7 Spectacular pricing strategies to implement now!

One of the most important and decisive questions you have to ask yourself as an entrepreneur is how much you charge for your product or service. When it comes to pricing, it’s such an essential decision because it concerns your marketing.

If done properly, pricing could also be a marketing strategy. So today, I’m gonna give you not one, not two, not five, but seven pricing strategies. So then, from now on, you know precisely how you should price your product or your service.

You see, when you are not charging adequately, let’s say you price too low, you’re not making a profit; you’re not making money and when you price too high, then maybe you’re not getting customers, you’re not getting enough volume so that you won’t grow.

So there’s that fine balance to just the right type of pricing strategy could change everything.

1. Price to your competition.

Price to your competition is the means to find out what your competitors are charging, and then maybe you charge the same. Let’s say they sell a product for $100; then, you’ll say, “Okay, I’ll sell mine for also $100.”

There are some industries you want to be competitive in. If you are in a commodity kind of business, that means your customers are shopping for the best price.

By having a price that’s maybe 5%, 10% costlier than everybody else within your industry, that might be bothering you.

Because your customers will be like, “Hey, you know what, you charge $100, I talked to your competitor, your competitor only charges 90 or 95.”

Now, unless you’ve done your proper marketing or you know how to position yourself, that might be a tough objection to overcome.

Now there’s a downside to this. That means you are always reacting. You’re always reacting to what your competitors are doing. They raise their price; you raise your price.

They lower their price, you lower your price. You’re always reacting to what your competitors are doing.

Ideally, if you want to be a leader, you want to play an offensive and not defensive. You to be the one who’s leading, you want to dictate the terms, dictating the price in the marketplace, so others follow versus you follow others.

2. Price to pay the bills.

Some even call this the break-even strategy. It means you price it enough so that it covers your overhead; it covers your cost, and you almost get no profit. That might be good initially in some cases; you are maybe entering a new marketplace.

You’re testing things; you’re saying, “Hey, you know what, all I want to do, is to break even. I want to test the waters, see how the marketplace reacts to my offer.”

It’s possible, but sometimes, you gotta use it very thoughtfully. Otherwise, you’ll go bankrupt doing this. ’Cause you’re not making a profit. You are pricing, using the break-even strategy to acquire a large volume of customers.

Sometimes I call that the self-liquidating offers. Meaning this is for your low-ticket offer on the front end. Suppose if you are selling a book, you don’t make money from selling the book, but it’s just to break even.

That’s fine because that’s what a book costs. It’s $20. So you sell the book, similar price. But you know all the profits, all the cash comes from the follow-up offers to the customers who have bought your book. That’s what you want to do.

3. Price of time.

This is probably one of the most typical pricing models. A lot of people do this. Lawyers, professionals, accountants use this a lot.

They charge per hour or charge per day or charge per week or charge even per month. That’s kind of like a retainer model.

In this model, you see how much time you spend on this special task or a project, and you then would charge, respectively. So you charge $20, $30, $50. Now, this model is very, very familiar.

Still, this model is getting out of date as we are now transitioning from the job economy to a skilled economy; corporations and people now pay for results.

When you price to time, the problem with that model is the relationship you have between you and your client; that relationship is always a conflict of interest; what I mean by that?

Let’s say you charge $50 per hour for what you do. And you bill them $50 per hour. And this is gonna take you 10 hours. And you bill them $500. That’s one thing. But let’s say you could get this done in eight hours. Now, be honest. Are you gonna bill them eight or 10 hours?

Even if you could get it finished in eight hours, you’re gonna get it done beyond eight hours. Because the relationship is, the longer it takes for you to finish something, the more money you make.

From the client’s perspective, he wants to get this done as efficiently, as fast as possible. But yet, he is paying for time. So how does this work? This is always a conflict of interest.

You want to make as much money as possible. They want you to get it done for as little time as possible.

I don’t believe in that anymore because the whole model came back in the industrial age. When your clients are paying you, they’re paying for results.

Shouldn’t they be rewarded if they can get it done in five hours instead of eight hours? If you can get it done faster, better, more efficiently, why shouldn’t they be rewarded? Why would they have to pay more for you to crawl the projects longer? It makes no sense.

But it is a widespread model, and still, a lot of people use it. If you want to use it that way, that’s fine.

4. Price to cost.

Now, this is very popular in the construction business. Let’s say a project’s gonna cost a million dollars? That’s the cost. And then you’ll add a 10, 15% mark up on that. That’s fine, that’s one way to do it.

Again, you see this very familiar in interior design and construction and a lot of different industries. Now, what’s the problem with this model? It’s a widespread model.

But it’s the same thing with the price to time model; it’s something that has been around a long time; it’s logical, but, again, they are getting paid based on spending more money.

So if I’m a contractor, let’s say, and I know this project with supplies and everything will cost a million dollars. And I’m gonna earn my mark upon them, my 15% that’s 150K.

Now, if there are ways that I could save money, if I can use better materials but actually cost less and I get the whole thing done, maybe $800,000.

Now, most contractors, not saying all, but most contractors will think, “Well, do I really want to get it done for $800K? Because now I make less money doing the same amount of work? Or is it in my kind of self-interest, to spend as much money as possible?”

From the client’s perspective, it’s the opposite; as per him, it’s wrong because the more money you spend, the more costly the materials, the more costly the labor, the more money you make, it’s just profiting you and not him.

Now, let’s say if I am building a building or an office. I can tell you that’s not the model I would strive for. I would do something that’s very, entirely different.

For example, I would negotiate with the contractor; I would have an obvious budget, and I would say, “Here’s the budget, right, let’s say a million dollars, ok.” But here’s what I would do.

“Out of this million dollars, chances are you’re gonna maybe 150K. I’m more than happy to pay 150K. But if you could save me money, if you can get it done for $800K, you’re smart; I’m gonna give you a bonus. I’m not gonna pay you $150k; I’m gonna pay you another $20,000, $30,000.”

Whatever it might be, depends on whatever the project is. The second thing KPI would have is that “If you can get it done on time or even early, I will pay you another reward for the result you produce.”

So now then we’re on the same page. So I and the contractor, we’re thinking about the same thing. We’re focused on the same thing; we have the same intent: getting the project done on time or early. He gets compensated for that.

Do you see how that works? So the contractor that takes on this contract knows I am results-focused. That’s what I would do. But again, you know, that’s one pricing model that’s out there. That’s pretty common.

5. Price of the package.

Now I like this one. I use this one a lot. It means that you are formulating an offer. You’re creating a package. And, let’s say the package, the total value is worth $10,000. And you’re only charging your customers $1,000 or $2,000.

They’re only paying a fraction of what the entire value; the package is worth it.

I like this a lot. First of all, it makes the offer irresistible. If you want to increase the price, all you need to do is increase the value you deliver.

There’s a general rule of thumb, and I’m giving that to you. I call that the one to ten. Meaning for, let’s say for an educational product, for $1,000 I charge, I want to deliver at least $10,000 worth of value.

If I want to charge $2,000, I want to deliver at least $20,000 worth of value.

Now, although some of those products, some of the rewards could be digital products.

Just think about how you can apply this to your business. Versus just selling the widget, the product, whatever you’re selling, how can you package attractively?

Let me give you another example. Let’s say you are selling website development.

Instead of saying, “Hey, you know what, I’m gonna charge you $100 an hour to design your website.” and the client says, “well, how long it’s gonna take? “ and you say, “Well, it’s gonna take me, you know, 100 hours.” and he says “Okay, great, I’m gonna pay you 100 hours.” Versus package.

“So, this website development package, we are going to design, let’s say, a 10-page website for you. And we’re gonna also set up a blog for you. And we’re gonna also create landing pages for you.

We are going to create 30 email follow-ups for you to convert those leads into sales, right. So you see how it’s a package?

Now the whole thing if you buy this, and you buy this, and you buy this, you buy this, and you buy this, all separately, it’s gonna be $7,000. But if you buy the whole thing from us right now, like a sign-up, as a client today, it’s gonna be $3,000.”

Now, why are you giving them that? So you may be thinking, “Well, aren’t I giving them a discount?” You’re not giving a discount.

You price the package. You know this is the package you put together, and you offer a complete solution. So it’s more engaging. ’Cause you’re thinking on the client’s behalf. It’s what we do at Bizzranker; we would design our clients the perfect tailored package.

We’re thinking ahead, like, “Hey, you know what? We could build a website, but won’t you need some landing pages down the road?

Don’t you need some emails down the road? Won’t you need all these things?” and the client says, “Oh, I never thought of that. So, why don’t we put together a package with a price according to that?” I like this model a lot.

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Cheers,

Susan.