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10 Tips to Better Pricing
Posted: August 6, 2010
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Offer product versions. One of the easiest ways to enhance profits and better serve customers is to offer good, better and best versions. These options allow customers to choose how much to pay for a product. Many gourmet restaurants offer early-bird, regular and chef’s-table options. Price-sensitive gourmands come for the early-bird specials while well-heeled diners willingly pay an extra $50 to sit at the chef’s table.
Implement differential pricing. For any product, some customers are willing to pay more than others. Differential pricing involves offering tactics that identify and offer discounts to price sensitive customers by using hurdles, customer characteristics, selling characteristics and selling strategy tactics. For example, customers who look out for, cut out, organize, carry and then redeem coupons are demonstrating (jumping a hurdle) that low prices are important to them.
Use pricing tactics to complete your customer puzzle. Companies should think of their potential customer base as a giant jigsaw puzzle. Each new pricing tactic adds another customer segment piece to the puzzle. Normal Norman’s buy at full price (value-based price), Noncommittal Nancys come for leases (pricing plans), High-end Harrys buy the top-of-the-line (versions), and Discount Davids are added by offering 10% off on Tuesday promotions (differential pricing). Starting with a value-based price, employing pick-a-plan, versioning and differential pricing tactics adds the pricing related segments necessary to complete a company’s potential customer puzzle. Offering consumers pricing choices generates growth and increases profits.
Since pricing is an underutilized strategy, it is fertile ground for new profits. The beauty of focusing on pricing is that many concepts are straightforward to implement and can start producing profits almost immediately. What better pricing windfall can your company start reaping tomorrow morning?