How to price test your market

What are people prepared to pay for your product or service? This is a tricky question to answer, particularly when launching a new product. Often market research - asking people what they would be willing to pay - is not very helpful or accurate.

Often, the only way is to launch the product and see what happens. But, if you are introducing your product through direct mail, try splitting part of your mailing list into three test segments and offering the product at three different prices.

The results could be revealing. It's not always the lowest prices that pulls in the best results. And if there's very little difference in the response rates, it might suggest that your target market is not particularly price sensitive.

In fact, some folks have found that, if a product fails to sell well, doubling the price can sometimes increase sales! John Fraser-Robinson, in his book "The Secrets of Effective Direct Mail" (publ. McGraw-Hill), describes how he kept increasing the price of his direct mail seminars, and demand kept on rising. In fact, over a 4-year period, he increased the price by 400 per cent and still filled his conference halls.

He did, in fact say that he thought that his experience was exceptional. But, as with any direct mail campaign, you should always test, test, test!

For some more good ideas on pricing (some of them real eye-openers!), have a look at "Make Your Price Sell" - see the side-bar on the right of this page.

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