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BUSINESS START-UP
GUIDE: 2nd Edition: Revised - Updated - Expanded Packed
with Valuable |
|
BUSINESS START-UP
GUIDE: 2nd Edition: Revised - Updated - Expanded Packed
with Valuable |
Excerpt from Chapter 9 highlighting 18 of the 31 Creative Pricing Strategies described in the chapter:
Open your mind to some more creative pricing opportunities. Only one or two of these choices could be the key to making your business unique. Take a chance. Test some of the methods. Use them on special occasions. Have fun. Be the first in your industry to adapt one of these strategies to your business. Some of these strategies are variations of the basic pricing methods previously discussed. Some are new strategies that could be the foundation for your whole business pricing decision. Many are extras you can add or use on special occasions to help stimulate interest. Use your imagination and see how many you can apply to your business.
Skimming Pricing: Set initial prices relatively high to recover the initial capital spent developing the product or opening a store. Feature quality, service, uniqueness. Competition will often force lower prices. Use skimming if you are one of the first out with new technology or are capitalizing on a current trend or fad.
Penetration Pricing: Set initial prices low at first to quickly penetrate the market. As business develops, gradually raise prices to a more profitable level. Feature low prices and convenience. This is a good pricing technique for generating immediate cash flow. Don't set the price so low that customers believe your product or service is inferior.
Promotional Pricing: Set special low prices to introduce new products or lines. Consider two-for-one specials, end-of-season sales. Utilize this method to maintain traffic, stimulate demand, or make room for new merchandise.
Loss-Leader Pricing: Select one item, and advertise it at below cost to create store traffic and sell other regularly priced items. Make sure you have the items in stock and plan to sell them without trying to illegally "switch" customers to higher-priced items. Loss-leader pricing is appropriate for items that already have low margins, but can drive sales of accessories or related items.
Prestige and Image Pricing: This is non-price competition. The business offers the finest merchandise, the best service, free delivery, or friendly, knowledgeable clerks in plush, convenient surroundings. Ads may not even mention price.
Bundling or Unbundling Pricing: Sell products or services together as packages or break them apart and price separately. Season tickets, stereo equipment, and automobiles use this strategy. Stress the value and benefits.
Time-Period Pricing: This technique is also called seasonal discount pricing. Products and services have seasons. Some are fairly short, such as ripe bananas, and some are longer, such as the tax season for accountants. Consider pricing your products or services to adjust for obsolete or perishable products and variations in supply and demand. Examples are bargain summer rental rates in Palm Springs and lower fees for accounting work during non-tax season time. Early-bird dinner specials and higher ticket prices for movies during weekends and evenings are other examples. Time-period pricing can both smooth and increase cash flow.
Trial Pricing: Make it easy by lowering the risk for a customer to try out what you sell. Special health club starter memberships, and free hours of on-line computer access are examples. Trial pricing is beneficial for new products or services that have not been fully accepted.
Value-Added Pricing: Include free or low-cost "value-added" services, without raising the price, to appeal to bargain shoppers. Special reports to accompany a magazine subscription and hotel airport pickups are examples.
Pay-One-Price Pricing: Provide unlimited use of a service or product at one set price. All-you-can-eat buffets, super passes at amusement parks, and copier service contracts are examples.
Performance Pricing: Performance or value received determines the amount customers pay. Contingent fees to lawyers, investment managers compensation tied to performance, and games of chance or skill are examples. This reduces the risk to the customer.
Payment Plan Pricing: Rather than adjust the total price, adjust the payments to make your price seem different and more economical. Use four payments of $9.99 rather than $40. Explain that a $10,000 investment that will last 10 years really only costs $1000 per year, $20 per week, or $2.75 per day.
Shifting Costs Pricing: Pass on certain costs directly to your customer and do not include them in your price. Lawyers charging for phone calls, photocopies, and travel in addition to fees, and hotels charging for phone calls, movies and food or refreshments in the room are examples.
Creative Variable Pricing: Set up a "price per" pricing schedule tied to a related variable. Lunch pricing per pound, children's haircuts priced per inch of height, and marina space billed per boat foot are examples.
Different Name or Segment Pricing: Sell essentially the same product, under different names, to appeal to different markets or different distribution channels. Clothing and electronics equipment are examples.
Captive Pricing: Lock in your customer by selling the system cheap, and then profit by selling high-margin consumables. Selling razors at cost with all the profit in the blades is one example. Selling copiers slightly above cost with all the profit in the paper and toner cartridges is another. Giving away cellular telephones with all the profit in the monthly fees is a third example.
Product-Line Pricing: Establish a range of price points within your line. Structure the prices to encourage customers to buy your highest profit product or service. Luxury car lines have high-end models that enhance the prestige of the entire line. However, they are priced to encourage sales of the more profitable middle and lower end.
Differential Pricing: Charge each customer or each segment what each will pay. Car sellers try to get the best deal they can from everyone. Golf courses offer discounts to local citizens. Financial planning feesoften relate to income level. Be careful you don't violate federal or state price discrimination laws.