Tom Morkes is a West Point grad, Iraq war veteran, founder and CEO of Insurgent Publishing, and author of The Art of Instigating, The Complete Guide to Pay What You Want Pricing and Collaborate.
Tom Morkes is also the host of In The Trenches, where he interviews today’s most fascinating (and sometimes controversial) marketers, entrepreneurs, writers, creators, inventors, and leaders, including Dr. Jordan Peterson, Seth Godin, and John Jantsch among many others.
TOPIC TOM COVERS
- Learn from the author of “The Complete Guide to Pay What You Want Pricing”
- Get tips on pricing strategies, entrepreneurship, art and writing from a military background
- Learn to apply the War of Art’s tactics and principles to your business
- Join the exclusive group who have attended Seth Godin’s Two Days Event and grow your business.
- Discussing the “Pay What You Want Pricing” model
- Exploring how the model can be applied to different types of products and services
- and a whole lot more
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READ THE TRANSCRIPTION
Bronson: Welcome to another episode of Growth Hacker TV. I’m Bronson Taylor and today I have Tom Warchus with me. Tom, thanks for coming on the program.
Tom: Thank you so much for having me. Bronson, appreciate.
Bronson: It. Yeah, for sure. Now, Tom, you’re the author of The Complete Guide to Pay What You Want Pricing, among other books and among other projects. And we’ll talk about your new book in just a moment. But first, tell us a little bit about your background so people can get to know you. What other things have you done that people might have seen online already?
Tom: Yeah, I mean, actually, my background play starts further back in that I went to West Point and then graduated there and then joined the military. So I spent about five years as commissioner, officer in the military, and just recently got out maybe about a few months ago, actually, so about six months ago. I want to say much at this point. So I started work on mine maybe about a year or two ago, kind of in my spare time. And. And then in that time, I started building my, my personal brand website, which is Tom Morningstar.com. So if you want to get inside my brain, especially for anybody listening, of course they can check out what I write at Morningstar.com. It’s kind of where I apply what I’ve learned leading troops of combat to entrepreneurship, art and writing. So I essentially take the concept of the war of art and make, you know, this is what Steven Press Field writes about in his book, The War of Art, appropriately titled. And I kind of I remember reading that book and thinking, like, I wish there was more content like this out there. So I was like, Well, you know, I could do that actually, because with my background, actually, it was kind of appropriate. I was like, why not just apply real world, you know, military, you know, tactics and principles and stuff like that to the same same concepts that he writes about. Yeah. And so essentially that’s what I’ve done. So in that time, I started that in September of last year that that website and grown it slow but steady since then, written a couple of books and published them myself through Tom Walker’s dot com. And the most read one is that the complete guide to pay what you want pricing, which is a model that I’ve used extensively for all my writing, and it inspired me to do a lot of research to find out if other people could use it, too. And so, yeah, that’s the essentially the culminating effort of about six months of my life has been building this thing. And so I’m really excited to have it released, and I’ve got some really positive feedback. So I’m excited to see the message spread to the concept of Pay What You Want.
Bronson: So I’m going to dig into all the nuts and bolts of that message in just a minute. Yeah, the War of Art is a great book. If people are listening to this and they haven’t read that book, they need to find a creative individual. It’ll put a fire under you for sure. Now, one of the books that you wrote was about was it Two Days with Seth Godin? Is that the name of it? Yeah. So did you actually go to kind of a little mini conference thing, a little mini I don’t know what you call it that he put on there.
Tom: Exactly. Yeah. You know, it’s funny because I was thinking about it myself, like, because I always kind of stumble on the word to describe it because it’s it’s not quite a conference and it’s not quite a seminar. It was just really interesting what he did. He put put together this kind of two day event. And he had a small group, but I don’t want to say it was maybe like 100 or so people. Like it wasn’t very big at all. And he put on this little events that was back in, I want to say, the fall of last year. And so I was like I had I saw his opportunities website when he posted about it saying he was going to this meet up. And it was kind of this idea of like helping people get their their businesses unstuck. So I’m everything that the time I don’t really have a business but I really want to go to this and just kind of hear him because I’ve read pretty much all his books and obviously I read a ton of his blog posts, stuff like that. So I feel like I understand his his his philosophy pretty, pretty well. And I was like, I really want to, you know, of course, like anything extra I can get from is, is wonderful. So when I went there, it was in New York. It was a great setting. Like really impressive. Like, if anybody was like curious, I wonder how I should run an event, I’d encourage you to go to Seth Godin event. I thought it was remarkable in that respect, which I guess shouldn’t surprise me, but it was awesome event. And then while I was there again, I didn’t have necessarily a reason to be there except didn’t have a business quite yet. I was just taking tons of notes. I’d done some things in like real estate and things like that before, but I didn’t really consider those kind of side projects as well, and I wasn’t going there for those. I just went there just to glean information. So I took a ton of notes. I ended up with about 60 pages of notes when I got back. Yeah, I wrote. I wrote everything down. So. So that was and in the end, I was like, you know, pretty happy with I’m like, this some great stuff. I’m going to write this up, I’m going to share it with with my small audience at the time. And so I kind of started to do that with portions of and I was like, you know, there’s just too much information here when I ended up transcribing it in there being like, you know, 30 plus pages in a word document, I was like, wow, that’s that’s probably too much for a blog post. So, yeah. So I was like, okay, I’m going to fleshes out a bit more and I’m going to create a PDF. And so one thing led to another, as most things do with me. And I ended up like drawing a. This original art form and stuff like that, the coverage of myself and all this stuff. So it’s just kind of I guess my nerdiness, you know, really taking the best of me and just putting way too much effort into something that was going to be take me like no time at all to do end up taking me a few months. And then I sent it the finished product to go nuts, like, Hey, do you mind if I share this with my audience? You know, I have a ton of great information, but essentially I was like, I understand if you don’t want me to send or share it though, too, because again, it’s, you know, two days, exclusive events, etc.. And then he tried within a few minutes, responded back, love it, go for it. And I was like, Cool, okay, that was awesome and really quick. So that afternoon I published it using Gum Road Ecom, which is another platform I talk about a lot because it’s it’s near and dear to me in terms of how easy it is to set something up and start selling it through Gum Road. Yeah, and I did that that afternoon and I use Pay What You Want. I didn’t know what to price it at, so I just let my audience decide. And within the first month, I made about $500 off of a product that was going to give away for free. And so that’s when I was like, you know, maybe there’s something to this pay what you want concept.
Bronson: You give people the option to pay anything they want and you end up making 500 bucks.
Tom: Yeah. So some they could have downloaded for free. Yeah. So I was like, okay, again, what? You know what just happened, right? Because I didn’t, I didn’t expect anything to happen. I knew that was great. Obviously, I knew it was great quality content like I might, but I have to make sure it was. But I still unsure how to price it or what people would think of it or right. Because, you know, again at the time, you know, new author, a new new online person doing stuff online, I wasn’t didn’t understand how to value myself at the time and be like, I’m still not sure today sign up. I’m sure like we all do. We all undervalue ourselves to a degree. I’ve never learned to to get over that, too. You know, even with this new book, I’m like, I wonder I wonder if people are going to pay for books. They may not pay what you want to get. And so it’s always for me, it’s always kind of a surprise that way. But yeah, so I using page one was remarkable for me. It was, it was really, it was profound. Yeah. Because letting people set their practice, one, it was easier for me as the new creator of something. And then it was, it had been incredible. If I press it, I did some analysis of it after the fact and looked at the prices or the results versus had I just published on Amazon and doing it the way I did it, I may I would have had to sell thousands of copies on Amazon because they take about 30 to 70% of your your your your payment, basically. And then I would have had to set it at like five bucks or something like that sort of. So if I had to it by $5, I would have had to sell thousands of copies to make what I did off it. And so I was like, okay, that way. I’m from now on is, is selling through my website directly to my audience because there’s nothing that that’s that.
Bronson: Yeah. No, that’s great. Is that what kind of inspired you to write an entire book about a pricing model? Because it’s kind of odd, if you think about it, to write a book about a single pricing model, but it must have had a deep impact on you, huh?
Tom: Yeah, well, it had an impact on me, but I also got so many questions from people about it. So I did a, um, a guest post on Thing Traffic, which is a pretty, pretty highly trafficked website. And it was I didn’t, I wrote the blog post, kind of my analysis of what I did and how it worked because I was like, again, you know, I feel like that was good, good. It was a case study. I feel like, well, it’s just my experience. But I thought it was a good case for other people to hear, especially who are new and just kind of starting out to hear that there are ways to do this, to do stuff online unconventionally, especially in a small way. Just kind of test your test, dab your toes into the water, so to speak, and pay what you want allowed me to do that. So I wrote about my experience. That post generated tons of responses and so many more questions. So people, people loved it. But then I got a ton more questions about like, well, does it work for, you know, physical businesses? Does it work for services? So I just gave an example, a digital product, that’s it. So I was like, well, I’m pretty sure it could because it’s just the way I was thinking, My God, I’m going to use this in the future. So I did some research. I connected with guys like Anthony Ventura, hybrid athlete, who had been using the pricing model for their fitness website for about a year and would bring it out on on on average per day, according to when I spoke to them about 4 to $600 per day on page product. So it’s a workout fitness website that uses this model. And I dug deeper. I connected with Terry Joyce, who has been doing it using page one for the last five years, and that’s been her model for her service based consultancy and web design. So that’s awesome. And just kind of, you know, one thing led to another and pretty soon, again, kind of I didn’t expect the project to take as long as it did and but it ended up being all consuming and taking me about six months to put together and do the due to the the model itself justice and and really get into the nitty gritty. So in the book I cover how to apply to services because it works really well for. Services. How to apply to digital products, of course. Plenty of keystrokes for that. But I also had a how to apply to physical based businesses too. So anybody is listening and it’s like, well, I have a restaurant. How does that apply to me? You know, and check out the book. You might be surprised. Like there’s actually an incredible amount of content that physical based businesses can use to to to apply pivot you want not just a lot of people think people to like the concept they have to use everything they do. That’s not the case either. I people can apply it to like say a singular product or singular launch or something like that so that people can apply just aspects of it to certain things. It doesn’t have to be across the board like I do where I sell everything if you want. So yeah. And a background.
Bronson: I’ll you that a little bit because you know with digital goods it’s just a really clear, you know proposition here’s a digital good what do you want to pay for that kind of thing. How would a service do it? So they have some services that are just their fixed prices, but then they have this extra service that’s pay what you want, that kind of thing.
Tom: Yeah. So again, you know, there are plenty of histories and people using in different ways, but it kind of comes back down to like two main areas that I talk about in the book. And one of those areas is what I call the five essential components of pay what you want. So it’s essentially like it’s criteria. It’s like the pay you want. Like you have to meet these five criteria, otherwise pay which won’t probably won’t work. So those five, those five, those five essential components are a product or service with low marginal cost, a fair minded customer. So, so number one, a product with low marginal cost. Number two, a fair amount of customer. Number three, a product that can be sold credibly at a wide range of prices. Number four, a very competitive marketplace. And five, a relationship between buyer and seller.
Bronson: So those are kind of those for us a little bit because those sound like there’s a lot to go into there.
Tom: Yeah. So I’ll be brief because some obviously are more self explanatory and others, but so so I’m brief with this because this is one of the areas. And then the second area is kind of well now what’s a metal those criteria now what do I do right? So this is kind of the foundation. So again, for anybody listening to put it in context, this is kind of the foundation you have to meet all these otherwise to probably pay what you probably won’t work. But then of course, once it meets all these criteria, then what do you do? So that’s the second kind of area that will get into this. Gotcha. But so, so the number one product with low marginal cost. So you’re probably already savvy to this. Bronson, but I know and probably many, many listeners are too who are entrepreneurs understand the cost of low marginal cost. But just to get everybody caught up, I think it’s just the concept of how much it cost to produce one extra unit of my products. So if I’m, I don’t know, making bricks or something like that, how much does it cost me to create one extra brick versus like if I have, like, you know, if I’ve already built like a thousand, what does it cost me to build one extra one? And so the cost of low marginal costs, anything that continues to decrease over X amount of units produced. Of course, when you think about that in context, digital products immediately springs to mind.
Bronson: There’s almost total cost of bids. Almost free.
Tom: Exactly. Yeah. So you see immediately the draw to use and pay you our digital products. But of course and we can get into more details and services and because again, that’s for products with low cost but actually works for services too. So I say the same concept to services. Now it’s the steelworks, so there’s marginal cost to services, but depending on how you kind of set up your service, say it’s a consultancy or, you know, one on one coaching, the same same rules apply to it. Yes, you’re going to use your own time to do it. But as long as you make sure that there’s not an extravagant amount of additional expenses for you to do your consulting, like if you have to be in person to do it, that’s not not so something a masterclass. If you have to fly to your client every time to consult them, that may not work. You see kind of the nature of the beast right there. Yeah. And even that there’s a caveat and we’ll talk about that later on. But that so that’s the general idea of low marginal cost products. So the second thing is a fair minded customer, self explanatory. You don’t want to be dealing with people that don’t value what you do. So, you know, if you you find that because I’ve talked to a lot of people, some people have tried to apply pay what you want in small ways and felt like like it failed for them. And so among other things that they did wrong, one of them was the whole concept of fair amount of customer in the because when I talked to had used it and then people took her up on her service offer. I sat down with her for consulting and then never, never paid her for what what she did. And so you never got to that. You know, I’d love to find out more details about what exactly happened, but I just remember thinking immediately, that’s clearly not fair minded customer. Obviously, what we’re looking for someone who values the time and effort you put into something. So you might be wondering, how do I do that again? Well, we’ll get to that number five, which is the relationship between buyer and seller. But that’s how you kind of can can validate somebody as fair minded or not expect that relationship. But you want somebody to understand that there’s a person behind the product or that you’re offering and that you’re not just a lifeless corporation. Yeah. So that’s the concept of fair minded customer. So number three is a product that could be sold credibly at a wide range of prices. This is the main rule of thumb is basically anything applies to this to degree under two conditions. One, it can’t be a commodity. I’ve made reference B before. You know, again, if you’re on petrol or, you know, fuel or gasoline, whatever, petrol won’t work. Right. So. So that’s kind of, again, common sense. But, you know, it’s it’s important to understand that and then to think, well, what, what are things that I know what is excluded from that but what can work. So that’s, you know, an example might be an E course. What is the actual value?
Bronson: Of course you to say anything is value based could probably have a wide range of prices.
Tom: Exactly. So that’s it in a nutshell. It’s anything that that value based is just the best way to put it. So any time the customer is deciding how much is this value to me, like what am I getting out of this again? I think e cost is one of the best because again, I’m not saying and only work for that, but which is a great example of a credible, you know, wide range of credible prices for something like that. Because I know people who are will sell E courses for anywhere from $50 to $5000 or more in some cases. So depending on what the impact is and what the values, it can be a wide range of prices. And so that’s that’s what you’re looking for at any time you’re selling a product or service, you want to be value based. Mm hmm. So number four is a competitive marketplace. Again, pretty self-explanatory. You want to make sure you’re not the only person in the space. So, you know, if you find competitors around you competing for, you know, with the same demographic at the same market, that’s a good thing. And so pay what you want will work if you find that you’re the only person in your niche like you’ve done some like I know it’s pretty popular concept to kind of niche down and get really specific views of if you find yourself in a space that’s devoid of competition. Again, I don’t think what you want will work, not in the same effect it will in a competitive marketplace where it creates exposure and it does its own marketing for it itself. But there’s also a second concept there in a competitive marketplace, since the customer will understand that that other people, other competing businesses or, you know, products or services, they’ll know what an average price of product or service supply costs.
Bronson: They know how to be fair minded because without any competition they may be fair minded, but they don’t have a baseline to compare it to.
Tom: Exactly. Exactly. So that’s exactly it. And so finally, a strong relationship between buyer and seller. Again, I would say that this you know, part of that is common sense. But that is so important that a large portion, the second area that I talk about how to create the perfect pitch, I call it my perfect pitch framework about how to actually pitch your product or service using coach. You want to encourage people to pay money for something you’re giving away for free, potentially. Relationship is the most important part, and obviously that’s what I had done with my audience up to that point. I hadn’t sold anything before. I’d just been writing a lot of my readers I had already connected with. I try to send, you know, a hello email to everybody that describes to me, even when I get swamped, it might take a few weeks, but I do. I can type every letter to to every subscriber. I go out of my way to connect with my readers and to give them the time of day to answer the questions. Stuff like I know a lot of people will charge consulting fees and things like that, but I don’t do it. I usually do. I’d be happy to answer questions as much as time permits. So I had without knowing it, I had built relationships my with my customer and with my audience. Yeah. And so now of course, if you think about that, like it’s not a hard thing to do per se, or it’s not, it’s not overly complex. It’s a pretty simple thing. It is hard some ways because it takes time. And if you’re not willing to put in the time to build a relationship with your customer or with your audience again, which isn’t the tactic or model for you, but for those who excuse me, for those who have built up an audience and already connected with them and built up a relationship with their audience, which you want, which works wonders for that person. So those are yeah, those are the five components.
Bronson: So there’s kind of five fundamental components. And then you said after you get those five down, it’s kind of then what? And there’s a second thing that you go into. What’s the second piece that you teach?
Tom: So then the second thing is what I call the the perfect pitch framework. Mm hmm. So again, you know, let’s say you’re listening to this when of your listeners listening, it doesn’t like. Okay, well, I think I excuse me. I think I have met all those criteria. Mm hmm. So now one of the things somebody might. Might be thinking is, okay, I’m going to put something off as pay what you want and watch the cash rolling. The problem with that is that just because you’ve met all the criteria doesn’t mean page one will actually work. The whole concept of pay what you want because you give the customer the option to choose their price. Mm hmm. You need to give them you need to give that same customer a reason to choose a price. Right. So it’s not just hear you decide your price. Go for it. When people have. On that or when companies have done that, it just it failed miserably. And so when you applied appropriately that I want to play the right way, you encourage people, you give people a reason to contribute. So that’s what I call the six step pitch framework. So there’s six steps to it, and I can walk through those if you’d like.
Bronson: Yeah, well, both of them are quick and let us know kind of how to put together the pitch so we can actually do.
Tom: Yes, yeah, for sure. And this is essentially I’ve been working with some people on this this framework and applying it. And these are these these criteria. And this there’s six steps to this. You doesn’t need to do all six and they’re not hard. Again, it’s just, you know, once you have it, the clarity of of the six steps, you understand. Okay, I can I can apply this to just about anything it’ll takes. It might take some time for certain things, but you’ll, you’ll realize these steps aren’t that hard and that there also some of them are universal principles. So I’ll get right to it, though. Yeah. So number one is, is clarify the offer. This goes for anything you’re selling. Now, if you’re using if you’re doing six pricing, you need to clarify the offer. You need to make sure what you’re offering is very clear to the customer. Right. So that’s why, again, if you have, you know, different entrepreneurs listening and stuff like that who are selling product or service, that’s kind of a rule of thumb for anything that you’re selling. And so it’s no different from paint you want you need to be precisely clear with what you’re offering with the value is there are hundreds of books written on just that topic, of course. So I see I get two pieces of advice. One, keep it simple, whatever you’re offering, and then to be straightforward and specific about what your impact is, what your value is. Just the two or two rules, rules of thumb, people. There’s tons of ways to get clever with it, with your headline, with your copywriting. But just to be super clear and upfront about what you’re offering, that’s it. Just be simple, be straightforward. About two is show. Show the audience or show your customer that you’re human. Again, it kind of you think, okay, well, that’s common sense. And well, common sense is not of course not always common practice. Oh, there are plenty of good examples of people online who are humans, and you can tell when you read their their websites and then they’re planning people who are trying to make a connection with their readers and they kind of come off sounding robotic and I don’t know what that what the reason is for that, except that I just know that the computer screen has an odd way of making this all sound inauthentic at times. So my piece of advice for that is be I would even suggest that. So some ways to be human one at a picture. So what you’re doing I know it sounds simple, but there’s truly there’s impact there when you actually add a picture to the splash page that you’re creating. And again, if you’re doing this in person, if you have a physical based business, actually be there to connect with the person who’s going to contribute, meet them face to face. A second way to do it is include a video again, just like a picture of videos. If it can be even more powerful, if you do it the right way and you let your personality shine through, and then finally, when you actually write right in a casual, I say a casual but passionate voice. So again, people sometimes write robotically or they don’t they don’t let their personality shine through. So just tips on that is right. Write passionately and write casually. So again.
Bronson: Like that.
Tom: Here. So I gave examples of like Amanda Palmer, you know who I actually do a case study on issues people want people to want from anything. She’s just a great example of somebody who is unabashedly herself online and like if you give an example in her copywriting, I was like, she misspells things. She doesn’t capitalize things. But the whole time you’re like, you can hear her voice when you read what she writes. Mm hmm. That’s powerful. And you can I don’t know if you can put a price on how valuable that is, when you can come through the computer screen and sound like yourself and sound like a human being. And then, of course, I give examples like Louis C.K., the comedian, it’s a great job on his website, doesn’t actually sell, put you on products, but he sells something that could be easily pirated, which is a standup comedy routine. And yet he does such a great pitch on his website to inspire you to contribute, to pay for something you can get for free, easily, illegally because of just how. So I highly encourage people to check out his website too. He doesn’t. It is funny, Louis C.K. kind of like negative style and you just like you feel compelled to pay money. So that’s kind of my overview of of of make sure that you don’t you you actually you’re human. So show the audience that you’re human. Those are my tips for that. Yeah. Number three is appeal to idealism. So again, I come since you need, you know, again, you’re giving people a reason to pay something for nothing or not. I’m sorry, not for nothing, because obviously that’s a bad way to present it. It’s not for nothing. There is value behind what you do and behind what you’re selling. But if they can get it for free, what’s the reason for paying? So one of the reasons you can give your audience for paying is appealing to their idealism. So talk about karma, for example, or talk about generosity or talk about the way you’re just a human being and you’re not a corporation. And there’s blood, sweat and tears behind all your products and services that you create. These are things I do. I’ve been doing on accident when I describe some of my stuff before and I found that the people that you apply to each one most effectively do that all the time. They remind people and they let people, not the human. And the appeal to this is concepts, idealism, whether it’s generous, karma, charity, virtue, all that across what sort of feel to that and then ways to do that. I get my my advice for that is you tell a story about the product and how you created it or the service. I put it together. You make references to these ideals or these virtues, specifically talk about karma, make a reference to it that, you know, pay it forward. Talk about the power of that, or also at pictures of stories of people that this concept of page one is copied. So that can be as simple as especially if you already tie it to charity, which, by the way, is is number six and the step by step model is using charity. But we’ll get to that in a second. But it also ties in to idealism. So any time you can tell stories about the impact of what this pay model has done, for example, if I means that don’t have the means to to contribute the full price to something, say, a $500, you course can pay what you want, gives them access to it. So obviously you can appeal to that idealism of the consumer. And while if I pay full price for this, I’m helping all these other people who don’t have financial means to get the same product as well. And then, of course, another way to do this is to create a common enemy to which is advice like, you know, kind of create that dichotomy between what you do and what’s out there. Again, that’s the whole concept of being a human being. One great way to do this is to say that you’re not a corporation and to let people know that and maybe making the corporation itself the enemy is one great way. You’re the human being. You’re the one you know, I’m just some guy Lucy kid is that I’m probably like I’m just some guy, you know, creating this stuff. I love how he writes it says that. But anybody can say that. Anybody can really say I’m just some guy, you know, doing my work and I appreciate any contributions. And so you automatically create an enemy that way saying, okay, yeah, you know, the corporation, the life loss corporation, that is kind of the enemy. That’s one dichotomy. But there’s other ways to finally or I’m sorry, number four, I finally just out but this is step number four is anchor the price. Again, a concept is pretty standard for most entrepreneurs. The concept of price anchoring is essentially drawing the attention of the value of what you’re creating. So drawing the attention of the customer or reader or fans or whatever and whoever is viewing your product or service, drawing their attention to a high price point so they become comfortable with the high price point. And in a nutshell, what better way to describe it? But the best probably one of the classic examples is iPads is one way to do price ranking. So anytime a new iPad comes out, you’ll see that there’s like, what? I don’t know, three different models, maybe more, whatever, you know, 16 gigabyte and they’re all the same except for like the amount of storage capacity, 60 gig, 32 gig on 64 gig in the 64 gig or whatever the highest is, will be something like 900 bucks or 700.
Bronson: Thinking about buying the 16 gig.
Tom: Exactly. So then when you look at the 16 gig, which is 500 bucks, the option doesn’t sound so bad. But if you just had iPad, a 15 gigs for 500 bucks.
Bronson: You wouldn’t compare to an Android.
Tom: Exactly. So you’re like, okay, there’s what’s my incentive if like it’s not, that’s really quite expensive. So I hope it does a great job of comparing using its own products as pricing, which not to use other products as price anchors. So you mentioned Android in the book, like an example of the surface, Microsoft’s tablet, which price anchors iPad because it’s in the collective memory of a lot of people and they show the iPad is like $500 and then the surface is only 350 and it’s you get more room and you get more speed or whatever, you know, it’s that there where they do it is at they do a great job of pricing great again the iPad people already understand what my pad cost for the most part price increase. When you look at the surface, 350 bucks, it’s nothing for an iPad or that’s nothing for a tablet. Think about that, though. Like if you compare a tablet to just a phone, you can get phones for free, smartphones for free on a contract. So again, depending on how you position something, it makes it seem like a value or it seems like or it seems like you’re being robbed. But again, it’s just I think those are two classic examples of it.
Bronson: Yeah. No, that’s great.
Tom: Yeah, go ahead.
Bronson: Now, as I say, is there any other parts of the kind of implementation there is are like five and six, I think.
Tom: Yeah. So yeah, number five is steer the customer to the right choice. So you alluded to this Bronson before, when you mentioned when we were talking beforehand or earlier, you had mentioned the concept of like, you know, in the competitive marketplace we were talking about and you were like, well, in the competitive marketplace, people know what they know, you know what they ought to pay for something because there’s tons of examples. Mm hmm. So steering the customer to the right choice is the same concept there in action. Because, again, excuse me if I. Again, you need to give people a reason to contribute, especially when. They don’t have to or they can contribute just the minimum.
Bronson: Yeah. So how do you stand toward something?
Tom: Sure. Excuse me. So one of the ways to do that is the humble bundle does a great it is a great example of this. And I would encourage anybody listening, if they’re really curious about this, to check out Humble Bundle AKAM, which bundles up video games together and they release, you know, in three like they give about three weeks and people can order this, this bundle of video games at any price that they choose. You get bonuses for a certain amount. But one of the things that’s really so they do incredible. They do pretty much everything right when it comes to page one. So they’re like the best case study ever. So check out Humble. But on the way they they create a website for the things they do to is and when you scroll down to like purchase a humble bundle, it’s already pre-selected at $25. So you think to yourself, wow, you know, ten video games or something like that, that might cost me like 150 bucks. Again, they do a great job pricing screen, all these other things, but they also have pre-selected $25. So there’s actually evidence to back this up in research case studies, people who have done stuff like that the of like pre selecting a price for their customer. And every time you do that, any time you preselect something for the customer, it’s more likely that’s going to be the choice. You know, we’re busy people oftentimes. I know I’m lazy and I’m busy. And so if somebody is preselect a price for me, that seems fair. I might just do that if I see a page one product service, right. And a lot of people are like that, too. So if you if you preselect a price for them, it makes it easier to choose and there’s no thinking you just choose. And that’s the beauty of it. A great example of a case study that was a small once a company, but a small I won’t say it’s tech sector dotcom. They released a group of e-books as pay as you want. It’s kind of an experiment. And they had kind of built up a pretty passionate audience at that point. What they did was they preselected, I want to say, $5 for per e-book. And the results were that the majority of people in the contributed contributed $5 with many people contributing over of course. But it’s just fascinating when you think about that. Again, four books that they could have done for free, just like pre selecting the price for the customer. It draws them to price beyond that. By choosing the price for your customer, you can position or make make references to what a retail price should be for something that, again, kind of the concept of price anchoring, you can help the customer decide what fair value is, and that’s another way to do it. So you can draw attention to the fact if you do an e-book, you really have to people kind of know because of Amazon that, you know, eBooks, it cost about ten bucks so that if value’s already in some of its head, but again, for something like an E course, it helps to see what the retail price is. So that’s a way to draw attention to it. And then finally adding charity to the mix. So this kind of ties back into a deal ism, but it’s its own beast because in every documented case page you want, the results have been much better, like in like way better than when they use when they when they integrate charity than when they don’t. So there have been actual, like, you know, certain, you know, more, more academic experiments and studies of this in multiple different circumstances. This concept of using pay what you want versus fixed pricing or what the results were, and then of course applying charity on top of that. And the results always are that when you add to the mix, people are more likely to contribute and they’re more likely to contribute a higher amount. So you might be thinking, Oh, that seems sleazy to use charity to sell my products. And I don’t think that’s how it comes off because if you actually apply it the right way, you’re doing some good. Hopefully you’re not using charity to just make an extra buck, but even you can, if you actually apply to apply charity, apply charity to service, and contribute to charity for what people can, you know, when they use pay what you want when they when they pick a price if that’s the worst thing in the world, I don’t think that’s too bad either for obvious reasons. So that’s why I think charity is awesome, especially again, it only works if it’s congruent with the message. So I think anybody trying to game the system and these page, you are like, Oh, I’m going to use charity. I’m apply charity to this. And then I think you want to work again. It needs to be authentic, you needs to be honest. But if you do charity, it’s hugely powerful. So yeah, the six step perfect pitch framework and I know this a lot and if anybody is like Listen, listening, take notes, but also you can check out the book if you want. It’s what you want so they can pick it up for more for more details on this and how to apply it, particularly now.
Bronson: That’s great. I mean, you really walk through kind of all the components of what are the necessary conditions with you and your audience and your market, and then also how do you actually implement it? So anybody that’s actually interested in this, they have what they need to try it and begin thinking about it. And just so people know who are watching and listening to this kind of why I wanted to talk about pricing with you and specifically page one pricing is because there’s always new pricing models. You know, I had John Lee Dumas on and he sells his kind of community in a in a price that goes up. Every time somebody buys it. So whenever you buy it, you got the lowest price. But if you wait till tomorrow, a little bit higher. That’s one new pricing strategy. Now you can pay what you want. And so all these things, there’s a place for them. And we get stuck in ruts like, oh, there’s three tiers 1929, 49. You know, it’s like, well, you think I mean, maybe there’s another way to price your startup. Maybe there’s another way to price your product, your book, your service, you know, whatever it may be. And it’s at least worth brainstorming. It’s worth thinking about the price. Maybe it’s worth trying it with a small group, a subset or something, just to see what happens. Because, you know, we’ve heard us so many times from so many people that changing and pricing can sometimes be the biggest break that you make in terms of revenue. Like that’s the point where somebody is giving you money. So if you tweak that a little bit, you can have dividends that pay way beyond the amount of time it took to actually implement a simple new price. So that’s what I want to talk about it. Let me ask you this. You’ve done pay what you want with your books. You know, can you disclose how well they’ve done? I mean, I don’t know what numbers you put out there publicly, because I’m just kind of wondering, has it worked for you enough that you’re going to keep doing it this way or do you feel or something and I should just charge whatever I want to get for it?
Tom: Yeah. Well, it’s interesting you mentioned like the three tier pricing, so I don’t know. I’ve always been kind of a nerd that way. I love reading books on anything this is related to that includes pricing techniques and that includes the psychology of persuasion. And, you know, that runs the gamut. I’ve read pretty much every business book on the planet, I want to say, and I continue to read very easily. So one of the you know, you mentioned three tiered pricing, and that’s actually a really powerful way to encourage, you know, purchases at a certain it’s a great way to steer the customers to add, you know, integrate three tiers. So it’s it’s interesting because you can kind of apply the same thing to pay what you want, but get off on a tangent. But, but using that concept, I think I may have done better in some circumstances had I used a three tiered pricing system in some cases. Mm hmm. But I’ve also found that the interesting part, too, is that while I might have had more income coming in, I don’t think I would have had the breadth of exposure or the reach or the impacts. So pay what you want. So that’s just kind of an overview of my general thoughts on it. So I, I, that’s why I subscribe to pay what you want from, from me and from my products and services. And part of the power of using it just in one off circumstances, even if you just do it one day a year, there’s tons of power in that. If you only offer your products or services page on your birthday, it is a great way to do it. You know, it builds it. It’s cool. It’s fun. You and you, all of a sudden you kind of maximize customer value. So it was at CVM Customer Value Maximization, which is a really like statistical way of saying, you know what, the true value of a customer, like if you could break the human being down to number of dollars in their pocket that they could pay you for your products or services, what is that maximum amount of money that they ever pay you for all your stuff? And so it’s a number that companies like Amazon try to continue to increase and optimize. How do we squeeze every dollar out of our potential customers.
Bronson: Top of the bills?
Tom: Exactly right. So the beauty of pay, what you want is that it can do that. It can. It can it can maximize that. Maximize the customer the value. Maximize the value of the customer. Excuse me, because all of a sudden you’ve lower the barrier to entry. So instead of a high price point, you’ve lowered the barrier to entry. You get a lot of people that didn’t have, you know, either the money to pay full price or the inclination to pay full price, who may have just ignored you, product or service. But now it’s paid you want and they’re interested. So those are I know I’m not I’m kind of walking, sidestepping your question. So I’m going to answer the question now. But just I feel like that’s kind of important to understand as far as how. Well, yeah, as far as how well my products have done, I want to say that book, Two Days with Seth Godin. My audience is about 160 hundred and 5060 subscribers when I released it. And so I made $500 off of it in that first month. Since then, my audience is growing. But I want to say I would say I’ve made about $1,000 off of that phone book is Pay What You Want. So not bad for small. I’ve a pretty small audience. And then with my other products combined, I made several thousand. So it’s not enough money to to retire on, of course. And it and so that I think that that might give people a point of reference. So like the most recent book is Pay What You Want It brought in. I want to say my launch I have about 400 I had about 400 subscribers at the time, 450 or something like that when I released it. And after that I made about $1,000 at launch. Yeah. So that gives people kind of like an idea.
Bronson: And it’s always it’s relative to the size of your audience and some of the examples used in the book, they have, you know, a large audience like the fitness website you mentioned, you know, they’re doing three or four or $5 a day, but they have a large audience. So it’s not, you know, good or bad in terms of the pricing model. It’s just it’s always going to be related to the person actually selling it.
Tom: Exactly right. And so that’s kind of the brilliance of it. And I kind of come back to this point in the book as well, but also just any time I talk to people, I say this was like the. Perfect pricing model for me when I first started. And I still obviously love it because I was an unknown author at the time who’s going to listen to Tom when there’s potentially like a million other Tom sounding people on the planet, maybe writing about similar topics about business, entrepreneurship, or even these pricing, you know, pricing models and things like that. So who’s going to listen to me? Again, I think that for the person listening who’s like, I was super timid and I was very scared to write online, I think because I was in the military too. I was like, where my boundary is? Like, I don’t want to divulge too much stuff and I want to keep this under the table as I was doing in my spare time. So it’s a fine line. So I was like kind of too scared to really promote my work or anything like that. And so in that same nature, I was very scared when I first started to publish stuff and then to sell stuff. And so I think for the person listening who’s like, that kind of scares them. One, I understand you like I trust me, I get you. Like if you’re you’re if it freaks you out, I publish online, I get you. And the second thing is, try to pay what you want. I think it’s great for the for the newbie, so to speak.
Bronson: Yeah. To have to find out and say this is what I’m worth. You can say, yeah, yeah, put it out there, see what happens.
Tom: Exactly. And so I think it’s just such a great way to validate a product or service very rapidly to find out what its true value is. So. Well, pay what you want the future. Absolutely. Avenue Journal coming out for my publishing company in search of publishing that I’m applying all the same principles and I’m actually tying it into charity this time. I hadn’t even done that with my own products. I’m taking my own advice. And so we give a portion of the proceeds to Kiva to help entrepreneurs in third world countries. And so again, it’s essentially donation based so people can donate whatever they want, like a dollar per issue minimum, but you can donate as much as you want above that. And a portion of every dollar goes to Kiva. So I’m still ingrained. I still believe in it. I still believe it works for certain things. I definitely believe it works for this publication that I’m getting ready to release in January. So just another example I think can work for some people and it definitely works for me and I still love the model, so I’m.
Bronson: Pretty, you know, it’s cool to hear. Well, Thomas has been great kind of getting inside your mind, talking about pricing with you, just kind of expanding the horizon on, you know, what possibilities are out there in terms of pricing. Have one last question for you. You know, you put out some digital goods, you put out e-books, those kind of things using gum road and gum roads. Amazing. I agree with you. I mean, they do so many things there that make life so easy. Yeah. Besides the pay what you want pricing model, what’s some of the best advice you have for people that are putting out their digital goods? You know, you just mentioned not being afraid. Use the pay what you want, anything else. You have words that you’ve learned kind of in the last year or so.
Tom: Start in a small way, start now. And I would say this might sound cliche, but you know, it starts sounds clichéd. I’m sure everything sounds cliche at this point in time because I’ve I’ve read so many things about this, this, this work online and stuff like that and different advice people have. But it’s true. Start start today, start small and then be consistent about it. I couldn’t have predicted where I’d be right now if I hadn’t been unreasonable when I first started, which was writing in my spare time, writing when I have, you know, a couple, you know, lunchtime free at work or something like that and go to my car and type in my car or when I get home on the weekends and weekends, you know, instead of watching TV, I would write or I would, you know, work on creating products or, you know, things like that. If you were entirely invest in the stuff, start small, be consistent and be unreasonable. Don’t, don’t be turned off or fearful of what might happen. The truth is, I think for anybody starting out, especially most people will ignore you. And that’s your that’s the worst thing that can happen. So just take that with a grain of salt. And I’m not saying don’t do your best work. Absolutely do your best work. But remember at the back of your mind, like nobody takes you as seriously as you do. And that’s coming from me, a guy who I’m a perfectionist and I’m my own worst critic. So I fight that battle every day to just shit. So yeah, that’s my, my best advice.
Bronson: Great advice. And I agree wholeheartedly. I mean, people are always afraid to get their startup going, to put out their digital good, to do whatever. And the thing is, is even after you do it, most people won’t care. It’s not that there’s gonna be a black mark on your reputation. Nobody knows you exist still. Like it takes so much work to get the ball rolling that no one’s ever going to like. You know, you just have to put things out there. Absolutely. Well, Tom, thank you so much for coming on Growth Hacker TV and just sharing all your insights with us.
Tom: Roslyn, thank you so much for having me. I really appreciate it. And I hope the audience appreciates it and learned something and tries applying it. And again, they can definitely reach out to me any time and I’m happy to answer questions. Time permitting, I answer everybody’s emails so they can definitely reach out to me at time at tomorrow’s dot com.
Bronson: That’s awesome. Thanks, Don.
Tom: For sure. Thank you.