7 Pricing Strategies to Move the Needle on Sales

Marketing tips for small business owners and entrepreneurs... Don't forget your due diligence when it comes to pricing strategies for your products or services.By Viqi French

Price. It’s likely the most important component of any entrepreneurial or small business marketing effort. When times are good, setting prices that resonate with targeted consumers is tricky. So in recessionary times, testing for optimal pricing, price reductions, and new pricing strategies requires urgent attention.

If you feel you’ve reduced your prices beyond what seems reasonable and still sales are slow, you probably wonder what on Earth to do next?

According to this free report by Accenture, a weak economy means it’s time to outperform our rivals, not simply drop your prices to the floor. The way to do this is by honing your strategic focus. Look at your business and answer these questions:
• Where in my service/product portfolio do I offer a differentiated advantage?
• Which of my services/products will continue to be essential to customers past the economic downturn?
• Which services/products will most easily lead to sales of other goods or services?
To manage the recession, focus on these products and the opportunities they provide. Also, do whatever you must to minimize costs associated with emphasizing this product or service group. And then, says Accenture, price strategically around these products or services.

I like how the niche marketing coaches express this way of operating your business. They advise marketers to focus an inch wide and a mile deep

From there, consider a new pricing strategy – perhaps one of these:

1. Prestige in Pricing: Are you price positioned at the Starbucks end of your category or the new McCafe model? The Lamborghini or the Chevy? Higher prices, of course, imply higher quality. The world’s most coveted luxury brands are fine paradigms of the prestige pricing strategy. And speaking of brands and elements that comprise yours, sometimes just altering the appearance, packaging, method of delivery or statement of promise can justify charging – and getting – a higher price. Work differently to find and cultivate the Lamborghini wanters among your market. Once you get them, treat them royally and incentivize them to become repeat customers.

2. The Numbers Game: Do you know that most people tend to associate the number 9 with value and a zero with quality? Consider the difference in pricing styles between upscale restaurants and fast food joints. A meal at a high-end establishment may set you back a nice, round $30. But grabbing a burger on-the-run may only cost you $3.99 – a penny less than a big, round number that might push your budget over the edge. So, do the prices of your products or services convey Quality or Value? Interestingly, there’s lots of talk these days about prices ending in lucky number 7, too. It’s all called Psychological Pricing, a strategy to use when you want customers to respond on an emotional, rather than a rational, basis. 

3. Recurring Payments Encourage Satisfaction. Customers who pay more frequently for a product or service tend to use it more often. Therefore, they perceive they’re more satisfied with the purchase. A perfect example of this pricing model is the gym or country club membership. If you only paid one time for membership, at some point, you’re likely to view it almost as “free” and not use the facility very often. However, if you’re charged for the membership on a monthly basis, you’ll be more likely to keep using what you keep paying for, and value the frequent benefits you derive.

4. Promotional Pricing: Are you “Lovin’ It” when McDonald’s runs a 2 for $2 special? Well, so is McDonald’s. That’s because when they suggest how many Egg McMuffins you want, you’re often likely to agree. This type of pricing to promote a product or service is quite common and comes in many other flavors, too. For example, the good old Buy One Get One Free (aka pronounced “BOGO”).

5. Bundle Pricing: There’s also the class of promotional offers where products seem to multiply like bunnies. It’s called bundling, and it conveys super value. This is the “But wait: There’s more!” pricing strategy. For the price of one product or service, you’re going to actually receive two, three or even 10 related add-ons. We see this a lot among TV informercials. Online, we’ve seen an explosion of this technique among ebook marketers. Product bundle pricing also is a popular way to move old stock.

6. Incremental Payments are a Smart Plan: This pricing structure offers a customer multiple, bite-sized payments to eventually reach the unit total. TV shopping channel QVC is masterful at this, offering customers a plan to make four easy payments of, say, $19.99 each. This certainly seems more digestible than the $79.96 price tag.

7. Attention Bargain Shoppers: Dropping prices to rock-bottom levels can definitely increase sales volume. Two pricing strategies fit under this umbrella:
a) Penetration Pricing, where you temporarily set prices artificially low to increase market share, and 

b) Economy Pricing, which is no-frills low pricing because there are little to no overhead expenses associated with manufacturing or marketing. 
In either case, it's important to point out to prospects how much less your price is or how much more they will save. Value Pricing like this becomes a popular strategy when factors such as increased competition or a recession are forcing you to act radically to keep or increase sales momentum.

It’s never easy to target just the right set of potential customers with just the right offer, value proposition, and price. These days, thanks to the Internet, customers have more information, more choices, and higher expectations than ever. But to keep pace with the intensifying challenges, businesses must continually refine elements of the marketing mix, and that includes price. 

Price testing and restructuring is an essential part of growing a business. Beyond that, stay at the top of the heap in terms of quality, and get your offer in front of more of the right audiences. It won't be long before your sales take a nice bounce higher.

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Jim Spencer said...

Interesting to see a variety of pricing models and consider which ones I am currently using and their benefits. Demonstrating value early on can allow more leverage in pricing. Thanks.

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Internet Marketing Coach said...

There are few pricing models here that I have never considered. Thanks for the info.

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