that’s something you can do in a relatively short time span and selling a course can give you a platform.

It can be a foundation on which you can build other things. I built the necessary marketing skills the necessary entrepreneurial skills the experience and I earned the money that was needed to start a business like Projex Academy by selling courses first.

In so many cases that's just the best way to start even if you have other ambitions. Maybe you are thinking of that $2,000 price point that was pretty attractive - I mean think about only having to make five sales to earn $10,000 that is really attractive.

But like we saw, there is the logistics problem well in many cases for many businesses having a really high ticket item having a very expensive item to sell is a great business decision that can often be the thing that kind of takes you know to another level in terms of revenue and success.

So it’s absolutely something worth doing and if it is something you want to do if you want to get to that point where you can make a high ticket item like this, there is no better way to get there than to create a couple of $200 courses first - once you've created and sold a few $200 courses you'll have this experience where you know how to put together a high value course.

You'll have refined your ideas and your teaching you have learned teaching skills that make for a high value course. You'll have marketing skills. You'll have customers ready to buy more from you.

It is such a good foundation so even if you want to go for the higher price even if you want to follow this principle of reducing your required reach by cranking that price up all the way, that's definitely a good idea to do but starting by selling **one or several $200 courses is the fastest way to get there **