This is a seven-part series on how to lower the prices you charge for 9×12 spaces.
Part 1: Selling Cheaper Than Ever
Part 2: Cheaper Printing
Part 3: Cheaper Postage
Part 4: Cheaper Design
Part 5: Affordability
Part 5: Building Your Perfect 9×12
Part 7: DFY Pricing Models
Building your own custom-tailored 9×12 system is crucial to reach the goals you want. What I believe (and why this article series exists) is that it should all be built around target pricing and margin. You should know what you want to sell your average space for and how much of it should be profit. Everything else should be designed to fit that goal. If you work the other way and start designing value the way you want it and then see what the price is and mark it up to make enough profit, you’ll probably find that you’re priced way out of league. Remember our car manufacturing example earlier … they don’t just build cars and then figure out what to charge for them … they start at the price & margin desired then design the features into it.
Building A Custom-Fitted 9×12
Here’s the simple three-step formula you need to figure out your custom-tailored 9×12:
Step One: Determine the average selling price (per ad) you’ll charge
Step Two: Determine the profit margin required
Step Three: Figure out the most value you can possibly squeeze in to fit the desired price and margin.
Just remember to keep it all within the five Pillars from Part I and keep it all as simple to understand as possible when completed.
The Cheaper You Get It, The More You’ll Learn
Think of how Samsung has to come up with a significantly better smartphone every year or two for typically the same price, year after year, constantly improving and making the value better without raising cost much if anything. It’s that kind of ingenuity that makes some companies dominate over ones that don’t push to solve problems.
I know it’s probably not the funnest thing in the world to do but the payoff is significant. By lowering your target price per ad while keeping margins healthy you can learn a tremendous amount, even if you’re just researching and putting together strategies to mull over. Any idiot can just pick the best options for everything and put them together for a high price with a high margin … but that’s sloppy business and will invite competitors in who can do the thinking and add more value for the same price.
Your 9×12 platform should be unique and customized to something that’s hard for anyone to beat. You’ve got everything you need in this article series to sit down and build a solution that’s virtually bulletproof and it shouldn’t take that long (a day or two?). While I’m a proponent of taking action sooner than later, at some point you’ll need to return to this part of the game and figure out how to make the numbers work optimally, so if you have some time to tackle it now, do it.
The Cheaper You Price, The Easier It’ll Be To Raise It More Profitably!
There’s a huge benefit to figuring out how to get your costs down while increasing value as much as possible … because the benefit of direct selling is that you’ll be able to simply raise prices whenever you want.
Here’s what I mean:
Person A sells the regular 9×12 specs for $500/ea and makes $3500 profit at 50% margin.
Person B spends time figuring out how to sell spaces for $325 at 50% margin, making about $1,000 less but selling spaces much faster. Then as confidence (and demand) grows, person B simply raises the price to $500 and now has a profit margin of 67%, profiting almost $4700.
See what a huge difference that makes!?
Choices & Sacrifices
When I consult with members trying to get to that next level (or are dealing with a competitor), I do this:
I have them list the components they’re not willing to sacrifice, along with the ones the ones they’re OK with making changes to if needed. For example:
- Campaign Quantity
- Layout (number of spaces available)
- Paperstock & Coating
- Distribution Methods
Then pick through the various pricing strategies to choose from:
- Flat price or first come first serve
- Small, Medium, Large
- Net 30 or Extended Payments
- Bi-month campaigns with monthly billing
- Barter discounts
- Referral discounts
- Contract/Commitment discounts
- Add-on/extension upsells for additional distribution or services
Once you’ve knocked off all the components that you’re not willing to sacrifice or make adjustments to, simply work through all the other options until you reach the best possible value you can get for the price and margin you want. Just remember to keep the end product simple for the prospect to understand.
Next we’ll go through proven pricing models optimized to 50% margins.
Go to Part VII: DFY Models W/Pricing
Very interesting. Particularly the idea of using bimonthly campaigns with monthly billing. This could cut design costs in half and gain economies of scale with printing. I’m wondering though about pricing within the model and perceived value.
Assuming I could sell a 20,000 piece bi-monthly mailing (6 mailings year) for $475 (medium) and $595 (large) month, I’d profit around $52,000 for the year. The pricing falls nicely within the affordability index as well. On the other hand, I could make it a monthly mailing to deliver more value and a lower price per address… say a 20,000 piece monthly mailing (12 mailings year) for $675 (medium) and $875 (large) per month and profit the same $52,000 for the year (although at a lower margin). The value to the business is that they can get twice the distribution for less than a 50% increase in the monthly cost.
Given these two approaches, which one is likely to be an easier sell? Do business owners see the overall value of increased distribution or will they likely be focused solely on the lower monthly price regardless of cost per address?
If you like the idea of bi-monthly mailings with monthly payments (which is a good thing!), you might want to explore starting with a monthly and after the second or third one moving it to the bi-monthly. It’ll make a lot of sense to your recurring advertisers as they get big mailings and lots of time to put their incentives out for. I really like that model.