A couple of years ago, one sweltering hot afternoon in Toronto I was visiting a friend, a long time internet entrepreneur named Richard.
Richard and I got to talking about our businesses and at one point he asked me how much I was charging for the product on my website. I gave him the figure, it was $4.95. He started laughing. “Double it!”.
Right. Double it. My inner skeptic said ‘no way’, but it kept nagging. So a few weeks later I figured it doesn’t harm to try, worst case I lose a few days of sign-ups, there’s worse things in the world. So I increased the price of the package to $9.95.
Now, you have to understand that this isn’t just a one-time fee, the $9.95 is recurring, it gets billed on a monthly basis. So I figured everybody that’s even halfway decent in math is going to say no way to paying $120 on an annual basis (nobody is fooled by those 5 cents right?).
The difference in signups? 0.
That’s it, a big fat 0. Still the exact same number of sign-ups on average per day. Even after three weeks. I could hardly believe it, that was very easy money. We just doubled our turnover.
I went to Richard to thank him and he looked at me and said: “Double it again!”.
Right… no way… NOBODY in their right mind is going to pay $240 per year for my website, he’s insane, forget it. This time it only took a week before I decided to take the plunge and increased the package price to $19.95. Two weeks of analysis later:
Still the same number of signups on average per day, 4 times the original turnover on the same traffic and with the same website.
You’ve guessed it, we tried once more, but that time there was a marked drop-off in sign ups, so I guess this trick has a limit to it.
But, if you’re charging less than $5 per month for your product, I have a bit of advice for you: Double it! And if it works, do it again, and again until you reach that visible end in how far you can stretch your customers on the sign up page.
And keep in mind that you’ll have to measure retention as well, there is no point in doing this if your retention gets cut by more than half when you double your price, then you still make less money in the end.
If it works please let me know!
(To this date, we still charge $19.95… tx Richard!)