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If you lined up most entrepreneurs and asked them what the most essential component of success is, they'd probably answer "a killer product". But from my observations (many of which have involved "killer products"), the single most important factor in a product's success is that product's pricing strategy.

Your pricing strategy determines not only your ability to earn revenue and generate profit, but also your position in the market. And that's not all - if you're selling via the Internet, pricing determines everything from the potential breadth, strength and energy-level of your distributor network, to your ability to provide customer support.

I recently met with a number of distributors to try and determine the best price for a product I'm launching at one of my start-ups. Here's what I learned:

• Marketing affiliates price their offering space by a simple formula
• That formula is: retail price * commission percentage * conversions to sale
• E.g. $100 x 30% x 3 sales a day = $90

I'll let you do the math (you can use the DealHorizon Sales Projections Calculator to run the numbers) - but what I think you'll find is

• Commission percentages are now fairly standard
• Conversions depend in large part of the nature of the audience in front of the offer
• The most important component of the calculation, by far, is price

The reason for this is probably obvious to you - when it comes to signing up an affiliate, that affiliate already has a pretty good idea of their audience and the kind of offers that work. They already have experience in asking for (and getting) commissions that are market-rate. Finally, they know exactly what their offering space (the real estate on their site dedicated to the sale of third party product) is worth.

Let's jump to the conclusion: if your price is much less than the pricing of a product of comparable quality with comparable features that appeals to their audience, guess what? You're out of luck. They will pick the comparable product every time.

You will have no choce then but to watch as sales of your competitor's products rise (along with positive reseller buzz). Before you know it, you're off the reseller radar, behind the eight-ball, and (woe of woes) selling direct to consumer without the support of a marketing network.

So let's talk hard numbers - what makes a good price for a product to be sold on the Internet? My view is that you should not sell anything on the Internet for less than an absolute minimum of $100 per year. Assuming a 25% commission (you do the marketing) to 50% (they do the marketing) kick-back, that leaves you with $50 (worst-case) to fund your operations, including customer support.

Product not worth $100? Consider creation of a premium offering, or if that can't be done, buying in third party products to bundle with your offering and bolster the value - so you can get your price up to a level (preferably $150+) where it becomes very hard for a potential distributor to say "no."

The bottom line: most distributors will not touch a product or service that retails for less than "x" amount - and "x" more often than not is $100 per sale. Ignore this advice at your peril.

Whatever you do, don't base your pricing on "gut feel" or single data points. When I priced my best-selling "Heart of Asia" CD-ROM back in the mid-nineties, I set the sale price at US$595 in a market in which most other sets were selling for $99. My thinking was, this price will establish a sense of value and quality, and the people that own post-production studios will make back this investment in two to three sessions.

I was right - and signed up some tremendous distributors, who sold the product for me for the next ten years - like hot cakes. Some nice reviews and quality samples helped - but our premium pricing strategy - 5x the competition - was key to creating a highly profitable product.