With all the negative economic news being reported by the media, your first inclination as a business owner may be to lower your prices fearing that unless you do, you won't have a customer segment willing and able to pay your desired prices. Consider that once lowered, however, it may be more of a challenge to raise your prices in the very near future. You're also assuming that your customers can no longer afford your standard prices. In actuality, pricing may not be the issue but rather customers are becoming more thoughtful with their purchases and merely need to be further convinced of the VALUE before plunking down their money. I recommend an energetically more ABUNDANT approach to this. Here are some new strategies and possible alternatives to consider in lieu of lowering your prices.
1. Have a sale or extend payment options.
Maintain your current pricing but establish defined sale periods with beginning and end dates to maintain the integrity of your pricing model but still offer customers a break. Also consider stretching payments over a period of time if feasible. I regularly offer a 6 pay plan with my Protégé program in addition to timed discounts.
2. Bundled offerings or gift with purchase.
Add additional products and services to your core offerings (for no additional cost) to substantially increase the value but without necessarily increasing your overhead. Can you add a "gift with purchase" that doesn't cost you any more money? Digital products & excess inventory items work great with this. Such as a gym offering complimentary towel and locker service for a year with a new membership.
3. Bonus gifts from other providers.
I still chuckle at an article submission site I subscribe to that would send me a 1lb box of fudge from an outside candy company every time I chose A $100 service package instead of a $60 package. Can you bundle with others to provide more value? I offer over $1000 in bonus gifts when you purchase my eBook and audio program at http://passion2prosperitybook.com/ . I created tremendous value for my customer that I did not have to pay for! Win-Win!
4. Rewrite your collateral materials to convey benefits.
This is a good time to review the benefits of your products and services line- by-line to be sure you're communicating maximum value to your prospective customer. One client wanted to lower her prices to attract more customers. Before she did that, I had her dissect her service, list out each benefit and assign a monetary value. This created a paradigm shift when she realized how much value customers were actually getting from her. She didn't lower her prices then, she raised them and customers are still showing up to pay.
5. Offer a sampling of complimentary products or new price point combinations.
Consider building in a new layer of products and services that you can offer for free so that prospective customers can easily experience you before making a purchase. When you sign in to http://passion2prosperity.com/ , you receive 3 free gifts from me. Also consider a new level of product offerings at lower price points without changing your premium price points. Even Starbucks is now offering bundled product combinations.
[Maria Simone is a business development expert with a spiritual twist. She'll show you "NEXT STEPS" for transforming ideas into products, effortlessly attracting investors and sponsors, and manifesting customers with ease. http://www.passion2prosperity.com/]
Showing posts with label pricing strategies. Show all posts
Showing posts with label pricing strategies. Show all posts
Tuesday, March 10, 2009
Monday, March 9, 2009
Priceless Pricing Strategies
The following article was written by my CFO buddy Aisha Jones-Scheffel. There are four basic pricing strategies which can be drawn out on a grid or matrix:
1. Economy pricing: Low quality and low price.
This would be the no-frills pricing, think of Wal-Mart or Southwest Airlines. Compare this to Nordstrom and first class on Virgin Airlines.
2. Penetration pricing: High quality and low price.
This strategy entails initially setting a lower than market price to gain entry into the market. Think back to when the Japanese initially introduced cars into the U.S. market. They were cheaper cars, but with equal or better equality. Now Toyota is poised to become the number one selling car manufacturer in the U.S.
3. Price skimming: Low quality and high price.
With this strategy a company will set a relatively high price initially and then reduce the price over time. Over time, they are able to get consumers at every price point. The perfect example of this is the Apple iPhone, it was originally $499 when it was introduced. Apple is now introducing the second version on July 11th at a price of $199.
4. Premium pricing: High quality and high price.
Every luxury brand follows this pricing strategy, which is keeping the price of a product or service high, so that buyers will favorably perceive it as superior or exclusive. Think of Coach or Bentley or even the Ritz Carlton.
How to use the matrix:
Step One: Determine where you are on the grid. You might have products or services that fall in one or more categories.
Step Two: Determine which quadrants your competitors fall into
Step Three: Determine holes in the market. Do you and your competitors fall under the premium and penetration quadrant? Then, there might be opportunities in the economy and skimming quadrants. What products or services could you introduce to take advantage of these "holes" in the marketplace.
Step Four: Determine if you can have products or services that would fall into every quadrant. For example, Toyota has a Toyota Corolla (Economy), a Prius (Skimming), and Lexus (Premium). H
ow do you know if a change in pricing strategy will be successful? Well you don't know what is going to be successful. The best thing is to do your research upfront before investing too much in a new pricing strategy or product or service. The three biggest questions are:
1. Is there a market for it?
2. How can I reach that market?
3. Do you have the talent and resources in order to reach that market?
So give some thought to your pricing strategy. What is the cost of increased market share, more customers, higher revenue, and increased profits - priceless.
Aisha Jones-Scheffel is "The Doctor CFO." Get her FREE SPECIAL REPORT, "7 Never Before Told Ways to Make Your Practice Stop Bleeding Money (That Has Nothing to do with Insurance or Billing)" and her FREE money management how-to tips at http://www.DoctorCFO.com.
1. Economy pricing: Low quality and low price.
This would be the no-frills pricing, think of Wal-Mart or Southwest Airlines. Compare this to Nordstrom and first class on Virgin Airlines.
2. Penetration pricing: High quality and low price.
This strategy entails initially setting a lower than market price to gain entry into the market. Think back to when the Japanese initially introduced cars into the U.S. market. They were cheaper cars, but with equal or better equality. Now Toyota is poised to become the number one selling car manufacturer in the U.S.
3. Price skimming: Low quality and high price.
With this strategy a company will set a relatively high price initially and then reduce the price over time. Over time, they are able to get consumers at every price point. The perfect example of this is the Apple iPhone, it was originally $499 when it was introduced. Apple is now introducing the second version on July 11th at a price of $199.
4. Premium pricing: High quality and high price.
Every luxury brand follows this pricing strategy, which is keeping the price of a product or service high, so that buyers will favorably perceive it as superior or exclusive. Think of Coach or Bentley or even the Ritz Carlton.
How to use the matrix:
Step One: Determine where you are on the grid. You might have products or services that fall in one or more categories.
Step Two: Determine which quadrants your competitors fall into
Step Three: Determine holes in the market. Do you and your competitors fall under the premium and penetration quadrant? Then, there might be opportunities in the economy and skimming quadrants. What products or services could you introduce to take advantage of these "holes" in the marketplace.
Step Four: Determine if you can have products or services that would fall into every quadrant. For example, Toyota has a Toyota Corolla (Economy), a Prius (Skimming), and Lexus (Premium). H
ow do you know if a change in pricing strategy will be successful? Well you don't know what is going to be successful. The best thing is to do your research upfront before investing too much in a new pricing strategy or product or service. The three biggest questions are:
1. Is there a market for it?
2. How can I reach that market?
3. Do you have the talent and resources in order to reach that market?
So give some thought to your pricing strategy. What is the cost of increased market share, more customers, higher revenue, and increased profits - priceless.
Aisha Jones-Scheffel is "The Doctor CFO." Get her FREE SPECIAL REPORT, "7 Never Before Told Ways to Make Your Practice Stop Bleeding Money (That Has Nothing to do with Insurance or Billing)" and her FREE money management how-to tips at http://www.DoctorCFO.com.
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