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Pricing strategies for small business

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    Pricing strategies for small business Pricing strategies for small business Presentation Transcript

    • PRICING STRATEGY FOR SMALL BUSINESSPETER KRAAN / @kraanpTSiBA IGNITION CENTRE / www.tsiba.org.zaMAY 24, 2012
    • PRICING STRATEGY FOR SMALL BUSINESS THE TWENTY-TWO STRATEGIES OF PRICING 1. Cost-plus pricing 12. Dynamic pricing 2. Creaming or skimming 13. Price leadership 3. Limit pricing 14. Target pricing 4. Loss leader 15. Absorption pricing 5. Market-oriented pricing 16. High-low pricing 6. Penetration pricing 17. Premium decoy pricing 7. Price discrimination 18. Marginal-cost pricing 8. Premium pricing 19. Value-based pricing 9. Predatory pricing 20. Pay what you want 10. Contribution margin-based pricing 21. Freemium 11. Psychological Pricing 22. Odd pricing Source: www.wikipedia.com
    • PRICING STRATEGY FOR SMALL BUSINESS PENETRATION PRICING Setting the price low in order to attract customers and gain market share. The price will be raised later once this market share is gained. Source: www.wikipedia.com
    • PRICING STRATEGY FOR SMALL BUSINESS LOW PRICES AND SMALL BUSINESS • Low prices are the final refuge of the marketer who has run out of ideas and is left with nothing but a commodity. • Organizing your business around lowering prices through efficiency, mass scale and smart choices is a powerful way to grow. Doing this is really quite difficult [and not something small business is usually good at]. • If all youre doing is writing a lower number on the price tags, youre probably playing the first game. [How long can you keep that up?] Source: adapted from Seth Godin, www.sethgodin.typepad.com/seths_blog/2012/04/low-prices.html
    • PRICING STRATEGY FOR SMALL BUSINESS COST-PLUS PRICING Cost-plus pricing is the simplest pricing method. Calculate the cost of producing the product and add on a percentage to that price to give the selling price. This method takes no account of demand and no account of the customer.  COSTING, yes! COST-PRICING, careful! Source: www.wikipedia.com
    • PRICING STRATEGY FOR SMALL BUSINESS MARKET-ORIENTED PRICING Setting a price based upon analysis and research compiled from the target market. This means that marketers will set prices depending on the results from the research. Source: www.wikipedia.com
    • PRICING STRATEGY FOR SMALL BUSINESS PREMIUM PRICING Premium pricing is the practice of keeping the price of a product or service artificially high in order to encourage favourable perceptions among buyers, based solely on the price. This exploits the tendency for buyers to assume that expensive items enjoy an exceptional reputation, are more reliable or desirable, or represent exceptional quality and distinction.  Beware of ARTIFICIALLY! Source: www.wikipedia.com
    • PRICING STRATEGY FOR SMALL BUSINESS VALUE-BASED PRICING Pricing a product based on the perceived value and not on any other factor.  PERCEPTION = REALITY!
    • PRICING STRATEGY FOR SMALL BUSINESS NINE LAWS OF PRICE SENSITIVITY AND CONSUMER PSYCHOLOGY 1. Reference Price Effect 6. End-Benefit Effect 2. Difficult Comparison Effect 7. Shared-cost Effect 3. Switching Costs Effect 8. Fairness Effect 4. Price-Quality Effect 9. The Framing Effect 5. Expenditure Effect Source: www.wikipedia.com
    • PRICING STRATEGY FOR SMALL BUSINESS REFERENCE PRICE EFFECT Buyer‟s price sensitivity for a given product increases the higher the product‟s price relative to perceived alternatives.  DIFFERENTIATE! Make sure it‟s about the whole PACKAGE, not just the PRODUCT. Source: www.wikipedia.com
    • PRICING STRATEGY FOR SMALL BUSINESS DIFFICULT COMPARISON EFFECT Buyers are less sensitive to the price of a known or more reputable product when they have difficulty comparing it to potential alternatives.  DIFFERENTIATE some more! Source: www.wikipedia.com
    • PRICING STRATEGY FOR SMALL BUSINESS PRICE-QUALITY EFFECT Buyers are less sensitive to price the more that higher prices signal higher quality. Source: www.wikipedia.com
    • PRICING STRATEGY FOR SMALL BUSINESS FAIRNESS EFFECT Buyers are more sensitive to the price of a product when the price is outside the range they perceive as “fair” or “reasonable” given the purchase context. Source: www.wikipedia.com
    • PRICING STRATEGY FOR SMALL BUSINESS Low Price Medium Price High Price Underpriced. The Attractive pricing that Premium pricing High Value product value is is ideal for market suggests prestige undercut . penetration. and prominence. Bargain, temporary Overpriced. The Price and value areMedium Value measure to raise uninformed will buy in balance. revenue, clear stock only once. Turns sales into Low Value Cheap stuff. Junk. Don‟t go there. complaints.Source: adapted from www.authenticpromotion.com
    • PRICING STRATEGY FOR SMALL BUSINESS Low Price Medium Price High Price Underpriced. The Attractive pricing that Premium pricing High Value product value is is ideal for market suggests prestige undercut . penetration. and prominence. Bargain, temporary Overpriced. The Price and value areMedium Value measure to raise uninformed will buy in balance. revenue, clear stock only once. “Fleece Turns sales into Low Value „em complaints. Cheap stuff. Junk. and Don‟t go there. run”Source: adapted from www.authenticpromotion.com
    • PRICING STRATEGY FOR SMALL BUSINESS Low Price Medium Price High Price Underpriced. The Attractive pricing that Premium pricing High Value product value is is ideal for market suggests prestige undercut . penetration. and prominence. Bargain, temporary Overpriced. The Price and value areMedium Value measure to raise uninformed will buy in balance. revenue, clear stock only once. “Let the Turns sales into Low Value Cheap stuff. Junk. buyer Don‟t go there. complaints. beware”Source: adapted from www.authenticpromotion.com
    • PRICING STRATEGY FOR SMALL BUSINESS Low Price Medium Price High Price Underpriced. The Attractive pricing that Premium pricing High Value product value is is ideal for market suggests prestige undercut . penetration. and prominence. Bargain, temporary“Info- and value are Price Overpriced. TheMedium Value measure to raise uninformed will buy mercial” revenue, clear stock in balance. only once. Turns sales into Low Value Cheap stuff. Junk. Don‟t go there. complaints.Source: adapted from www.authenticpromotion.com
    • PRICING STRATEGY FOR SMALL BUSINESS Low Price Medium Price High Price Underpriced. The Attractive pricing that Premium pricing High Value product value is is ideal for market suggests prestige undercut . penetration. and prominence. Bargain, temporary Overpriced. The Price and value areMedium Value measure to raise uninformed will buy in balance. revenue, clear stock only once. “Tourist Turns sales into Low Value Cheap stuff. Junk. complaints. trap” go there. Don‟tSource: adapted from www.authenticpromotion.com
    • PRICING STRATEGY FOR SMALL BUSINESS Low Price Medium Price High Price Underpriced. The “What‟s Attractive pricing that Premium pricing High Value product value is is ideal for market wrong suggests prestige undercut . penetration. and prominence. with this?” Bargain, temporary Overpriced. The Price and value areMedium Value measure to raise uninformed will buy in balance. revenue, clear stock only once. Turns sales into Low Value Cheap stuff. Junk. Don‟t go there. complaints.Source: adapted from www.authenticpromotion.com
    • PRICING STRATEGY FOR SMALL BUSINESS Low Price Medium Price High Price Underpriced. The Attractive pricing that Premium pricing High Value product value is is ideal for market suggests prestige undercut . penetration. and prominence. Temporary measure “Inventory Overpriced. The Price and value areMedium Value to raise revenue, in balance. Sale” uninformed will buy clear stock. only once. Turns sales into Low Value Cheap stuff. Junk. Don‟t go there. complaints.Source: adapted from www.authenticpromotion.com
    • PRICING STRATEGY FOR SMALL BUSINESS Low Price Medium Price High Price Underpriced. The Attractive pricing that Premium pricing High Value product value is is ideal for market suggests prestige undercut . penetration. and prominence. “Square Bargain, temporary Price and value are Overpriced. The deal!”Medium Value measure to raise in balance. uninformed will buy revenue, clear stock only once. Turns sales into Low Value Cheap stuff. Junk. Don‟t go there. complaints.Source: adapted from www.authenticpromotion.com
    • PRICING STRATEGY FOR SMALL BUSINESS Low Price Medium Price High Price “MoreUnderpriced. The for Attractive pricing that Premium pricing High Value product value is is ideal for market suggests prestige your undercut . penetration. and prominence. money” Bargain, temporary Overpriced. The Price and value areMedium Value measure to raise uninformed will buy in balance. revenue, clear stock only once. Turns sales into Low Value Cheap stuff. Junk. Don‟t go there. complaints.Source: adapted from www.authenticpromotion.com
    • PRICING STRATEGY FOR SMALL BUSINESS Low Price Medium Price High Price Underpriced. The “The Attractive pricing that Premium pricing High Value product value is discerning for market is ideal suggests prestige undercut . penetration. and prominence. customer” Bargain, temporary Overpriced. The Price and value areMedium Value measure to raise uninformed will buy in balance. revenue, clear stock only once. Turns sales into Low Value Cheap stuff. Junk. Don‟t go there. complaints.Source: adapted from www.authenticpromotion.com
    • PRICING STRATEGY FOR SMALL BUSINESS Low Price Medium Price High Price Underpriced. The Attractive pricing that Premium pricing High Value product value is is ideal for market suggests prestige undercut . penetration. and prominence. Bargain, temporary Overpriced. The Price and value areMedium Value measure to raise uninformed will buy in balance. revenue, clear stock only once. Turns sales into Low Value Cheap stuff. Junk. Don‟t go there. complaints.Source: adapted from www.authenticpromotion.com
    • PRICING STRATEGY FOR SMALL BUSINESS NOW DO YOUR COSTING:  Still making money? PROCEED  Not worth your while? REPACKAGE, REPOSITION
    • PRICING STRATEGY FOR SMALL BUSINESS Access to Networks Facilities and Infrastructure Market Linkages Technology Infrastructure Newsletter, Website, Blog Meeting Rooms Quarterly Breakfast Forums Company Address Market Days Virtual Web Space Office Space Business Mentorship Experienced Entrepreneurs Seasoned Business Executives Business and Finance Graduates Basic and Advanced Innovative Business Training Financial Instruments Business Essentials Course Loan Scheme Computer Literacy & Careers Workshop Bridging Finance Personal Financial Literacy Course Micro-Equity Fund Business Plan Writing Micro-Finance
    • PRICING STRATEGY FOR SMALL BUSINESS BRIEFING SESSIONS EVERY THURSDAY MORNING FROM 9AM – 10AM. NO APPOINTMENT NECESSARY. TSiBA Education Peter Kraan Ignition Centre 021 532 2750 Mupine Campus @kraanp 307 Forest Drive Ext. peter@tsiba.org.za Pinelands 7405, Cape Town www.tsiba.org.za