Product Pricing Strategy Pricing may be the most important decision that the entrepreneur makes. Often this decision is rushed and done by the seat of the pants. Most entrepreneurs think pricing is easy. Many small businesses use mark-up pricing. Mark-up pricing uses some multiple of cost such as three or four times the “estimated cost”.…
“Perceived Value” pricing is pricing for a product or service at a level that reflects the potential savings, the highest satisfaction level, or the maximum use that a client will receive from the purchase and the use of the product or service. Overall, price is set at the highest level that your target market is…
It is legend that in good times people drink (alcohol) a lot and when times are bad they drink even more. Yet, for the first time in recent memory, alcohol sales dropped in the fourth quarter during the holiday season. According to Jerry Hirsch of the LA Times in the December 25, 2009 issue, preliminary…
You must know and understand the four dimensions of pricing for a new product or start up: 1. Cost. 2. Customer. 3. Competition. 4. Yourself. Cost drives a lot of pricing decisions, but for the wrong reasons. A typical price strategy is to mark up the estimated cost by some multiple like 3 or 4…
When establishing the prices for your products or services, don’t fall into the trap of establishing an “across board” price margin for all your products or services. Instead, look at each product individually. Look at this way. You might be able to justify a lower margin for products and services that account for a high…
Perceived Value Pricing is the best choice for niche marketers (most of the time). This pricing strategy is defined as pricing a product or service at a level that reflects the potential savings, the highest satisfaction level, or the maximum use that a client will receive from the purchase and/or of use of the product…
Undoubtedly, pricing an offering is one of the more important decisions that an entrepreneur makes, yet it is my observation that it seldom gets much thought. Pricing decisions are often emotionally based and made quickly, while prices are long lived (like it or not). The market can dictate a price point or price range for…
While the stock market appears to be in a free fall and the business press is tossing around words like depression, doom, and chaos (irresponsibly, I may add), there is cause for optimism. The good news is that the US dollar is rising very quickly in value on the world market. Last week the dollar…
Pricing below the market is a technique used by giant mass market firms to take market share. Also known as “penetration” pricing, this is a strategy where a provider sells products below market price to break into a market or to take market share. When enough competitors are scared out of the market, the giant…
Price skimming refers to the pricing of a new product or service at a very high level (while you can get away with it). This type of pricing is often deployed for a product which has a competitive advantage that is not sustainable. This happens a great deal in technology when an innovative product first…