How Do You Price Your Products? Part 3 of the Series
If you’re reading this article it may be safe to assume you are seeking information that can better help you, or other businesses you oversee, in achieving sustainable profits through the best pricing possible. Following some of the steps outlined on this how-to series will help you achieve just that.
Before jumping on the third part of this series, here’s a quick summary on the previous articles, along with links should you choose to read them in full.
1) Know your costs
If you’re in the business to make a profit you need to ensure you get paid for your passion and bring in enough money to cover your expenses. This is something often referred to as the break even analysis. Click on this link to read the first article in full
. The second step to setting a successful price is to:
2) Know what your competitors are charging?
Understanding what your costs are , and what your competitors are charging for similar products will help you adequately and successfully price your products and services. Click on this link to read the second article in full. Now that you’re up to speed, lets jump right into the part 3:
3) Tiered Pricing
Tiered pricing is the strategy of offering multiple price points for a consumer to consider.
This tactic is widely used in many businesses to offer different classes that often range from “Good, Better, or Best.” We can point to nearly any service or product and watch this tactic in action. Using the car industry as another great example, automotive companies typically have at least three standard editions for nearly every model. A basic model, followed by a mid-class, and lastly some type of luxury or top of the line/sport edition. This same tactic is also used by industry leading companies such as Apple and their iPhone, which comes in three different models (16 GB, 63 GB, and 128GB)
A recent article
written by Eilene Zimmerman of the NY Times provides us with the following Quick Tip:
“Give your customers choices, like off-peak pricing or tiered pricing, where the price varies depending on enhancements to the product.”
Similar to cross-selling, think of complementary products or services
you can add to increase your revenues. It’s no coincidence stores pack items that complement your purchase, as well as last minute items right at the register. This method allows you to add cost effective products/services to your customer while effectively increasing your bottom line.
- Attract new customers – Introduces new consumers to your products at a lower cost/lower risk. If they like your product/service, they may recommend to others and conduct repeat purchases.
- Build brand awareness- Selling items at a lower price helps the consumer rate your work, and decide if your company is deserving of their higher priced purchases. Setting lower price points may also help build your reputation and create brand awareness.
- Attract different classes- Some consumers may only be interested in the higher tiered products. By offering a higher-tier line of products you may attract a new audience.
Incorporating these simple steps, one at a time, will help you achieve a success by not only allowing your products and services to sell, but by netting you high profits with ever sale made.
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on any of the social media links listed!
Lastly, if you have a question you’d like to ask, hit me up on Twitter, handle is @AJRos02 and use the hashtag #AskAJ I’ll reply back and/or write an article answering your questions.