The document discusses several key points about pricing products and services for a business:
1) Pricing is a crucial business decision that impacts profits, yet many businesses underprice their offerings.
2) There is no single formula for setting the best price - businesses must consider factors like costs, demand, competitors' prices, and desired positioning.
3) Businesses should use multiple methods to calculate pricing, such as determining costs and desired profits, analyzing competitors' prices, and considering how pricing impacts perceptions of quality.
4) Common pricing mistakes to avoid include initially pricing too low with the goal of raising prices later, and making sudden price cuts without reducing services.
This webinar covers the fundamentals of Value Pricing so that participants can:
Understand the relationship of pricing with the other elements of the marketing mix.
Achieve the value you deserve through optimal pricing strategies that maximize profits.
Ensure that marketing is more proactive to optimize value for new products and maintaining value over different life cycles.
This document reviews best practice in pricing processes to provide a reference against which current practices and proposals can be tested. Our objectives have been: to research the attributes of world-class pricing through publications and academic sources; to investigate how these attributes are applied in practice to products and services; to assess pricing processes in successful businesses.
In recent years a new attitude toward pricing has emerged. Deregulation and international free trade agreements have increased competition. Price promotion has eroded the power of brand loyalty. Pricing has assumed greater importance to most businesses.
As markets increasingly assume a global dimension, customers can more easily compare prices between one region or country and another, using the internet or a fax machine. They can often locate the same product, or an
acceptable substitute, from another source. Customers are more demanding and fickle, and their expectations increasingly difficult to fulfil.
Price inflation in western economies is now at its lowest for decades. Price increases are no longer accepted without protest from customers, if at all.
The Chairman of General Electric has predicted the onset of the ‘Value Decade’. Global price competition will strengthen because of: reduced product differentiation; global over-capacity for production; significantly diminished trade barriers; efficient information and distribution systems; providing customers with easy access to the prices of suppliers; a growing lack of customers’ loyalty to individual suppliers. Choice will be increasingly driven by price.
This is a challenging scenario that reinforces the need for an integrated strategy and concerted managerial action on pricing.
Pricing processes have lagged behind developments in the market place. They are often characterised by internal conflict between accountants wishing to maximise profit per unit and marketing specialists who seek to maximise
throughput. They are also affected by the potential for strained relations with good customers.
Some companies have downsized their operations to a level where diminishing returns cause them to question the benefits of continuing to focus upon reducing costs. As they switch their attention from cost cutting to adding
value, pricing naturally assumes increased weight in the marketing mix.
We have found many companies reluctant to discuss their own processes.
Some may wish to avoid betraying a lack of sophistication.
When you need to execute a price increase (and make it stick!)MarketCrest
How to get your price increase communicated, executed, and still keep your customers. A guide for sales executives and their managers or any business owner who needed to pass along a price increase and was scared to do it! Managing the process of implementing a periodic price (or costs) increase can be harrowing, but it should be a normal part business life. All too often though, we see increases deployed with mixed results.
The good news is there are steps you can take to ensure your price increase “sticks” and so do your customers. During the series, we will answer some of the most common questions on the topic. We will share our experiences and suggest some smart moves to make, while warning you about a few dumb ones to avoid. Enjoy!
Pricing Strategies Guide - How To Define PricingIlya Bilbao
You may ask this:
1 do amazon use dynamic pricing
2 do apple use premium pricing
3 do forms pricing
4 do it yourself fiberglass pools pricing
5 do pricing
6 do pricing errors have to be honored
7 do taxis have surge pricing
8 do the math pricing
9 do underwriters compete in ipo pricing
10 doterra pricing
11 how can collusion affect pricing in an oligopoly
12 how can i get gm employee pricing
13 how can pricing policy affect a business
14 how does uber pricing work
15 how much is education pricing for apple
16 how much is ford a plan pricing
17 how much is ford employee pricing
18 how much is gm employee pricing
19 how much is gm preferred pricing
20 how much is gm supplier pricing
21 how much is surge pricing
22 how much is uber pricing
23 how much is uber surge pricing
24 how much is x plan pricing
25 how to audit transfer pricing
26 how to be a pricing analyst
27 how to cost plus pricing
28 how to costing and pricing
29 how to define pricing
30 how to garage sale pricing
31 how to mark up pricing
32 how to photography pricing
33 how to pricing a product
34 how to pricing strategy
35 how to structure pricing
36 how to transfer pricing
37 pay-what-you-want pricing can it be profitable
38 should businesses use target pricing
39 should cost pricing
40 should cost pricing model
41 should fixed costs be considered in pricing
42 should i put pricing on my website
43 should predatory pricing be an illegal strategy
44 should pricing decisions remain with the players
45 should we be pricing ecosystem services
46 what are the various objectives that pricing can achieve
47 what factors should be considered in pricing
48 what is bundle pricing and why would it be used
49 what is capital asset pricing model
50 what is cost based pricing
51 what is cost plus pricing
52 what is penetration pricing
53 what is pricing policy
54 what is pricing strategy
55 what is psychological pricing
56 what is surge pricing
57 what is transfer pricing
58 what is transfer pricing and how can it benefit a company
Strategic Pricing - International CEO Forum 2011Pricing Insight
Strategic pricing - driving improved profitability and earnings growth. Presented by Ron Wood, Director of Pricing Insight at the International CEO Forum, 18th October 2011
This webinar covers the fundamentals of Value Pricing so that participants can:
Understand the relationship of pricing with the other elements of the marketing mix.
Achieve the value you deserve through optimal pricing strategies that maximize profits.
Ensure that marketing is more proactive to optimize value for new products and maintaining value over different life cycles.
This document reviews best practice in pricing processes to provide a reference against which current practices and proposals can be tested. Our objectives have been: to research the attributes of world-class pricing through publications and academic sources; to investigate how these attributes are applied in practice to products and services; to assess pricing processes in successful businesses.
In recent years a new attitude toward pricing has emerged. Deregulation and international free trade agreements have increased competition. Price promotion has eroded the power of brand loyalty. Pricing has assumed greater importance to most businesses.
As markets increasingly assume a global dimension, customers can more easily compare prices between one region or country and another, using the internet or a fax machine. They can often locate the same product, or an
acceptable substitute, from another source. Customers are more demanding and fickle, and their expectations increasingly difficult to fulfil.
Price inflation in western economies is now at its lowest for decades. Price increases are no longer accepted without protest from customers, if at all.
The Chairman of General Electric has predicted the onset of the ‘Value Decade’. Global price competition will strengthen because of: reduced product differentiation; global over-capacity for production; significantly diminished trade barriers; efficient information and distribution systems; providing customers with easy access to the prices of suppliers; a growing lack of customers’ loyalty to individual suppliers. Choice will be increasingly driven by price.
This is a challenging scenario that reinforces the need for an integrated strategy and concerted managerial action on pricing.
Pricing processes have lagged behind developments in the market place. They are often characterised by internal conflict between accountants wishing to maximise profit per unit and marketing specialists who seek to maximise
throughput. They are also affected by the potential for strained relations with good customers.
Some companies have downsized their operations to a level where diminishing returns cause them to question the benefits of continuing to focus upon reducing costs. As they switch their attention from cost cutting to adding
value, pricing naturally assumes increased weight in the marketing mix.
We have found many companies reluctant to discuss their own processes.
Some may wish to avoid betraying a lack of sophistication.
When you need to execute a price increase (and make it stick!)MarketCrest
How to get your price increase communicated, executed, and still keep your customers. A guide for sales executives and their managers or any business owner who needed to pass along a price increase and was scared to do it! Managing the process of implementing a periodic price (or costs) increase can be harrowing, but it should be a normal part business life. All too often though, we see increases deployed with mixed results.
The good news is there are steps you can take to ensure your price increase “sticks” and so do your customers. During the series, we will answer some of the most common questions on the topic. We will share our experiences and suggest some smart moves to make, while warning you about a few dumb ones to avoid. Enjoy!
Pricing Strategies Guide - How To Define PricingIlya Bilbao
You may ask this:
1 do amazon use dynamic pricing
2 do apple use premium pricing
3 do forms pricing
4 do it yourself fiberglass pools pricing
5 do pricing
6 do pricing errors have to be honored
7 do taxis have surge pricing
8 do the math pricing
9 do underwriters compete in ipo pricing
10 doterra pricing
11 how can collusion affect pricing in an oligopoly
12 how can i get gm employee pricing
13 how can pricing policy affect a business
14 how does uber pricing work
15 how much is education pricing for apple
16 how much is ford a plan pricing
17 how much is ford employee pricing
18 how much is gm employee pricing
19 how much is gm preferred pricing
20 how much is gm supplier pricing
21 how much is surge pricing
22 how much is uber pricing
23 how much is uber surge pricing
24 how much is x plan pricing
25 how to audit transfer pricing
26 how to be a pricing analyst
27 how to cost plus pricing
28 how to costing and pricing
29 how to define pricing
30 how to garage sale pricing
31 how to mark up pricing
32 how to photography pricing
33 how to pricing a product
34 how to pricing strategy
35 how to structure pricing
36 how to transfer pricing
37 pay-what-you-want pricing can it be profitable
38 should businesses use target pricing
39 should cost pricing
40 should cost pricing model
41 should fixed costs be considered in pricing
42 should i put pricing on my website
43 should predatory pricing be an illegal strategy
44 should pricing decisions remain with the players
45 should we be pricing ecosystem services
46 what are the various objectives that pricing can achieve
47 what factors should be considered in pricing
48 what is bundle pricing and why would it be used
49 what is capital asset pricing model
50 what is cost based pricing
51 what is cost plus pricing
52 what is penetration pricing
53 what is pricing policy
54 what is pricing strategy
55 what is psychological pricing
56 what is surge pricing
57 what is transfer pricing
58 what is transfer pricing and how can it benefit a company
Strategic Pricing - International CEO Forum 2011Pricing Insight
Strategic pricing - driving improved profitability and earnings growth. Presented by Ron Wood, Director of Pricing Insight at the International CEO Forum, 18th October 2011
Value Based Pricing Strategy PowerPoint Presentation SlidesSlideTeam
Presenting this set of slides with name - Value Based Pricing Strategy Powerpoint Presentation Slides. Our topic specific Value Based Pricing Strategy Powerpoint Presentation Slides deck contains twenty four slides to formulate the topic with a sound understanding. This PPT deck is what you can bank upon. With diverse and professional slides at your side, worry the least for a powerpack presentation. A range of editable and ready to use slides with all sorts of relevant charts and graphs, overviews, topics subtopics templates, and analysis templates makes it all the more worth. This deck displays creative and professional looking slides of all sorts. Whether you are a member of an assigned team or a designated official on the look out for impacting slides, it caters to every professional field.
What is your company's pricing capability? How do we protect and expand revenue and profits? What can we do to drive short term and long term margin improvements? Pricing Insight can help.
Ethical and legal consideration in RETAILINGAsrar Mohd
What is ETHICS ?
This is a set of rules for human moral behavior. For retailers they can have explicit code of ethics or implicit code of ethics.
Explicit code of ethics: Written policy that specifies what is ethical and unethical behavior.
Implicit: Unwritten but well understood set of rules/standards of moral responsibilities.
This PowerPoint was presented by James Matson at the 2012 Local Foods Network Workshop: Taking the Product to Market in Spencer Virginia. In his presentation, Matson explores how to develop a pricing strategy that is right for your business.
"Product Pricing strategy" @ the 11th Prod.active meetupprodactive
Pricing strategy": Key pricing principles and methods, how should a company adapt prices to meet varying circumstances and opportunities? What do consumer perception has to do with all the above?
This presentation will provide you with a deep knowledge of the pricing and product strategies adopted by Google Nexus in order to make a name for themselves in the smartphone market. This will also emphasize the reasons behind each strategy and how it got Nexus to grow so quickly.
What is Pricing Strategy and what are the objectives and factors affecting the Pricing Strategy.
There are Certain types of Pricing Strategies as well. Each and every strategy has its own affect on the product and services offered by an organization.
Value Based Pricing Strategy PowerPoint Presentation SlidesSlideTeam
Presenting this set of slides with name - Value Based Pricing Strategy Powerpoint Presentation Slides. Our topic specific Value Based Pricing Strategy Powerpoint Presentation Slides deck contains twenty four slides to formulate the topic with a sound understanding. This PPT deck is what you can bank upon. With diverse and professional slides at your side, worry the least for a powerpack presentation. A range of editable and ready to use slides with all sorts of relevant charts and graphs, overviews, topics subtopics templates, and analysis templates makes it all the more worth. This deck displays creative and professional looking slides of all sorts. Whether you are a member of an assigned team or a designated official on the look out for impacting slides, it caters to every professional field.
What is your company's pricing capability? How do we protect and expand revenue and profits? What can we do to drive short term and long term margin improvements? Pricing Insight can help.
Ethical and legal consideration in RETAILINGAsrar Mohd
What is ETHICS ?
This is a set of rules for human moral behavior. For retailers they can have explicit code of ethics or implicit code of ethics.
Explicit code of ethics: Written policy that specifies what is ethical and unethical behavior.
Implicit: Unwritten but well understood set of rules/standards of moral responsibilities.
This PowerPoint was presented by James Matson at the 2012 Local Foods Network Workshop: Taking the Product to Market in Spencer Virginia. In his presentation, Matson explores how to develop a pricing strategy that is right for your business.
"Product Pricing strategy" @ the 11th Prod.active meetupprodactive
Pricing strategy": Key pricing principles and methods, how should a company adapt prices to meet varying circumstances and opportunities? What do consumer perception has to do with all the above?
This presentation will provide you with a deep knowledge of the pricing and product strategies adopted by Google Nexus in order to make a name for themselves in the smartphone market. This will also emphasize the reasons behind each strategy and how it got Nexus to grow so quickly.
What is Pricing Strategy and what are the objectives and factors affecting the Pricing Strategy.
There are Certain types of Pricing Strategies as well. Each and every strategy has its own affect on the product and services offered by an organization.
Deviprasad Goenka Management college of Media Studies
http://www.dgmcms.org.in/
Subject:BRAND BUILDING
Lesson : Brand startegies
Faculty Name: Vishal Desai
The digital age requires you to evolve the tools and technologies you use. With this evolution, the old pricing methods don’t work anymore.
In this research-based session, Trent McLaren will share key pricing strategies designed to ensure you thrive in the digital age.
Sure, let's go through the main concepts of financial statements, their advantages and disadvantages, and provide examples and relevant ratio calculations.
Main Financial Statements
1. Income Statement
2. Balance Sheet
3. Cash Flow Statement
4. Statement of Changes in Equity
1. Income Statement
Concept:
• Shows the company's revenues, expenses, and profits or losses over a specific period.
• Key components include revenues, cost of goods sold (COGS), gross profit, operating expenses, operating income, interest, taxes, and net income.
Advantages:
• Provides a clear picture of profitability.
• Helps in assessing operational efficiency.
• Useful for trend analysis over different periods.
Disadvantages:
• Can be manipulated through accounting practices.
• Does not provide a complete financial health picture (e.g., cash flow).
Example:
Sure, let's go through the main concepts of financial statements, their advantages and disadvantages, and provide examples and relevant ratio calculations.
Main Financial Statements
1. Income Statement
2. Balance Sheet
3. Cash Flow Statement
4. Statement of Changes in Equity
1. Income Statement
Concept:
• Shows the company's revenues, expenses, and profits or losses over a specific period.
• Key components include revenues, cost of goods sold (COGS), gross profit, operating expenses, operating income, interest, taxes, and net income.
Advantages:
• Provides a clear picture of profitability.
• Helps in assessing operational efficiency.
• Useful for trend analysis over different periods.
Disadvantages:
• Can be manipulated through accounting practices.
• Does not provide a complete financial health picture (e.g., cash flow).
Example:
Sure, let's go through the main concepts of financial statements, their advantages and disadvantages, and provide examples and relevant ratio calculations.
Main Financial Statements
1. Income Statement
2. Balance Sheet
3. Cash Flow Statement
4. Statement of Changes in Equity
1. Income Statement
Concept:
• Shows the company's revenues, expenses, and profits or losses over a specific period.
• Key components include revenues, cost of goods sold (COGS), gross profit, operating expenses, operating income, interest, taxes, and net income.
Advantages:
• Provides a clear picture of profitability.
• Helps in assessing operational efficiency.
• Useful for trend analysis over different periods.
Disadvantages:
• Can be manipulated through accounting practices.
• Does not provide a complete financial health picture (e.g., cash flow).
Example:
Sure, let's go through the main concepts of financial statements, their advantages and disadvantages, and provide examples and relevant ratio calculations.
Main Financial Statements
1. Income Statement
2. Balance Sheet
3. Cash Flow Statement
4. Statement of Changes in Equity
1. Income Statement
Concept:
• Shows the company's revenues, expenses, and profits or losses over a specific period.
• Key components include revenues, cost of goods sold (COGS), gross profit, op
How to Price Effectively to Boost Your Company's Growth and ProfitsSurefire Local
Most contractors base their pricing on the cost of materials without necessarily realizing that money is often left on the table.
Professor Dholakia (top marketing thought-leader and George R. Brown Professor of Marketing at Rice University), shares actionable steps your business can take to price its services more effectively.
Some of the things you'll learn are:
- How to raise prices without actually raising prices
- The role of customer value and reference prices in setting prices
- The importance of price execution
- How to evaluate success of your pricing decisions
A pricing strategy is an approach taken by businesses to decide how much to charge for their goods and services. The interaction between margin, price, and selling level is given specific consideration while pricing products. Therefore, it’s important and complicated to design a proper pricing plan that ensures business success.
ProductCamp Vancouver 2019 Value to the CustomerSteven Forth
Price and value are central to the user experience. Ignoring them leads to poor design decisions. Ask how does each stakeholder receive emotional and economic value? How is that value distributed over the customer journey?
Why is this book so important? One of the biggest lessons I have learned within the startup landscape is that even though pricing, together with the business model, remains by far the lever that most impacts revenue, the subject is a sensitive one.
Pricing is a strong — but often underused — tool available to capture a share of value created for customers
Pricing is one of the biggest challenges that startup face. The book is a practical toolkit that positively influences the pricing strategies of startups. It reveals insights in the different pricing methods and tactics used by successful companies.
Are you concerned, worried or frustrated with your lack of sales this year?
Are you searching for what works best now to get more visibility for your business, more leads and more new clients?
Would you be open to discover today's proven ways to get more sales. If you answered yes, then this message is for you.
2. In business, few decisions are more crucial than the price
you charge for your product or service. Interestingly,
research indicates that many owners of businesses and
professional practices under price their products and
services.
JERRY R MITCHELL 2 April 27,2009
3. In theory it might seem that only the seller offering the
product or service at the lowest price ought to do any
business. But in reality, the highest priced seller might be
moving the greatest number of units.
JERRY R MITCHELL 3 April 27,2009
4. As a general principle, you should charge as much as possible
for your merchandise or services. But there are dozens of
factors (kind of customer you want to appeal to, competition,
selling for cash or credit, your willingness to accept returns,
guarantees) to examine before you can figure out your best
prices.
JERRY R MITCHELL 4 April 27,2009
5. You can offer the lowest prices possible, but to do so you
will probably give up amenities that others in your
industry offer: personal attention, delivery service, prompt
replacement of defective merchandise, unquestioned
refunds, and/or easier credit terms.
JERRY R MITCHELL 5 April 27,2009
6. If you don't offer such service, be prepared to lose
shoppers who want it and are willing to pay for it. Many
businesses fail to realize that, with low-cost competitors,
it's often more effective to position a product/service
higher upscale than it is to cut the selling price.
JERRY R MITCHELL 6 April 27,2009
7. For Example:
Japanese motorcycles are priced around 25 percent under
Harleys. But Harley-Davidson stresses custom styling,
American origin and the mystique of a powerful road
machine. The image is reinforced by heavy advertising and
the customers' club. The message? Only Harley offers the
real thing - anything else is a cheap substitute.
JERRY R MITCHELL 7 April 27,2009
8. Lower than average prices generally fail to increase sales
enough to raise profits if any of the following are true:
• You fail to advertise low prices widely
• Items are rarely bought
• Customers lack a clear basis for comparison
• Luxury items are involved
JERRY R MITCHELL 8 April 27,2009
9. There are many ways to price a product. Let's have a look at
some of them and try to understand the best policy/strategy in
various situations.
JERRY R MITCHELL 9 April 27,2009
10. Product pricing is hard. There is no magic formula that will determ
the best price for your product. I can't provide any easy answers, b
I can give you some things to think about as you make your pricing
decisions. In the end, you will just have to make a decision using y
own judgment. There will be times you will wonder if you made the
right decision. You may never know for sure.
JERRY R MITCHELL 10 April 27,2009
12. Let us first say that our goal is to find the price at which profit is
maximized. If we say that a price is "too high" or "too low," we
are saying that our profit could have been greater if we had set
the price either lower or higher.
JERRY R MITCHELL 12 April 27,2009
13. You set prices when you develop a new product or
service, when you market to new customers, and when
you bid on new contract work.
JERRY R MITCHELL 13 April 27,2009
14. Follow these six steps when setting a price for your
business' product or service:
1.Select the pricing objective for your product or
service.
• 2.Determine the demand for your product or service.
• 3.Estimate the costs for your product or service.
• 4.Analyze your competitors' prices, products and
services
• 5.Select a pricing method for your product or service
• 6.Select the right price for your product or service.
JERRY R MITCHELL 14 April 27,2009
16. First decide how you want your price to position your business.
Consider pursuing one of the following four major objectives
through your pricing:
JERRY R MITCHELL 16 April 27,2009
17. 1. Survival, if your business is plagued with overcapacity,
intense competition, or changing consumer wants.
JERRY R MITCHELL 17 April 27,2009
19. 3. Market-share leadership, if owning the largest market share
will result in your business enjoying the lowest costs and
highest long run profit (achieved by setting prices as low as
possible).
JERRY R MITCHELL 19 April 27,2009
20. 4. Product-quality leadership (achieved by charging a high
price to cover the high quality of your product or service).
JERRY R MITCHELL 20 April 27,2009
21. DETERMINING DEMAND.
Each price you charge for a product or service leads to a
different level of demand. Therefore, demand largely sets a
ceiling to the price you can charge for the product or service.
JERRY R MITCHELL 21 April 27,2009
22. ESTIMATING COSTS.
Costs set the floor for your pricing. The price must cover all
costsof producing, distributing, and selling the product or
service, including a fair return on effort and risk.
JERRY R MITCHELL 22 April 27,2009
23. Consider the following costs:
Cost Per Unit of product. This is a variable cost that is
duplicate with every unit of product sold. It includes:
JERRY R MITCHELL 23 April 27,2009
24. •Cost of the product
•Order processing
•Shipping and packaging
•Postage to mail the product
•Overhead and an allowance
for bad debt
JERRY R MITCHELL 24 April 27,2009
25. Campaign and Overhead Costs.
These are fixed costs that vary little with changes in the
number of products sold. These include:
JERRY R MITCHELL 25 April 27,2009
26. •Printed materials (cover letter, brochure, etc.) for a direct mail
piece
•Mail preparation to stuff envelopes, sort and mail a direct mail
piece.
•Postage to send mail pieces
•Advertising costs for display and classified ads.
•Other marketing costs such as telemarketing, card decks, the
Internet, etc.
•Overhead costs such as accounting and office expenses
JERRY R MITCHELL 26 April 27,2009
27. ANALYZING YOUR COMPETITOR'S PRICES, PRODUCTS
AND SERVICES.
While demand sets a ceiling and costs set a floor to pricing,
competitors' prices provide an in between point you must
consider in setting prices.
JERRY R MITCHELL 27 April 27,2009
28. Several pricing strategies are available to
you to seek an advantage over the
competition:
JERRY R MITCHELL 28 April 27,2009
29. 1.Price-discount strategy: Offer customers a product or service
comparable to the leading competitors at a lower price.
2. Cheaper-goods strategy: Offer customers an average- or
low-quality service at a much lower price.
3. Prestige-goods strategy: Launch a higher-quality product or
service and charge a higher price than the leading competitor.
JERRY R MITCHELL 29 April 27,2009
30. SELECTING A PRICING METHOD.
Given the demand, the costs, and competitors' prices,
you are now ready to select a price.
JERRY R MITCHELL 30 April 27,2009
31. Price is a promise.
Each time a buyer chooses a product, they match up a price
with its promises. So, as the owner of a small business, it is
your job to understand what are the price and promises for
your service.
JERRY R MITCHELL 31 April 27,2009
32. Determine your promises .
As you set your prices (or consider raising them), take stock
of all the value factors that go into your price. What
attributes of your product or service are noteworthy? Below
are some examples of value factors that go into a product’s
or a service’s price:
JERRY R MITCHELL 32 April 27,2009
33. For a product:
•Quality of the raw materials
•Finished product performance
•Packaging
•On-time delivery
•After-sale service
JERRY R MITCHELL 33 April 27,2009
34. For a service:
•Experience level of the service provider
•Bottom-line impact of the final deliverable
•Appearance of the service provider
•Turnaround time on phone calls/emails
•Ability to meet deadlines
JERRY R MITCHELL 34 April 27,2009
35. As you can imagine, your ability to deliver various factors,
over and above your competitors, directly impacts the prices
you set and get. If you promise certain factors, yet fall short
on delivering them, your price will be challenged through
customer complaints, delayed payments or customer
defections.
JERRY R MITCHELL 35 April 27,2009
37. One big mistake I see small business owners make is using only
one method to calculate their prices. But, what if your calculations
are wrong? Then, you are stuck with a bad price. Instead, I
suggest that businesses use several different methods to
calculate their prices.
JERRY R MITCHELL 37 April 27,2009
38. Method No. 1 –Costing out a price .
JERRY R MITCHELL 38 April 27,2009
39. This first method takes into account your costs, your desired
profit, and then totals. These indirect costs cover everything
you need to keep your business operating every day,
whether or not you make any sales. After you’ve uncovered
what all your direct and indirect costs are, add them up.
.
JERRY R MITCHELL 39 April 27,2009
40. One person I know sells ad specialties (custom-t/shirts),
so lets use them for our next example.
JERRY R MITCHELL 40 April 27,2009
41. Just for fun, let’s say they estimate they can sell 20,000 t-shirts
in a year. They know that their expenses will be $100,000 on this
transaction.
JERRY R MITCHELL 41 April 27,2009
42. Dividing their $100,000 in expenses by the 20,000
quantity, you end up with a breakeven of $5.00/t-shirt.
This breakeven price is the lowest price you can charge
and still cover all your costs.
JERRY R MITCHELL 42 April 27,2009
43. The next step is to ask yourself what profit you want. Let’s say
you’d like to have $100,000 to live on during the year. This is
your profit.
OK, now take that $100,000 and divide it by the 20,000 t-shirts
you expect to sell, and you come up with $5.00/t-shirt. Add this
to your $5.00/t-shirt cost and the price you should charge is
$10/t-shirt.
JERRY R MITCHELL 43 April 27,2009
44. Method No. 2 – Pricing competitively .
JERRY R MITCHELL 44 April 27,2009
45. After you’ve established your cost-based price, you want to
compare this price against market prices. These are prices your
competitors are already getting, and are a key determinant of
your own pricing.
JERRY R MITCHELL 45 April 27,2009
46. Finding competitive information isn’t all that hard; it just
takes a little creative work. If I were an ad specialty sales
person like in the example above, I would visit 5 other
t-shirt shops and inquire about their pricing.
JERRY R MITCHELL 46 April 27,2009
47. Then I’d ask myself do they offer the same quality t-shirts as my
current supplier? If their prices are higher, what else are they
offering to justify the price? If their prices are lower, is their
product quality (or service) noticeably lower? This kind of
competitive surveillance is crucial when determining your prices.
JERRY R MITCHELL 47 April 27,2009
48. Now, what if you are in a business-to-business market,
a service? Here are some common sources of informat
competitive prices:
•Your preferred customers who can supply you with price sheets f
competitors.
•Trade associations who might monitor pricing among the trade.
•Job candidates interviewing with your company—who come from
competitors.
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50. The Worst Pricing Decision You Can Make.
When you think,” We need the work. For now, we’ll set our
prices really low. Then, as we get more business, we’ll raise
our prices, alarm bells should go off. This is one of the worst
marketing mistakes you can make.
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51. Why? Because you’ll struggle from the outset just to cover
your costs. And, even if you do have some profit left over,
you’ll resent working so hard for such a little payoff.
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52. You’ll also position your company as lower in quality versus
most of your competitors (whether or not it is true). Avoid this
situation at all costs and price your service right the first time.
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53. Why It’s Better To Make A Mistake On The Side Of
Higher
Pricing
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54. If you have two price points you are considering, but are unsure,
which is right, choose the higher one. This will position you as
higher quality and will ensure adequate profitability from the
beginning.
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55. And should you meet resistance at this price, you can discount
down to an acceptable price. The alternative is choosing a
too-low price, which leaves no room for negotiation…or profit.
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56. The Second Worst Pricing Decision You Can Make
JERRY R MITCHELL 56 April 27,2009
57. Have you ever said something like “OK, if I lower my price to
$15/widget, will you buy?” The problem with discounting your
price like this is that it communicates your price is over- inflated.
And if the buyer perceives this, they will feel compelled to
negotiate until they find out what your true price is.
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58. Instead, it’s much better to couple any price discounts with an
equal reduction in services or product offered. So for example,
you might say “OK, I can reduce my price to $15/widget by
reducing our 5 year warranty to 3 years.” This way, you’ve
shown flexibility in meeting the needs of your buyer, yet have
maintained your pricing integrity.
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59. Commit Your Pricing Strategy To Paper
Once you’ve finalized your pricing strategies, write them down.
This commits you to a plan of attack, and gives you something
to go back to when you plan again next year. It should look
something like this:
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60. Pricing strategy:
We will premium price our products in the top third of our
market.
We will do this because it (rationale):
JERRY R MITCHELL 60 April 27,2009
61. 1.Positions us as higher quality than our
competition.
2.Further justifies our additional services.
3.Ensures adequate margins now and in the
future.
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62. Remember pricing is a financial matter, but just as important,
it’s a marketing matter that impacts your positioning, your
selling abilities and your brand. Follow the steps outlined
above and you’llensure you set—and get—the right prices.
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63. Figuring Costs And Profits For A Consultant Service
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64. Pricing services, where your own labor or expertise is used, is
different from pricing services that use materials and other
labor.
For instance, most consultants price their services by the hour.
Senior consultants charge more for their time than do their less
experienced counterparts.
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65. Remember to charge for an adequate number of hours. Travel
time is usually listed as an extra charge.
It is unlikely that all of your time will be billed to clients. Therefore,
hourly or contract fees must be set high enough to cover
expenses during slow periods. That is why one-half of the total
normal working hours for a given year are used in figuring
overhead rates.
Try to obtain long-term, monthly, or contract assignments when
possible.
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66. Summary
Your pricing structure and policy are major components of
your public image and are crucial to securing and keeping
your clientele
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67. Pricing for service businesses may be more complex than
product pricing. However, the result is the same: cost, and
operating expenses, and desired profit, equals the service's
price.
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68. The key to success is to have a well-planned strategy.
Establish your policies; constantly monitor prices and
operating costs to insure profit
Accuracy increases profits!
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69. Formula A-Price Per Hour of Service.
Labor expenses per hour + overhead and variable
expenses + profit = price per hour charged.
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70. Formula B-Price Per Job
In lieu of charging an hourly rate for your service, you may
wish to have a per job charge. To figure out this price,
determine the total hours to do the job, and then add this
figure to this formula.
Labor expenses per hour x hours needed to do job +
overhead and variable expenses + profit = price charged
per job.
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71. Remember, the key to setting prices for your product or service
is to set them high enough to cover all your costs and low
enough to encourage people to buy. Learning to set prices
takes some business experience. The information in this fact
sheet is presented as a helpful guide; some degree of
flexibility is needed.
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72. I am often asked if there are any standards or rules of thumb
for setting prices for a consulting business. There aren't really
any standards for setting the price for services rendered, but
there are some basic approaches you can follow that will help
you determine what you want to charge.
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73. Here is a basic formula you can use to get
started in setting your fees:
P = (H x B x R) – E
Where:
P = Profit on a project;
H = Hours worked;
B = % of those hours that are billable;
R = Your hourly rate; and
E = Expenses.
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74. You should charge your profit plus your expenses or, P + E.
For example, you want to make $20,000 for a job you are
bidding on. You estimate it will take 400 hours to do, of which
only 300 hours can be directly billed to the project. You
estimate that your expenses will be $4000 to complete the
project. What do you charge per hour?
$20000 = (400 X .75 X R) - $4000
$24000 = (300 X R)
$24000/300hrs = R
R = $80/hr.
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75. Suppose you have a set hourly rate of $80 and you want to
know how much you will make on a project. Assume your
expenses are still $4000, it will still take you 400 hours to do
the project and only 300 hours are billable. You can use the
same formula:
P = (400 X .75 X $80) - $4000
P = $24000 - $4000
P = $20000
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76. If you want to make more money, you have to lower your
expenses, increase your billable hours, or raise your rates.
The math here is simple. What's hard is selecting the
approach you take to choosing the numbers you plug into the
formula.
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77. There are 2000 working hours in a year (50 weeks x 40
hours).
Suppose that only half of that time, or 1000 hours, is actual
billable work. Suppose also that your overhead and other
expenses are$30,000 for a year. Assume you want to make
$160,000 net income.
$160,000 Net income
+30,000 Cost
$190,000 Gross income
Divide $ 190,000 by the number of billable hours (1,000) to get
the hourly rate:
$190,000/1000 hrs = $190/hr
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78. Sell Your Own Product via the Net
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79. If there is one thing I have learned trying to make money
online, it is this: you will succeed if you have your own
unique product...
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80. This might be your own e-book or even a tangible product
that you think might sell well on the Internet. As you
probably know, information is what sells best online
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81. Do YOU have unique information or a very specific area of
expertise? Even if you answer "yes", you must also ask
yourself: Is there an online market for my product/service?
Otherwise, you may be putting forth a lot of wasted time.
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82. Ask yourself:
What do I know better than anyone else?
What can I offer online that would be of value to a
specific group of customers?
Can I make things with my hands or with tools?
Can I write well?
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83. What did I do in the offline world?
Can any of this expertise be translated to the Internet?
As mentioned above, information is the best-selling online
item today. It will probably remain this way for the
foreseeable future.
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84. Perform a survey:
Hopefully, you already have newsletter subscribers or
some sort of opt-in list. If so, you can simply send a survey
to each one of them. Make it very simple, just yes or no
answers.
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85. Ideally, just have them be able to click on one link for
"yes", and another link for "no". Try not to ask more than
five questions. Keep your language simple. A lot of my
newsletter subscribers are not from the United States.
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86. If you are just starting out, you may have to find
an ezine that relates to your product or service.
Then write to the ezine publisher and tell him
what you need. He might let you run your survey
in his ezine, charging you his usual ad cost. He
might even help you with the formatting. Best of
all, he might send it out to each of his subscribers
as a single ad. They might think he is offering the
survey.
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87. They will be much more likely to answer a survey that
seems to be coming from their publisher, someone they
know and trust.
If you are lucky, you will get enough responses to come to
a logical conclusion. You need at least 25(this is very
minimum). If you don't get at least this many, try another
ezine. Once you have all your responses together, throw
out any widely divergent answers.
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88. Here's another way to do the same thing. Start
your own ezine and advertise it in one of those
"pay for subscribers" places like
(newslettersforfree.com). You can pay as low as
0.16/subscriber. If you do this, make sure your
description is accurate and interesting. This is BY
FAR the fastest way to build your own true double
opt-in list. One more thing, be sure to let Topica
sponsor your newsletter. It's only about $100/year,
but it's well worth it.
JERRY R MITCHELL 88 April 27,2009
89. If you ask how much people would be willing to pay for
your products, and most answer in the range of $50-$60,
then this is a range you can trust. You must throw out the
two guys willing to pay $80 and $100, as well as the three
persons who would only pay $25, $30, and $35. With these
five divergent opinions, I am assuming you have at least
20 persons willing to pay $50-$60 for your
product/service.
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90. Customers want the best value for their money, and thus
they will almost always do a quality comparison and make
purchases based on the best price for the best value. To
illustrate, put yourself in your customer's position.
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91. • Suppose you go into an office-supply store to buy
a ream of paper for your printer, and you find that
there are dozens of options to choose from. As you
scan the shelves, you notice that most reams cost
about $7.99, but you notice one ream for $5.99.
You may be tempted to pick it up, but if you're
like most consumers, you automatically think to
yourself, "Why is this so cheap? Maybe the
quality isn't as good, and maybe it will jam my
printer. Or maybe the ink will bleed through." To
ease your mind, you likely buy one of the higher-
priced reams.
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92. As with most rules, however, there are exceptions
when it comes to pricing. For example, if you
have a product or service that is in exceptionally
high demand, you will usually be able to get away
with selling it at a higher price. Remember a few
years back when Mazda came out with the Miata,
and the little sports car sold like hotcakes?
JERRY R MITCHELL 92 April 27,2009
93. Mazda was able to capitalize on that boom
and raise the car's price because the demand
was so great that consumers were willing to
pay the extra money. Similar circumstances
happen every year around Christmas with
must-have toys for children, as was the case
with Cabbage Patch Dolls in the late '80s
and Tickle-Me Elmo's in the 1990's. When
you have such products that are "all the
rage," you can set your own prices.
JERRY R MITCHELL 93 April 27,2009
94. Another time you may get away with overpricing is if your
product or service is perceived by the public to be worth
more because of your company's brand name. For
example, a bottle of perfume may have $10 worth of
perfume in it, but add the name "Calvin Klein" or "Chanel"
to the bottle, and suddenly the perfume sells for $50. These
are situations in which the highest-priced products will be
purchased by status-seeking consumers because of their
perceived value, whether it is a reality or not
JERRY R MITCHELL 94 April 27,2009
95. Additionally, if you are in an industry where the products
change quickly, such as high-tech, you may have to set
prices a little higher, knowing that you only have a small
window of opportunity in which to sell. The computer
industry is a prime example of this: What is on the market
today may well be defunct in a year or two. Thus, this is
one of those rare cases where you may have to overprice in
order to sell quickly and make a profit.
JERRY R MITCHELL 95 April 27,2009
96. Remember this golden rule when setting prices:
perception is everything. How customers view
your product or service and what they are willing
to pay for it is based upon those perceptions. In
the end, customers will tell you loud and clear
through their purchasing behavior whether or not
your prices are too high, too low or right on the
money.
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97. Stickiness -- this is customer loyalty with a twist. Once
someone buys from you, does it quickly become too costly
for her to switch to a competitor? The costlier it is to
switch...the stickier is your product.
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98. Shaver handles used to be expensive. And they only fit a
certain brand of blade. The cost of switching to another
brand was the cost of buying another expensive handle, so
customers had to continue to buy expensive refills. Hence
that old phrase... the "razor-and-blade" strategy.
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99. Consider free Web site hosts like Geocities. Once you
build a site, it becomes tough to move it elsewhere. Also,
the amazingly cheap online brokers are remarkably
"sticky" -- it takes a while to learn a system and set
everything up. Once you do that, you don't want the hassle
of switching.
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100. Summary
Well, here we are at the end of the presentation. You've heard the
whole thing, and just like I threatened at the beginning, you don't
have any simple answers.
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101. I've given you a whole bunch of guidelines and issues to
consider as you face your pricing decision. I've said some
things here which conflict with other things I've said here.
Which issues are you supposed to consider?
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102. You should consider all of these issues, and probably a few more
that are specific to your situation. Look at the decision from every
possible angle. Anything you’ve heard on the subject of pricing is
merely an aid to your own judgment, not a substitute for it.
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103. Unfortunately, there is no such thing as the perfect price. There
is that mythical price that gives the customer excellent bang for
his buck and the company excellent profits for its efforts, but
even that price point can't be considered the perfect price. That's
called compromise, not perfection.
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104. Are Your Prices Where They Should Be?
Ask yourself the following questions regarding your prices.
1)Do I need to generate more revenue that I can't achieve from
product or service improvements?
2)Do I want a higher market share that will lead to lower costs
through higher volume?
3)Is the economy suffering a downturn or a recession?
4)Have one or more of my competitors recently lowered their
prices?
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105. 5)Are my prices set according to the quality of my product or service
as compared to that of my competitors?
6)Is my revenue level suffering because of the effects of inflation?
7)Is the economy enjoying an upturn or boom?
8)Is my product or industry likely to be obsolete a year from now?
9)Have one or more of my competitors recently raised their prices?
10)Is there a greater demand for my product or service than I can
supply?
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106. If you answered yes to any of questions 1-5, you may want to
consider lowering your prices. If you answered yes to any of
questions 6-10, you may want to consider raising your prices.
If you answered no to all or nearly all of the questions, chances
are your prices are at the right level.
JERRY R MITCHELL 106 April 27,2009