What to consider for a profitable pricing strategyFebruary 5 2018
A query by Noreen Makosewe on the forum: “I’m interested in how entrepreneurial businesswomen price products and services of their own creation. I’m curious to find out how entrepreneurs in this community approach and structure their pricingfor profit.”
A very good observation, Noreen! You may have come across businesses which offer similar products and services at different prices. How did they arrive and structure their pricing for profit? Here’s our reply with the help of fellow community members.
For Diana Gonzales, below is a good reference for pricing a product. She also mentioned to consider the following: competitor’s price, product’s added value and customer’s background.
We also added our own to some of Anuradha Vasudeva’s pricing strategy suggestions:
- Demand and Supply – Are there less players, or is the market crowded? If the supply is less than the demand, a high price could be feasible.
- Commoditized/Non Commoditized Product or Service – Commodities have standard pricing, and such prices can only take significant deviation only if premium quality products are offered.
- Industry Maturity- A mature industry means leaders already know how to optimize their costs. A price war is also possible.
- Differentiated Offering – If you are a new entrant in the market, a strong value proposition can entice customers to pay more.
- Freemium Services – LinkedIn, Trello, and Slack provide free basic services but their premium services are available for additional fees. Note that this would require a large capital or investment to embark on.
- Rate-Based Pricing – Also known as hourly pricing. Lawyers, consultants and coaches are known to use rate-based pricing to provide services. The drawback is that the client may think that you are not as efficient as you could be as you are driven to work more hours to earn more money. A workaround is to agree on a deadline.
- Penetration Pricing – This is one of the most commonly used methods among start-ups. Here products and services are priced low enough to attract customers and capture market share. Upon making a brand among the customers, the price can then be raised.
Help Noreen by sharing your own approach on pricing products and services here!
(Photo from: Pixabay)