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related expenses into your spreadsheet calculations. This is beyond the scope
of this manual, but consider this...
Some of these costs are variable expenses (ex., advertising and promotion).
Others are fixed (ex., overhead). Be careful about picking one of the lesser
price points -- you may dip into the red. Run a complete P&L through a
spreadsheet to make sure -- unless you’re a dot-com, the idea is to make
money, right?
The lower your cost of production, the closer will this profit graph will be to the
“Gross Dollar Sales vs. Price” graph -- at zero-cost (digital products), they are
identical. In the example graph above, the cost of production was $25 -- so it is
somewhat similar to the gross sales graph. If the cost of production for this
graph was $100, this graph would actually lose money until $101 on the x-axis!
It would be dramatically different in shape.
In the example above, the graph peaks at $90 -- this is your single, most
profitable point. Still, you might not choose to set this as your price. You
might go quite a bit lower or higher, depending on your pricing model
(penetration vs. top).
In general, remember this...
For a high-price/low-volume top pricing plan (skim a lot of profits, but not
make many sales), “slide to the right” on the x-axis. If you are thinking of a lowprice/
high-volume business model (many sales through fast penetration
pricing), “slide to the left” on the x-axis. But wait, you’re missing a vital piece of
information...
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Make Your Price Sell!
8 5
Now that you can see profits, you can’t see the number of units sold at each
price point. So to make your final Perfect Price™ decision, it’s time to see it