How to Price Digital Downloads – New Strategies

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Value-Based Pricing Strategy

Value-based pricing sets your price based on the perceived value of your digital product rather than production costs. It prioritizes quality and customer satisfaction, allowing for higher prices that reflect customer benefits.

The most common form of value to customers is the overall satisfaction they experience from acquiring and using your product.

Buyers seeking higher-value products should expect to pay more, while those aiming for lower prices must be willing to forgo certain benefits.

Example: A block of brick: How you use the brick determines the value of the brick—paperweight vs. building a home.

Psychological value refers to how your product generates positive emotions and satisfaction for consumers compared to the best alternative products. For instance, Rolex watches may not provide a tangible monetary benefit to their owners, but they hold a high psychological value, symbolizing success, a high standard of living, and a particular lifestyle.

This same applies to selling a digital download offering unique community access. Being part of a specific community can hold a high psychological value, thus increasing the perceived value of your digital download.

Pros

  • You can set the price according to the real value the download offers.
  • You can easily control the profit margin.
  • You can ask above the average market price.
  • It has a larger profit range than with other pricing strategies.
  • You can attract high-price-oriented customers (which tend to be higher-value customers).

Cons

  • Higher pricing narrows down the audience.
  • Your perceived value can differentiate from your customer’s perceived value.
  • Asking too high a price can hinder sales.

Competition-Based Pricing Strategy

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Competition-based pricing is mostly visible in established marketplaces. All of the products shown in the image are from different creators and companies. Image credits.

Competitor pricing is a pricing strategy that involves setting prices for digital downloads based on competitors’ pricing. To implement this strategy, you need to conduct thorough market research on your competitors and use their pricing as a reference point for determining the prices of your products.

Competition-based pricing strategy is best suited for already established marketplaces where your product is one of many. A good example would be Creative Market, Etsy, or Gumroad. In the mentioned marketplaces, elevating your brand isn’t easy, and asking for significantly higher prices (compared to your competitors) will most likely hinder your sales.

Ways to do market and competition research:

  • Research the average price point your competitors use to sell their products.
  • Read competitors’ product descriptions and see what they are offering.
  • View competitor’s product images, branding, fonts, colors, etc.
  • Does your competitor use video or images to do marketing?
  • Are your competitors executing any active Facebook (Facebook’s ad checker tool) or Instagram campaigns?

After doing extensive analysis, how can you differentiate your digital download from the rest of the market? What can you offer in terms of pricing that customers would opt to buy from you?

Pros

  • Low-risk approach.
  • In line with your competitors.
  • Easy and fast pricing strategy to execute.

Cons

  • It can easily become a race-to-the-bottom pricing strategy.
  • The price might not reflect the true value your digital download offers.
  • You attract specific pricing level-oriented customers.

Cost-Based Pricing Strategy

In the cost-based pricing model, prices for digital downloads are determined based on the actual production or distribution costs involved in creating and delivering the product.

Even though we talk about digital downloads, they still have production and distribution costs.

For example, selling your digital download through a service like Podia does accrue costs. Also, creating the actual product with some design software like Adobe or Canva will cost you every month.

Costs to consider when executing a cost-based pricing strategy:

  • Sales taxes for digital products.
  • File hosting fees and general platform fees.
  • Sales transaction fees (Stripe, PayPal, platform).
  • Software expenses (Grammarly, Adobe, Canva, etc.) (for creating the digital download).

Pros

  • A justified and reasoned price point.
  • Does not require market research.

Cons

  • It can be hard to make a profit with this strategy.
  • You might forget to take into consideration all possible business expenses.
  • The price point can become low, hindering scaling your business.

Brand-Based Pricing Strategy

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The top example is from Creative Market, and the bottom example is from Oliur. Both are selling Lightroom presets, one with a clear brand advantage and one without it.

Brand-based pricing strategy revolves around setting prices for products or services based on the perceived value and reputation of the brand itself. Rather than relying solely on production costs or competitor benchmarks, this approach leverages the brand’s image, recognition, and consumer trust to justify premium prices or create a sense of exclusivity.

The brand’s strength is pivotal in influencing customer perception, allowing you to command higher prices and cultivate a loyal customer base.

When you price your product low, you send a signal to the customer. When you price your digital product high, you send a different signal to the customer. So the question is: what kind of signal do you want to send?

Pros

  • The brand’s image easily justifies higher prices.
  • No absolute limit to the asking price.
  • Increasing brand value enables you to increase prices.
  • Higher pricing can increase the brand’s perceived value.

Cons

  • It takes a lot of time and effort to build a brand.
  • Brands’ views of themselves vs. the view of the customer might differ, which creates price variations and challenges in implementing the brand-based pricing strategy.
  • Lower pricing can decrease perceived brand value.

Pay What You Want Pricing Strategy

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Gumroad is one of those platforms that enable you to offer digital downloads with the pay-what-you-want strategy. Image credits.

Pay-what-you-want (PWYW) pricing lets customers decide what to pay for your product. This inclusive strategy gives customers the power of choice and can attract unexpected buyers who love your content. The key is being a content creator with a significant following to sell digital downloads.

Pay what you want pricing strategy is about sales psychology and how willing people are to set a price by themselves for your product.

If customers see your product worth paying for, they can set a price before the checkout process.

Pros

  • You get market feedback for your product, which can automatically signal which price is correct for that particular product.
  • Customers determine the price of your product.

Cons

  • You might make $0 sales more than you would like.
  • You need a significant following to make this pricing strategy worth it.

Offer-Based Pricing Strategy

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Having an offer-based pricing strategy can create urgency and fear of missing out on the prospect. The offer can be an evergreen one.

An offer-based pricing strategy is used when you want to entice your customers with a limited-time offer or a sale, creating urgency inside the prospect.

By customizing offers and discounts, you can entice customers, maximize sales volume, and foster long-term loyalty. This pricing approach aims to create a win-win situation where customers feel valued, and you can optimize revenue generation.

Different offer types to use with an offer-based pricing strategy:

  • Tripwire: Selling a low-ticket item (irresistible offer) before upselling the main digital download.
  • Upsell, downsell, cross-sell: Offer another digital download with a reduced price after the checkout or if the prospect is leaving your checkout page.
  • Bundle: Combining multiple digital downloads to be sold as one product.
  • Sales, promotions, and discounts: Flash sale, holiday sale, Black Friday sale, limited-time offer, one-time offer (OTO), self-liquidating offer (SLO (used when running ads)).

Pros

  • Offers are always considered better deals.
  • Creates urgency and FOMO (fear of missing out).
  • Can increase sales volume.

Cons

  • Cuts profits.
  • It can devalue your brand’s image.
  • Can attract price-oriented customers vs. value-oriented customers.

Option-Based Pricing Strategy

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Option-based pricing enables you to customize the digital download offering to different customer needs. Even though the example is about membership, the deliverables are mostly digital downloads. Image credits.

Option-based pricing is all about giving different options while keeping the core offer roughly the same. In option-based pricing, you usually create three different pricing tiers (low, middle, and high). While the three options are all different, the core product tends to be the same.

Customers create associations with prices:

  • Low: I’m better than that.
  • High: I don’t need that much.
  • Middle: I’m fine at this level.

The most bought option (unsurprisingly) is the middle-priced product. In option-based pricing, it’s all about customers association with pricing tiers.

Pros

  • Customers love options.
  • You can customize the digital download offering to suit different customer needs.
  • You can increase profit margins with a high-priced option.

Cons

  • It can become unmanageable if there are too many options.
  • Options can create confusion among the customer.

Feature image credits.

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Okuha

Digital Artist

I’m a digital artist who is passionate about anime and manga art. My true artist journey pretty much started with CTRL+Z. When I experienced that and the limitless color choices and the number of tools I could use with art software, I was sold. Drawing digital anime art is the thing that makes me happy among eating cheeseburgers in between veggie meals.

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