Pricing – let’s list how many ways it can be done!

[GuestMember]

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So many businesses struggle with pricing. It can be really tricky. So I thought it would be great if we could list as many ways as possible to decide on price. Could I kindly ask that we keep them short – and just a straightforward list please – so they’re easy to read down and we’ll be able to consult it? Thanks.

I’ll start it off:

• Look at what your competitors are charging.
• Ask likely customers what they would pay.
• The minimum that leaves us feeling valued.

[motherandbabyshop]

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I would suggest the following approach

1. Assess your actual cost on particular product/service
2. Check what your competitors are charging for the same/similar service
3. Consider your positioning in the market (i.e. where is your business standing, location, target market etc)
4. Decide whether you want to undercut your competitors, offer the same price or higher.
5. If price is to be higher, determine how you are going to sell it to the target market against cheaper competitors. After a few weeks review your strategy and see if it worked. If not – review the price (go back to step 1).

[ScarlettR]

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Shouldn’t this one be obvious?

Figure out your overheads, how much you want to earn a year in profit, and then bring it down to an hourly rate. Then apply that hourly rate to your time and you have your price.

[encocreative]

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Pricing is never obvious. I know a lot of people that have found they price too little (regardless of them thinking they got enough). It’s hard to figure out the value of a product or service, especially as a value is a subjective thing.

I’d go for:

• Find how much your services are worth to your audience, or in other words how much they would be willing to invest in it
• Check the competitors pricing
• Check your costs that go in a single item of sale (or what you price for)
• If you have multiple services or products, think of linked sales when you figure out pricing – you may earn less on one product but if there’s a high chance of an upsell or cross-sell, then that should go in the equation (keep it simple though as it’s easy to overthink)
• Not sure if this is the topic here, but a pricing model should be created – hourly, monthly, per project, packages, etc.

[bb1]

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encocreative, post: 220217, member: 69122 wrote:

• Not sure if this is the topic here, but a pricing model should be created – hourly, monthly, per project, packages, etc.

If I have read this right, you are suggesting your pricing could change on the run.
If that’s what you are saying I fully agree. There have being times I have quoted on 2 jobs which are almost exactly the same, but one will be quoted anything up to 50% higher just depending on other circumstances beyond just how many dollars an hour I want.
This could range from how busy I am, ie. if my schedule is full and I don’t really want the job, I’ll quote it high, and if I get it its worth squeezing in. Or if you have a bad feeling about a potential client, or a multitude of other reasons.
I guess my view is never set an hourly rate, and don’t move from it.

[JohnTranter]

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Value Based Pricing : this is where you base your price on the value you will bring to your client.
e.g. If you can bring in another $50,000 worth of profits, then you might charge $10,000.

[ScarlettR]

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encocreative, post: 220217, member: 69122 wrote:

Pricing is never obvious. I know a lot of people that have found they price too little (regardless of them thinking they got enough). It’s hard to figure out the value of a product or service, especially as a value is a subjective thing.

You’re right it isn’t always obvious, but in order to sustain your business and get out of debt you have to have enough money rolling in to cover the basics that run your business in the first place, and your time, wouldn’t that be where you need to start? Otherwise you’re just running in debt for the entire life of the business.

If you start assessing your income by what other competitors charge, you may be charging way too low considering you offer extra services, or require more funds because you have other employees and they only run a solo business, etc…

You need to have a base price point to go up from don’t you?

[GuestMember]

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Thank you everyone for your replies so far. It’s easier to read the list types at the top of the post. It’s a community, of course, and if you wish to stop off to discuss, that has great value too, and I respect that. The only problem is, it usually it drops into detail and people start discussing particular points back and forth and the list idea breaks down. Like brainstorming, I’d hoped we could just bullet point them and take or leave them. No need to agree or disagree – so safe to contribute – and a nice resource for us all. It’s much easier that way to get a lot of short, bulleted, easy-read ideas and easier to refer back to later. We could discuss individual pricing ideas as new posts and create a debate around them if you like? Thanks again.

[GuestMember]

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• By season, e.g. fruit and veg, tourism.
• According to your ability to supply, e.g. if demand is high and labour is restricted, better to have a few paying a lot than a lot paying a little, i.e. use price to contain your demand.
• Status changes – when sole traders get a higher qualification or more experience, their perceived value increases.
• Deliberately appear to offer something better than competitors by charging more.
• Choose price to clear stock fast and release cash to purchase other produce.

[encocreative]

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[USER=7506]@Paul[/USER] – my fault there, knew if I put out a response that confronts another person, it would start a discussion.

@ScarletR – I agree on your points, but it’s only a start to pricing. That’s why my remark.

Again to Paul:) -> think pricing is quite a huge field, and the list can be huge as well, as there are a lot of creative ways to look at the subject. Why don’t we select an area and brainstorm different pricing for it? Just selecting between product and service based businesses is a big leap

[GuestMember]

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Haha. No worries.
Yes, pricing is a huge field. However, we can have a long thread on it! It was just to stimulate thinking – quite a relaxed thing. A hair salon owner would read down and think nope, nope, oh yes, that one’s a good idea. A web designer would find different suggestions interesting.

We can learn from different industries and products versus services. Sometimes it stimulates creativity to map across an idea from elsewhere.

What about we take a gamble on it and just list generally? If it breaks down or becomes a problem then we could start afresh with a narrower focus?
Some more ways to choose a price:

• By Recommended Retail Price.
• Set by franchisor.
• By auction – let the market decide its worth

[bb1]

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encocreative, post: 220280, member: 69122 wrote:

[USER=7506]@Paul[/USER] – my fault there, knew if I put out a response that confronts another person, it would start a discussion.

[USER=69122]@encocreative[/USER] from the comments you have written I don’t think you confronted anyone, just if you are bullet pointing options, sometimes they need clarification or more info.

[GuestMember]

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• Loss leader – loses money but encourages more sales elsewhere.
• Last minute offer to shift something that won’t last until tomorrow, e.g. a hotel room or perishables, such as fruit.

[encocreative]

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[USER=53375]@bb1[/USER] – I did comment on Scarlet’s, but you’re right, it wasn’t harsh:)

• Structure pricing based on features (actually underused with feature heavy software)
• Pricing per activity and pricing for bulk activities
• Retainer based pricing
• Food – deliberately put sooner expiration dates as a producer so the shop would sell the products sooner by using discounts for “soon to expire” products
• Price higher then discount it to the real price

[bb1]

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encocreative, post: 220393, member: 69122 wrote:

[USER=53375]@bb1[/USER]

• Price higher then discount it to the real price

This has being mentioned in another thread recently and if I understand what you are suggesting correctly, it is actually against ACCC rules.

[Author]

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