Pricing Strategies

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Pricing Power

How to get paid what you are really worth

Pricing For Profit

 Look at competitors
 Take costs and mark up
 Pick a number

Most people cost using one of these methods.

” If you have the power to raise prices without losing business to a competitor , you have a very good business  and if you have to have a prayer session before raising the price by 10% you have got a terrible business” – Warren Buffet

Different people will pay different prices for different experiences.

When quoting use (low, mid, high) options and give 3 options.

4 P’s of Marketing :

 Product
 Place
 Promotion
 Price

Aspects of pricing: time payment , bonus, bundling, auction, tender, quality options, quantity options, distribution. A recent McKinsey study showed a 1% increase in price can result in a minimum of 10% and up to 80% increase in profit. Fair value is a myth as its always seen through our lens and not necessarily as our customers might see it.

Tip: When selling your house, get your neighbourhood to list theirs at well over its value so yours by comparison looks so much better value.

You Are What You Charge:

In professional services, don’t charge by the hour. Example of understanding value – in Brisbane a commercial cleaner specialising in building fit outs puts 1 cleaner on the job so the builder can charge out his last invoice but brings in the whole team only when the job is completed.


In pricing anchor, put a large number in somewhere – e.g. Prada put the most expensive bag on prominent display as you walk in, so other bags look much cheaper. When you have an expensive option with real substance then offer alternatives – most people go for the middle option.


 Tell an inspiring story
 Have a number of options
 Cash Price
 Installment Price


 Put similar priced items together
 Put the most expensive items in middle


Price is a signal – e.g. The New York Humane Society selling dogs at $20 (to cover costs) had a 65% return rate, but when they put the price up to $110 the return rate plummeted. Value is in the eye of the beholder.

Next Best Alternative:

People compare to the next best alternate, but it may not be the same product – e.g. compare other businesses to Ritz Carlton or Disneyland

Pricing Utopia:

Let the customer set the price. Price has nothing to do with cost e.g. the price of movie popcorn, it’s all about the value perception.

Fun fact: Radio head allowed fans to set the price for a music download; 62% went free but the average payment was $6!

You Can’t Be Premium and Cheap:

You need to decide where you sit!

 Don’t compete solely on price.
 Use options and versions – e.g. digital, paperback, hard back
 Innovate with price – e.g. GE charge for hours flown on jet engines
 Test, test, test!!
 Let price drive value
 Segmentation/discrimination
 Premium pricing (try to be the most expensive in your industry)

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