The high quality free resources provided by business gurus like Rich Schefren and StomperNet have inspired me to "move the free-line" starting with a guide to the essential area of pricing decisions with How To Price What You Sell.
Previously I have had this report on a very restricted circulation because I thought that this 21 page guide to pricing was too good to give away for free.
Pricing is the number 1 most effective lever on business profitability
A bold claim but if you work out the numbers or get your accountants to work out the numbers then (provided you are profitable) a 1% increase in prices with no other changes will have more effect than a 1% reduction in costs of a 1% increase in your sales volumes.
It works the other way around as well. If any of your main profit drivers worsen, then your average selling price is the one that has the maximum impact.
Your pricing decisions are that important but generally pricing is given very little attention and certainly not the dedicated focus that it needs.
In large companies, pricing decisions often fall into the white space between departments. Is it a sales responsibility, a marketing responsibility, a product development responsibility or a finance responsibility?
In smaller companies, the pricing decisions are often just made on the hoof with no market research and little testing.
How Do You Get The Pricing Report?
Sorry, this report on pricing is no longer available.
Download the report and discover how you can improve your pricing decisions to increase your profit.
I find strategic pricing a fascinating subject as it pulls together so many other management disciplines and for me, decisions on pricing are where your business strategy hits the road.
Customers Don't Buy On Price
Many people assume that price dominates the customer buying decision but often that just isn't true.
As an example, indulge me and look at the clothes and shoes you are wearing?
How of these items did you buy because you were sure that they were the cheapest available?
Are you wearing the cheapest suit, shirt, trousers or shoes you can buy?
Then look at your car, the food you buy and your computer. How many of these did you buy because they were the cheapest?
Yes you may have hunted around for the lowest priced new BMW 520 you could find but a second hand model has a lower price and there are many models of cars with much lower purchase prices.
You see, when people buy they have other reasons for making that buying decision:
- Convenience and a pressing time factor
- Value for money. This product gives me more benefits than that one and while the price is higher, the value for money is better.
- Visual and emotional preferences. You just like this one but don't like that one.
- Status. Sometimes you buy the more expensive because it makes you feel good and makes other people look up to you. "He's got a new Jaguar coupe. His business must be doing well."
- Confidence. I have more trust in this supplier or "That sounds too good to be true"
What Happens If You Cut Price?
I believe in giving customers a good reason to buy and that can mean making compelling price based offers to get them to give you a try.
But what happens if you sell a commodity product and you make the decision to cut your price?
People know what they are getting so imagine you are a market trader selling vegetables with similar stalls around you.
What happens if you walk around and see that everyone else is selling cauliflowers for 80p so you make the pricing decision to give a special offer for 45p?
Soon everyone is selling for 45p or may be even less. pricing decisions have a nasty habit of quickly spreading based on the need to match your competitors prices.
There Has To Be A Better Way
Sign up for this pricing report and learn:
- How other companies set their prices
- How to calculate whether a change in prices will pay off
- The differences in the three main ways to price - competitive pricing, cost-plus pricing and value based pricing
- The 5 main pricing strategies
- How to motivate customer behaviour through different types of discount
- The 9 steps to a pricing strategy
- How to discover what your customers want
- How pricing fits into the 4 Ps of marketing
- The role of pricing in your business strategy
- 6 factors which affect your competitive advantage and the price you charge.
- Two very useful ready reckoners to find out the volume changes required to break even for a particular price change for your business margin.
For example if you have a 40% margin and you are considering changing prices. If you increase your prices by 7% you can afford to lose 15% of your sales volume but if you reduce prices by 10% you need to win 40% extra volume.
You can now see why I have been holding back the report. It is packed with great information to encourage you to think about your pricing strategies and help you to find ways to increase your profit by making effective pricing decisions.