We discussed lots of different pricing strategies last time, but there are so many more. Here’s part two of the discussion. Implement some of these into your own pricing and see what a difference it makes.
– Product Markups
Setting a standard markup on costs is easy but lazy—and will potentially leave money on the table. Set your price based on the value from the customer’s viewpoint; considering how well your product meets her needs. Is an umbrella worth more on a rainy day? Is a product’s setting (packaging, store ambience) influential on Heidi’s perceived value?
Smart business owners understand that Heidi’s pricing needs differ in three primary ways:
– Pricing plans
– Product preferences
– Product valuations
Pick-a-plan, versioning, and differential pricing tactics serve these diverse needs. Let’s quickly look at them.
a. Pick-A-Plan –
If Heidi has a problem with your pricing plan, provide options. Examples are rent, lease, prepaid, all-you-can-eat, happy hour, or quiet-day promotions. Provide ownership options, reinforce value, and overcome financial constraints.
b. Product Preferences –
We covered an aspect of these in Pricing Display Tips above. Refer to some of these and test them on your own products.
c. Versioning –
Offer good, better, and best versions. These options allow Heidi to choose how much she wants to pay for a product. In our health food shops chain in Australia, we reduced our offerings for vitamins to only three options based on price breaks. Sales increased once the choice was narrowed because customers found the price point that suited them.
– Differentiated Products
Water is a great example of a commodity transformed into a differentiated product. You differentiate your product relative to your competitors based on three factors: price, quality and service. If you want to signal high quality, you should probably be priced higher than most of your competition. Product includes its packaging in setting a quality position. For example, I just bought a jar of Big Tree Farm’s cocoa nibs. There is no doubt in my (emotional) mind that this superb new packaging delivers better value for money than the cardboard carton I previously bought from them.
– Service Pricing Tips
What message do you want your price to communicate? There’s a market for goods and services at all price points, and your pricing plays a key part in your positioning. The concept that “you get what you pay for” is ingrained in Heidi’s consciousness.
– Price Services According to Value
Cost and value should not be confused with setting your price. Don’t set your price based on the value you see in the work involved providing the service. Instead, discover the value that Heidi perceives in getting her job done perfectly. Your price should be directly related to the amount of value you deliver.
– Your Form of Offer
Clients often pay a higher price for reasons other than quality. Mostly it’s about what you offer and how you’re offering it that makes a difference. Your offer to Heidi needs to focus on what value your services will provide for her in getting the job done. If you itemize tasks and hours then you distract Heidi from what is important to her. You are throwing up multiple pain points, your tasks imply commodities, and you’re inviting her to pick apart your estimate and go comparison-shopping. Pain = Loss = Price. I used to price on hours as a basis of being “fair” and I had as many pain points from it as Heidi did!
– Bundle Your Service Price
The bundled pricing technique is one of the most effective ways of communicating value when presenting your fees.
● Give a lump sum amount for the solution offered, but don’t mention any sort of bonus. List the deliverables in your solution that help Heidi get the job done. This suggestion alone can offer a 36% increase in approvals over the task-invoice approach.
● Offer options that improve the solution you have provided. Heidi can easily understand these and doesn’t need to be resold. Limit your options. Research by Bidsketch on 25 000 proposals and estimates shows that limiting options to just one or two of the right type increases revenue by 32%!
With Pricing, many of these concepts are easy to implement and can start yielding profits almost immediately. So what can your business work on today?
CEO and Co-Founder
neXtep Business Builder Community Pte Ltd
Singapore ACRA Business Registration Number: 201424522Z
80 Kitchener Road #09-09/10 Singapore 208539