Do You Charge So Much Your Customers Complain?

May 6th, 2008 by Bob Bly

An article in Circulation Management (5/08, p. 12) states: “Your subscribers should be complaining about their subscription price. If they’re not, then you’re not charging enough.”

I get the logic of this: if your customers accept your pricing too readily, it indicates that they would be willing to pay more — and therefore, you should price your product or service accordingly.

But I’m not sure I agree with it, because it sounds like making your prices so high that customers find them a burden, and are unhappy paying them, is a good idea.

Do we really want our customers complaining about our prices? Should we in fact always charge the maximum price we can get away with for everything we sell?

Internet marketer Fred Gleeck has a rule for pricing information products: the price should be low enough that if you multiply it by 10, the product would still be worth buying at that multiple.

Therefore, a product with a value of $1,000 should cost no more than $100.

I’m more comfortable with Fred’s pricing guideline than Circulation Management’s advice on pricing so high that customers complain.

Fred’s rule ensures that customers always get more than their money’s worth.

Circulation Management’s rule ensures that they barely or rarely get their money’s worth.

Which do you think is better?

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This entry was posted on Tuesday, May 6th, 2008 at 4:32 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

11 responses about “Do You Charge So Much Your Customers Complain?”

  1. Sean said:

    wow a comment like that really makes my blood boil. Not just as a marketer, but as a consumer.

    There are 3 parts to a major magazine, editorial, publishing, and circulation. When divided (and competing with each other) that strategy makes sense. Circulation’s job is to get as many subscriptions at the greatest cost. But what if they all worked together?

    Less money on the circulation end might mean more money in advertiser’s sales, affiliate sales, or back-end deals (book clubs). Also happy customers (fans) are more willing to contribute editorially and spread your articles to friends and co-workers.

    So, no, customers should not be complaining about anything. Subscription rates should be used to reflect perceived value and than adjusted based on your marketing strategy. In my opinion it is based on whatever gets the most subscribers (low price vs. high price vs. free).

    I wonder how this changes across different industries.

  2. Mark said:

    Strictly from a business perspective: a complaining customer is a customer who is looking for a better deal. What you want to do is get your customer to never think about going elsewhere. Making sure your customer complains is pretty much insane.

  3. Bob Bly said:

    Mark: I agree, and if you practice Fred Gleeck’s rule — each product is worth at least 10X its price — customers won’t shop around.

  4. Lou Wasser said:

    While Fred Gleek’s rule sounds like a useful one at first blush, I’m not sure whether the multiplier of 10 is workable for all situations and all products in all industries.

    If one uses a multiplier of 8 1/2 or 9, is he pushing the envelope on pricing? Even on the Gleek pricing grid, the logic of the article in Circulation Management has to kick in at some point.

  5. Louis said:

    And once you’ve done that 10X multiplication, how do you settle on the value? Are you good as long as the potential for their return is greater than their investment? That would also depend on their business model too, right? Someone who is simply trying to educate himself may not have a measurable return until much later.

  6. Craig McNamara said:

    As long as they feel they’re getting their money’s worth (for whatever they’re paying), they’ll come back as a customer. It’s why I can charge the top going rate for freelance writers in the Minneapolis market.
    (More opinions and advertising commentary at craigmcnamara.blogspot.com)

  7. Bob Bly said:

    Louis: in the case of an information product, the marketer must explicitly make the case for the value he claims in the copy. For instance, let’s say you are selling an e-book of forms for consultants. To pay a lawyer or expert to create each form would cost the prospect at least $200 per form, and there are 50 forms in the book. Therefore, buying the collection of ready-made forms can save the customer $10,000, allowing you to claim a value of 10K for your product. Would I charge $1,000? Probably not. But you could charge $97.

  8. Troy Bingham said:

    if you can get away with it, you may want to try some split testing on pricing. You can get some very interesting results.

  9. Susanna K. Hutcheson said:

    I think that as far as pricing anything is concerned, a lot has to do with the true value. If there’s nowhere else the prospect can get the service or product, or, if the service or product offered is preferable to others on the market, price is not much of an issue.

    For example, I subscribe to the Morningstar Web site. It’s somewhat expensive. At the same time, belonging to the site, using it’s many great premium features, has made me a good deal of money. Therefore, what I pay Morningstar is really not that much at all.

    I always feel like I’m not getting something of much value when it’s too cheap. Sure, I love getting a bargain and I’ve found valuable items for dimes and quarters at garage sales. But if I only pay a lawyer $25 an hour, I sure don’t expect much. In fact, I figure I’ll lose my case.

    The bottom line, in my opinion, is you should charge what your product or service is truly worth BUT take into consideration the realities of what the market will truly bear.

    It’s OK for people to think your price is a bit high if, on the other hand, they feel they’ll be repaid many times.

    As another example, Chris Marlow charges quite a bit for her pricing survey for freelance copywriters. It’s more than “Who’s Charging What!”, which is the industry standard. But, on the other hand, it’s well worth the price when you discover how much you can increase your income by having the information.

  10. Terry said:

    Robert G Allen used a survey to set the price of his offers in his famous challenge to make at least $24,000 in 24 hours. (Which actually made $94,532.44 in 24 hours). You can find the details in his book, “Multiple Streams of Internet Income”. One of the offers was a personal one-on-one coaching with himself. He asked the respondents to check the price they would be willing to pay (offer was limited to 10 people). The choices were: $5,000; $2,500; $1,495; $995; $495. The amazing results: “About half of the 1,046 people responded that they would be willing to pay for private mentoring with me chose the cheapest possible price. But 9 percent chose the most expensive option. When given a choice of paying $495 or $5,000 a significant number of people voluntarily agreed to pay $5,000 (94 people paying $5,000 is almost half a million dollars)!”
    It definitely pays to test test test!

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