Hi Jeff,

That was a great post.... and I agree with you on pricing!

It's taken me a while to really understand this point....

In brief, here's how I understand it. In direct response, each person you attract to read your offer costs you money.... Whether it is the cost of the mail, or the cost of the newspaper ad, and so on....

So, let's say each direct mail piece costs you $1 each to make and send. Then sending it out to 500 people will cost you $500.

Now, let's say that 1% of the people who get your mail end up buying. That means that out of the 500 people you sent it to, only 5 people will buy.

That means that those 5 people have to cover your total cost of $500. That is, in this case you need a MINIMUM of $100 gross profit per person who buys just to BREAK EVEN.

So if you're not making at least $100 gross profit per sale on this particular promotion, you'll lose money.

This is what really hammered the point home to me.... Direct response marketing costs money, and you have to at least cover your costs!

It doesn't mean you can't offer low cost stuff, though, but if you do you need both low cost as well as high cost products. You'll probably make most of your money on the higher priced items....

One way is the "back end" model, where you make your real money from the "back end." Reader's Digest is like this.... I've read that they don't make any money selling their magazine. Reader's Digest makes their real money on the "back end" selling their books, CDs, etc. to their subscribers.

Another model is having several products, both low priced and high priced, with the lower priced products serving as "introductory" products. Jim Straw uses this approach .... You can buy a $10 report from him. If you like it, he's expecting that you'll be back for more of the higher priced reports he has, all the way up to his $100 report....

I like the latter model (Jim Straw's one) the best, but they both would work. :)

Gosh, Jeff, now you've got my brain cells working.... :)

> I didn't make this up, but it is a good way
> to work out your price point and it can lead
> you to suitable markets.

> How much do you want to make per month?
> Let's say $5000......and how many customers
> would you like to have? Well how about 12 a
> month?

> That gives you a product price of at least
> $416.

> Now all you have to do is find a market that
> is use to spending that kind of money on
> something they want.

> You can play with the numbers, but remember
> that if you price low at the very begining,
> like $20 you're going to need 250 sales per
> month (compared with 12) to make the same
> $5000.

Wow, that's a good calculation.... I hadn't seen that before! Thanks for sharing that Jeff!

Oh, and that's GREAT news that Bill Myers will be back online! :)

I get nothing from this either, but you can check it out at www.bmyers.com .... (It will be a subscription web site....)

- Dien