The 12-Month Evolution of a Digital Product Pricing Strategy: The Good, The Bad, and the Ugly

Pricing digital products is incredibly difficult…

even for people who supposedly know what they’re doing.

More so than services or physical products where you’re starting with a set rate for labor or variable costs based on materials and shipping, the price of a digital product is about telling a story.

Of course, it’s not the price itself that tells the story. It’s what the price makes you think of that tells the story.

For instance, if I see a ring with a shiny clear crystal and yellow metal that is priced at $25, I will assume that crystal is plastic and that the metal is an alloy. If it’s priced at $150, I will assume that the crystal is quartz and that the metal is gold-plated or filled. If it’s priced at $5000, I will assume the crystal is a diamond and the metal is 14k gold.

I don’t need tags, a salesperson, or a lengthy product description to give me a good idea of “what” the ring actually is. The price tells me a great deal. In an instant, it tells me whether the product is actually what I’m looking for or interested in.

The same is true of most offers — but especially digital products.

The story that is most enticing to your customers often dictates the price of your product. Sometimes that means pricing it higher and sometimes that means pricing it lower. While market and customer research can point you in the right direction, you often don’t know the “right” story and the “right” price until you experiment.

Another factor making pricing digital products a challenge is that, contrary to many assumptions, digital products do have costs.

There may not be materials that need to be purchased or labor that needs to get paid out for every sale but there are delivery costs, sales costs, support costs, and hosting costs. Some digital products have extremely large profit margins and some do not.

If you fail to account for those costs, you might have a product that sells easily and puts you out of business at the same time.

Now, I understand these things because they are my struggle as an entrepreneur, product developer, and marketer, too. Despite having received somewhat of a reputation for being “good” at pricing, I will admit that it is an art and not a science. And, sometimes, art misses the mark — a few times in a row.

Over the course of 2017, I took my company through a sizable pivot, away from being an education and coaching company and toward being a community and support company. We chose to sunset our signature program, Quiet Power Strategy®, and focus on our support community for digital small business owners, CoCommercial.

I’m thrilled with the results of the product we’ve built, the team we’ve assembled, and the community that has stepped forward.

But one area we haven’t quite nailed is price.

The 2 main reasons we haven’t nailed price yet are the two challenges I outlined above: the story and the costs.

Digital products tend to fall into 2 categories: high-priced courses that promise clear and measurable outcomes and low-priced resources that promise to sell you a high-priced course.

Membership communities, like our support community, are neither and remain challenging to sell because they defy those expectations. That said, I still believe that membership communities are a huge opportunity in the digital small business marketplace and the success of fitness apps like Aaptiv and MyFitnessPal confirm this. Further, I still believe that a support community is exactly the kind of value I want to create to serve this market.

To that end and to honor our company value for transparency, I want to share how we’ve evolved our pricing strategy over the last year. The truth is: we don’t have it figured out yet but that doesn’t mean we haven’t learned a lot.

Stage 1: Premium Membership

Our initial offer and price was a holdover from when we offered membership as additional support for our training and coaching programs at $59 per month.

The story we wanted to tell was that our community was full of people who were committed to both their businesses and the community. It was intimate, friendly, and super smart.

We also offered a 30-day free trial to entice people to check it out and make sure it was a perfect fit.

As we looked to scale the community quickly, though, we found this price was getting in the way. It was more challenging than it should have been to enroll new free trials and those who did enroll would often not convert to paying members or would request a refund when they noticed that charge for the thing they signed up for and forgot about hit their credit card.

Our numbers weren’t bad by any stretch of the imagination but they weren’t getting us where we wanted to go. Plus, we didn’t feel we had enough time with each new member to share with them all the community had to offer.

Around the time that I was realizing we might need to make a change to the pricing strategy, I received an email from our partners at Mighty Networks. Because we had a white label app in in the Apple App Store, we needed to adjust our pricing to conform to their standards. In other words, it had to end in 99 cents.

The idea of selling a membership for $59.99 per month really, really irked me. I like round-ish pricing. Ninety-nine cents might make sense when you’re talking about a $2.99 app or a $9.99 per month fitness service… it does not make a lot of sense when you’re talking about prices higher than about $25 and it does not say “premium membership.”

We needed to make a big change and we needed to make it quickly.

Stage 2: The Leaders Circle

Spoilers: we decided we needed to go with a lower price point. But we had plenty of happy customers at the higher level and we wanted to keep them (and keep them happy)! I believed we could do both by introducing some great new member benefits. Plus, plenty of bootstrapped SaaS apps have converted a premium-first business strategy into highly profitable companies.

I made the choice to invest in additional support for the community as we were ramping up membership by self-funding the expense through more hands-on coaching offers. This meant I had a fabulous new team member who could spend time actively working with the community and hosting events.

We announced 2 new weekly meetings: Flash Mastermind and Coworking Chats. Plus, we added monthly day-long community Work & Learn sessions.

Members were thrilled and churn slowed to a crawl.

Stage 3: Introducing A Crazy Low Price Point

As I mentioned, I’m cool with .99 pricing to a certain point. Plus, I thought we had an opportunity to tell a different story.

Instead of telling a “premium” story (although all those things are still true), we decided to tell a story about our community being like the other tools (largely subscription SaaS apps) you use to run your business. We’re there for you whenever you need us, we take care of you and anticipate your needs, and you don’t have to give up other tools to take advantage of us.

We decided on $14.99 per month.

It was a big change. The initial results were incredible. Our assumption was right: many more people would give us a try with this new price point (and the new story).

But in the end, the story still wasn’t right. Many of our fears — like that the quality of new members would go down or that people wouldn’t think it was good — were proved wrong. However, the rate of new trials was still too low and the cost of acquisition was still too high.

Cashflow was crunched and we started looking for other options.

Stage 4: A Similar Price Point — With A Twist!

I still loved the story we were telling about CoCommercial being that go-to tool that small business owners use, not for email marketing or landing pages, but for help and personalized support. But it just wasn’t quite clear enough… it lacked urgency… it lacked concreteness.

I also realized that I had missed the mark on how many of the SaaS apps small business owners used were now selling their wares. Instead of a low monthly price point, many had switched to an annual fee.

Why? Commitment, investment, cash flow.

The same things we need to make our community work (commitment from new members, investment in getting the help you crave, and solid cash flow to support our hands-on staff) were what SaaS companies needed too.

I also noticed that “free trial” just wasn’t resonating with our audience. They were used to spending thousands on online courses but didn’t “click” with an offer to get quality support free of charge for 30 days. Instead of being continually baffled by this (and truthfully, I get their concern), I decided to regroup entirely.

“Let’s make it a 30-day money back guarantee. Let’s make it an annual fee,” I said.

So in the next week, we’re rolling out some new pricing. The annual price for CoCommercial is going up to $200. And, because Apple is Apple, it still needs to be $199.99… but I won’t be speaking that outloud!

We’re doing away with our monthly plan and free trial as we experiment with this new pricing strategy. Instead, we’ll remove the risk by offering a 30-day money back guarantee and our team will work hard to help everyone who joins get more than they’ve paid for out of that first month’s experiences.

At the same time, we’re revamping our marketing strategy and messaging. The story that CoCommercial is there for you whenever you have challenges or questions about your business will remain. But the context will be much clearer. I’ll leave the explanation of that for another day — but I’m incredibly excited about it.

Stage 5: Who Knows?

I wouldn’t say that pricing your digital products is a negotiation with your audience. But it is a process. Just because a price is set doesn’t mean it can’t change.

Even if I wouldn’t recommend making as many changes as we have over the last year!

As you consider adjusting the price of your products — or services — in the next year, make sure you’re also considering the story you’re telling and the real costs you’re accumulating. Make sure that the price you set isn’t just a number but a full accounting of where you want your offer to be in the market, how it fits into your customers’ lives, and the story they’ll tell themselves when they see the price.


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