Lower Prices = More Profit?
(Real Life Example)
Take a look at this funnel:
1. Facebook ad traffic leading to...
2. A $7 front end offer
3. An optional $27 checkout bump
4. An optional $97 upsell
This is a simplified version* of one of my funnels which builds my email list on autopilot with fresh customers who have never interacted with my business before.
*in my actual set up there is also another upsell and two downsells but we can ignore those for our purposes here.
If you've heard advice like "You're not charging enough!" or "If you want more profit then raise your prices!" then you'd probably think of increasing some of the prices.
Maybe you'd move the bump offer from $27 to $47 and the upsell from $97 to $197.
The basic law of economics is demand and prices are inversely related - so higher prices leads to less units sold.
This can be okay because less sales at a higher price points will often mean more total revenue (which is essential to pay for your ad costs).
But what if higher prices choke demand so much that revenue actually drops?
That's exactly what happened when I tested higher prices on this funnel.
The percentage conversion on the bump and upsell dropped so much that the high prices couldn't make up for it and my total revenue fell.
So what did I do?
I went in the opposite direction and actually dropped my prices, specifically:
Bump from $47 to $17 (lower than the original $27)
Upsell from $197 to $47 (lower than the original $97)
And guess what happened?
Yes, total revenue and average customer revenue for the bump and upsell increased significantly.
Which is great because that means I could then pay more for my ads.
2 lessons from this...
Lesson 1: Don't just take 'conventional wisdom' as 100% true
Usually there is a lot of truth in the advice that gets passed around but that doesn't mean it's a universal rule, so always use some healthy scepticism!
Lesson 2: Play around and try things out for yourself
Unless you try things like this you'll never know for sure and could be leaving a lot of money on the table.
Just because lowering the prices worked for this funnel, doesn't mean it'll work for you or even work for other funnels that I have.
In fact, most of my other funnels are the opposite in that raising prices does generate more total revenue.
Note: The main reason, in my view, lower prices worked for this particular funnel is because it's designed for fresh customers who don't know me or my business, so they are far more resistant to buy at higher prices but will convert very well at lower price points.
So test, play around and try things for yourself.
Remember, if you're using paid ads as a traffic source give it at least 10-14 days before you draw ANY conclusions, regardless of your budget!
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