Pricing in reverse: use a product's price to figure out what you need to build
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Re: Pricing in reverse: use a product's price to figure out what you need to build
#2Interesting analysis, but with one flaw - Assuming 1-2% conversion rate, and $1 on avg on google ads (thats what I have seen at least for most keywords with decent frequency), your formula is yielding $50-$150 for everything you build.
Re: Pricing in reverse: use a product's price to figure out what you need to build
#3Interesting analysis, but with one flaw - Assuming 1-2% conversion rate, and $1 on avg on google ads (thats what I have seen at least for most keywords with decent frequency), your formula is yielding $50-$150 for everything you build.
I don't see a lot of keywords where you can just assume they'll all be $1 CPC. Project management software: $14 a click. "iphone camera app" - $2.90 a click, "stop smoking" - $4.62 a click. And those are just the first 3 i looked up.
Re: Pricing in reverse: use a product's price to figure out what you need to build
#4Interesting analysis, but with one flaw - Assuming 1-2% conversion rate, and $1 on avg on google ads (thats what I have seen at least for most keywords with decent frequency), your formula is yielding $50-$150 for everything you build.
I don't see a lot of keywords where you can just assume they'll all be $1 CPC. Project management software: $14 a click. "iphone camera app" - $2.90 a click, "stop smoking" - $4.62 a click. And those are just the first 3 i looked up.
The article assumed 1% Click Through Rate (CTR) not a $1 cost per click (CPC).
Re: Pricing in reverse: use a product's price to figure out what you need to build
#5Slick mobile version. I'm reading the article from my iPhone and I'm impressed.
Re: Pricing in reverse: use a product's price to figure out what you need to build
#6He could just divide the CPC by the conversion rate and figure this out in about one sentence:
$1.53/0.015 = $101.33
Re: Pricing in reverse: use a product's price to figure out what you need to build
#7I don't entirely disagree with this article but I do know that Google Ad prices are driven by market demand which means that if you price your product to break even on Google Ad conversions you are really just piggybacking on your competitor's math. That's what they have found to work. If enough people use this logic you'll converge on an average market price - not what customers are willing to pay.
TL;DR: You are participating in a pricing feedback loop with your competition.
Re: Pricing in reverse: use a product's price to figure out what you need to build
#8It is definitely useful to do these sort of 'back of the envelope' calculations. A few things to bear in mind:
-It is strongly in Google's interest to inflate bid prices. I would take their suggested bid prices with a pinch of salt. The Google traffic estimator shows that I should be able to get around a 4% CTR on [speed reading] at around $0.50 per click in the USA: https://adwords.google.com/ko/TrafficEstimator/
-The amount you have to pay for a conversion in Adwords depends hugely on how well you play the game of Adwords. Most people using Adwords have very little idea how to set up or manage their accounts and are paying a lot more per click than they need to (I have looked at quite a few Adwords accounts).
-There are more countries in the world than the USA. You may be able to get clicks and conversions a cheaper elsewhere.
-There are probably lots of keywords related to speed reading that are cheaper to bid on than the exact match [speed reader], e.g.
speed reader course
speed reader techniques
speed reader software
speed reader tips
speed reading
speed reading course etc
They will probably have lower search volumes, but it shouldn't be hard to come up with a few hundred of these. Some of them might also have higher CTR and conversion rates.
-I think the numbers used are reasonable (1% CTR, 1.5% conversion rate). My own numbers are a bit better than that, but not too far off. But my average cost per click (selling downloadable software) is waaaay lower than $1.53.
Re: Pricing in reverse: use a product's price to figure out what you need to build
#9Amy Hoy doesn't say you should use adwords, does she? Correct me if I'm wrong as I've only read the free chapters and watched the video, but she basically tells you to find a suitable group of customers, see what kind of product they need, and create it. Also, blog about things which that group would find interesting, like 37signals does, to connect with these customers.
Now after reading this article I wonder whether this can actually work. Can you not make a living by creating a product and getting some sales from your blog + SEO?
Re: Pricing in reverse: use a product's price to figure out what you need to build
#10Slick mobile version. I'm reading the article from my iPhone and I'm impressed.
I love it. It's all Dustin Curtis' doing and design. http://dcurt.is/. He created the SVBTL blog network I'm a part of.