12/11/2021 Tip: Become a Master at Pricing | Growthink

12/11/2021 Tip: Become a Master at Pricing

Today’s Quote

“To live is to choose. But to choose well, you must know who you are and what you stand for, where you want to go and why you want to get there.”
~ Kofi Annan

 

Today’s Tip

Normally, if I were to ask an entrepreneur or business owner how they could double their sales, they’d propose increasing their sales force, trying to get customers to buy twice as much, or doubling their advertising budget.

But often, a superior pricing strategy can get the same results with less effort.

Making even minor price changes to find the “sweet spot” where the most people will buy can massively increase your results. Think back to economics class, when they covered the Price Elasticity of Demand. Now, if you’re still awake, remember how you might raise your product’s price down or up and lead to an increase in sales.

Price it too high, and your margins will be great, but you’ll generate less revenue because fewer people buy it. Don’t price your product too low, for obvious reasons, but don’t be afraid to try going lower (even temporarily, like during a promotion) and observe the results.

Test this enough and you’ll find the sweet spot that works the best for customers and your bottom line.

Some pricing strategies to consider are:

  • Competitive-Based Pricing: pricing your products/services based on how your competitors price theirs.
  • Cost Plus Markup Pricing: determining your product or service’s costs to create and fulfill, and then choosing a price above this amount based on the gross profit you want to make when selling each item.
  • Loss Leader Pricing: offering prices below your costs in order to attract more first-time customers who you hope will buy higher-ticket items or a variety of items over time.
  • Higher Perceived Value Pricing: using higher prices, to take advantage of the premium image and psychological positioning they promote.
  • Versioning Pricing: this pricing technique is used often with services, or technical products like software and apps. With this, you sell the same product in two or three different versions. The trial version (often called Basic) is usually priced very low or is even free. Think of it as the loss leader that gets people in the door and wanting to expand to the full functionality that it offers (often called the Premium, or Gold/Platinum version).

Other pricing options are closeout prices (liquidating excess inventory), quantity discounts (discount when purchasing larger quantities), and bundling discounts (discounts when purchasing several different products from you; not several of the same ones).

 

Today’s Resource

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If you want more customers, you need a better marketing plan.

A better marketing plan will focus your efforts on the activities that will actually work… so you generate more leads, customers and increase your sales and profits.

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And I’ve got good news today…

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Trivia

Today’s Question: In 1933, how much did a night’s stay in a double room cost at the famous Waldorf Astoria Hotel in New York City?

Previous Question: Where did Levi Strauss come from, and what did his blue jeans first sell for in 1850?

Previous Answer:  Levi Strauss came from Bavaria, and the original price of a pair of his jeans was $1.25.

Levi Strauss, the inventor of the quintessential American garment – the blue jean – was born in Buttenheim, Bavaria on February 26, 1829 to Hirsch Strauss and his second wife, Rebecca Haas Strauss.

In January of 1853 he became an American citizen, and in March he arrived in San Francisco, establishing a dry-goods business under his own name and also serving as the West Coast representative of the family’s New York firm. In 1863 the company was renamed “Levi Strauss & Co.”

 

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